UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):   July 19, 2011

Quepasa Corporation
 (Exact name of registrant as specified in its charter)
 
Nevada
 
001-33105
 
86-0879433
(State or other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
324 Datura Street, Ste. 114
West Palm Beach, FL
 
 
33401
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (561) 366-1249
 
(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
Item 1.01
Entry into a Material Definitive Agreement.
 
On July 19, 2011, Quepasa Corporation (“Quepasa”), IG Acquisition Company (“Merger Sub”), a wholly-owned subsidiary of Quepasa, and Insider Guides, Inc., doing business as myYearbook.com (“myYearbook”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for the acquisition of myYearbook by Quepasa. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, myYearbook will be merged with and into Merger Sub (the “Merger”). Following the Merger, Merger Sub will change its name to Insider Guides, Inc.
 
Subject to the terms and conditions of the Merger Agreement, which has been approved by the boards of directors of the respective parties, if the Merger is completed, holders of myYearbook securities will receive $100 million consisting of approximately $18 million in cash and $82 million in Quepasa common stock. The number of shares of Quepasa common stock to be issued will be based upon the Transaction Share Price, which will be the lesser of (A) $10 per share and (B) the average of (i) $7.5715 and (ii) the average closing price of Quepasa common stock on the 20 trading days ending with the trading day three days prior to the closing of the Merger. The Transaction Share Price may be lower than or higher than the market price as of the time of closing.

Quepasa and myYearbook have made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions, each of Quepasa and myYearbook is required, among other things, to conduct its business in the ordinary course in all material respects during the interim period between the execution of the Merger Agreement and the closing of the Merger. In addition, neither Quepasa nor myYearbook may solicit alternative business combination transactions and, subject to certain exceptions, may not engage in discussions or negotiations regarding any alternative business combination transaction. Quepasa is required to seek shareholder approval of the issuance of the Quepasa shares as part of the Merger consideration because NYSE Amex rules require shareholder approval whenever more than 20% of outstanding shares are issued in a transaction such as the Merger. Each party will call and hold a special shareholders meeting seeking to obtain these approvals.  Holders of 96.7% of the myYearbook voting power agreed to vote in favor of the approval of the Merger Agreement and in favor of the other actions contemplated by the Merger Agreement and holders of 11.5% of the Quepasa voting power agreed to vote in favor of the issuance of the shares in connection with the Merger and in favor of the other actions contemplated by the Merger Agreement.  Additionally, all of these security holders agreed to certain transfer restrictions on their shares until completion of the Merger.
 
Quepasa and certain myYearbook security holders entered into a Sales Rights Agreement which provides for the security holders to have certain registration rights with respect to the shares of Quepasa common stock they acquire in the Merger. If during the 24 month period following the closing of the Merger, Quepasa proposes to sell common stock in a public or private offering, these myYearbook security holders will have the opportunity to participate and sell their shares of common stock on a pro-rata basis in the offering. 
 
Completion of the Merger is subject to certain conditions, including, among others: (i) approval of the issuance of the shares by Quepasa shareholders, (ii) Quepasa raising at least $10 million in equity, (iii) approval of the Merger Agreement by myYearbook’s shareholders (iv) the absence of any court order, law, or rule prohibiting the completion of the Merger, (v) the registration statement on Form S-4 used to register the Quepasa common stock to be issued as consideration for the Merger having been declared effective by the Securities and Exchange Commission (the “SEC”), (vi) the listing of the Quepasa common stock to be issued to myYearbook security holders in the Merger on the NYSE Amex having been authorized, (vii) the granting of 1,782,500 options to myYearbook employees, and (viii) Quepasa entering into new employment agreements with key myYearbook employees. The obligation of each party to complete the Merger is also conditioned upon the accuracy of the other party’s representations and warranties and the other party having performed in all material respects its obligations under the Merger Agreement. If the Merger is completed, Quepasa is obligated to appoint myYearbook designees Geoff Cook, Rick Lewis and Terry Herndon (or replacement designees selected by myYearbook) to the Quepasa board of directors and to include three myYearbook designees (who may be Messrs. Cook, Lewis and Herndon) among its director candidates for three years following the closing. In addition, Mr. Cook will be named Chief Operating Officer of Quepasa and also will serve as President of the Consumer Internet Division.  Quepasa and Mr. Cook entered into an employment agreement which will be effective upon the closing. Under the employment agreement, Mr. Cook will receive (i) a base salary of $250,000 per year, (ii) 450,000 stock options vesting based on certain performance milestones and (iii) an annual bonus equivalent to 85% of the average of the bonuses paid to Quepasa’s Chief Executive Officer and Chief Financial Officer.
 
 
2
 
 
Quepasa has received a $5 million financing commitment from Mexicans & Americans Trading Together, Inc. (“MATT”), a large shareholder of Quepasa.  The financing commitment provides for MATT to purchase shares of common stock at the lesser of: (i) the Transaction Share Price and (ii) 85% of the average closing price of Quepasa’s common stock during the 20 trading days ending with the trading day three days prior to the closing of the Merger.  MATT will also receive registration rights, certain participation rights and first right of refusal rights with respect to the remaining financing that Quepasa acquires in connection with the Merger.
 
The Merger Agreement contains certain termination rights for both Quepasa and myYearbook, including if the Merger is not consummated on or before January 19, 2012 (subject to extension by mutual agreement of the parties) and if the required approval of the applicable party’s shareholders is not obtained. The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including termination of the Merger Agreement by either Quepasa or myYearbook as a result of an adverse change in the recommendation of the other party’s board of directors or certain other circumstances (a “Triggering Event”), such other party shall reimburse the party entitled to reimbursement up to $1 million in expenses. In addition, in the event that following the termination due to a Triggering Event, if the party causing the Triggering Event within 12 months enters into a letter of intent or agreement with respect to an acquisition proposal in which such party is to be acquired by a third party (or if certain similar events occur), the other party shall receive a termination fee of $3 million, less any previously-reimbursed expenses.
 
The foregoing description of the Merger Agreement is not a complete description of all of the parties’ rights and obligations under the Merger Agreement and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
 
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Quepasa or myYearbook. The representations, warranties, and covenants contained in the Merger Agreement were made only for purposes of that Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them rather than establishing matters as facts, and may be subject to standards of materiality that differ from those applicable to investors and security holders. Accordingly, investors should not rely on the representations, warranties, and covenants or any description thereof as characterizations of the actual state of facts or condition of Quepasa or myYearbook or their respective businesses.  Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by Quepasa.  Accordingly, investors should read the representations and warranties in the Merger Agreement not in isolation but only in conjunction with the other information about Quepasa that it includes in reports, statements, and other filings it makes with the SEC.
 
Item 8.01
Other Events.
 
On July 20, 2011, Quepasa issued a press release announcing execution of the Merger Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 8.01.
 
 
3
 
 
Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.
 
Exhibit No.
Description
 
2.1
Agreement and Plan of Merger among Quepasa Corporation, IG Acquisition Company and Insider Guides, Inc. dated July 19, 2011 (certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K; a copy of any omitted schedule will be furnished supplementally to the SEC upon request).

10.1
Form of myYearbook Voting Agreement

10.2
Form of Quepasa Voting Agreement

10.3
Form of Mexican and Americans Trading Together, Inc. Voting Agreement

10.4
Sales Rights Agreement

10.5
Geoff Cook Employment Agreement

99.1
Press Release dated July 20, 2011
 
Important Information for Investors and Shareholders

Communications in this Report on Form 8-K do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the Merger between Quepasa and myYearbook, Quepasa will be filing documents with the SEC, including a registration statement on Form S-4 that will include a proxy statement and prospectus of Quepasa. Before making any voting or investment decision, investors and shareholders are urged to read carefully the proxy statement and prospectus regarding the Merger and any other relevant documents filed by Quepasa with the SEC when they become available because they will contain important information about the Merger.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website ( www.sec.gov ), by accessing Quepasa’s website at www.quepasa.com under the heading “Investors” and then under the link “SEC Filings” and from Quepasa by directing a request to Quepasa at Quepasa Corporation, 324 Datura Street, Suite 114, West Palm Beach, FL 33401, Attention: Investor Relations.

Quepasa and its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the Merger.  You can find information about Quepasa’s directors and executive officers in its definitive proxy statement filed with the SEC on April 14, 2011. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and prospectus and other relevant materials to be filed with the SEC when they become available. You can obtain free copies of these documents from Quepasa using the contact information above.
 
 
4
 

Cautionary Statement Regarding Forward-Looking Statements
 
This Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements regarding the Merger with myYearbook.  All statements other than statements of historical facts contained herein, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements.  The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
 
Important factors that could cause actual results to differ from those in the forward-looking statements include: the possibility that the anticipated benefits from the Merger will not be realized, or will not be realized within the expected time period; the possibility that the Merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions including the failure of Quepasa shareholders to approve the issuance of the shares pursuant to the Merger and the failure of the shareholders of myYearbook to approve the Merger; the risk that the Quepasa and myYearbook businesses will not be integrated successfully and disruption from the Merger making it more difficult to maintain business and operational relationships.
 
Further information on our risk factors is contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2010.  Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 
5
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
  QUEPASA CORPORATION  
       
Date:  July 20, 2011
By:
/s/ Michael Matte  
 
Name:
Title:   
Michael Matte
Chief Financial Officer
 

Exhibit 2.1
 

 

AGREEMENT AND PLAN OF MERGER
 
BY AND AMONG
 
QUEPASA CORPORATION,
 
IG ACQUISITION COMPANY
 
AND
 
INSIDER GUIDES, INC.
 

 

Dated as of July 19, 2011
 

 
 
 
 
Table of Contents
 
Page
 
ARTICLE I THE MERGER
1
1.1
The Merger
1
1.2
Closing; Effective Time
1
1.3
Effects of the Merger
2
1.4
Certificate of Incorporation; Bylaws
2
1.5
Directors and Officers of the Surviving Corporation
2
ARTICLE II CONVERSION OF SHARES
2
2.1
Certain Definitions
2
2.2
Effects on Capital Stock
6
2.3
Exchange of Stock Certificates
8
2.4
Company Options and Warrants
9
2.5
Lost, Stolen or Destroyed Certificates
9
2.6
Tax Consequences
9
2.7
Dissenting Shares
10
2.8
Required Withholdings
10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY
10
3.1
Organization, Etc.
11
3.2
Authority Relative to This Agreement
12
3.3
No Violations, Etc.
12
3.4
Board Recommendation
13
3.5
Capitalization
13
3.6
Compliance with Laws
14
3.7
Financial Statements; Controls
14
3.8
Absence of Undisclosed Liabilities
15
3.9
Absence of Changes or Events
15
3.10
Capital Stock of Subsidiaries
17
3.11
Litigation
17
3.12
Insurance
17
3.13
Contracts and Commitments
17
3.14
Labor Matters; Employment and Labor Contracts
19
3.15
Intellectual Property Rights
20
 
 
 
-i-
 
 
3.16
Taxes
21
3.17
Employee Benefit Plans; ERISA
23
3.18
Environmental Matters
26
3.19
Affiliates
27
3.20
Finders or Brokers
27
3.21
Title to Property
27
3.22
No Existing Discussions
28
3.23
Negative Assurances
28
3.24
No Aggregate Company Material Adverse Effect
28
ARTICLE IV REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB
28
4.1
Organization, Etc.
28
4.2
Authority Relative to This Agreement
29
4.3
No Violations, Etc.
30
4.4
Board Approval
31
4.5
Fairness Opinion
31
4.6
Capitalization
31
4.7
SEC Filings
32
4.8
Compliance with Laws
32
4.9
Financial Statement; Controls
33
4.10
Absence of Undisclosed Liabilities
33
4.11
Absence of Changes or Events
33
4.12
Capital Stock of Subsidiaries
35
4.13
Litigation
35
4.14
Insurance
36
4.15
Contracts and Commitments
36
4.16
Labor Matters; Employment and Labor Contracts
37
4.17
Intellectual Property Rights
38
4.18
Taxes
39
4.19
Employee Benefit Plans; ERISA
41
4.20
Environmental Matters
44
4.21
Finders or Brokers
45
4.22
Title to Property
45
4.23
Third Party Financing of Cash Consideration
45
4.24
No Existing Discussions
45
 
 
-ii-
 
 
4.25
Negative Assurances
45
4.26
No Aggregate Parent Material Adverse Effect
45
ARTICLE V COVENANTS
46
5.1
Conduct of Company Business During Interim Period
46
5.2
Conduct of Parent Business During Interim Period
48
5.3
No Solicitation
50
5.4
Access to Information
53
5.5
Company Special Meeting; Board Recommendations
53
5.6
Parent Special Meeting; Board Recommendations
54
5.7
Registration Statement; Proxy Statement/Prospectus
56
5.8
Other SEC Filings
57
5.9
Commercially Reasonable Efforts
57
5.10
Public Announcements
58
5.11
Notification of Certain Matters
58
5.12
Indemnification
58
5.13
Stock Exchange Listing
59
5.14
Resignation of Directors and Officers
60
5.15
Consents of Parent’s and Company’s Accountants
60
5.16
Voting Agreements
60
5.17
Tax Treatment
60
5.18
Employee Benefit Matters.
60
5.19
Representation on Parent Board and Executive Committee
60
5.20
Parent Stock Options
61
5.21
Sale Rights Agreement
61
5.22
Parent Reincorporation in Delaware
61
5.23
Tax Free Reorganization
61
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
62
6.1
Registration Statement/Listing of Parent Common Stock
62
6.2
Parent Stockholder Approval
62
6.3
Company Shareholder Approval
62
6.4
Governmental Clearances
62
6.5
Statute or Decree
62
6.6
Financing Transaction
63
6.7
Share Price
63
 
 
-iii-
 
 
6.8
Exchange Ratio
63
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF COMPANY AND PARENT
63
7.1
Additional Conditions To The Obligations Of Company
63
7.2
Additional Conditions To The Obligations Of Parent And Merger Sub
64
ARTICLE VIII TERMINATION
64
8.1
Termination
64
8.2
Notice of Termination; Effect of Termination
67
8.3
Fees and Expenses
67
ARTICLE IX MISCELLANEOUS
69
9.1
Amendment and Modification
69
9.2
Waiver of Compliance; Consents
69
9.3
Survival; Investigations
69
9.4
Notices
70
9.5
Assignment; Third Party Beneficiaries
70
9.6
Governing Law
71
9.7
Specific Enforcement; Consent to Jurisdiction; Waiver of Jury Trial
71
9.8
Counterparts
71
9.9
Severability
71
9.10
Interpretation
72
9.11
Entire Agreement
72
9.12
Definition of “law”
72
9.13
Rules of Construction
72
 
 
-iv-
 
 
EXHIBITS
 
Exhibit A                     Form of Company Voting and Lockup Agreement
Exhibit B                      Form of Parent Voting Agreement
Exhibit C                      Certificate of Merger
Exhibit D                      Sale Rights Agreement
 
 
INDEX OF DEFINED TERMS
 
Term
Section
   
Acquisition Proposal
5.3(c)
Acquisition Transaction
5.3(c)
Action
3.11(a)
Affiliates
3.19
Aggrieved Party
8.3(b)(iv)
Agreement
Recitals
Breaching Party
8.3(b)(iv)
Cash Consideration
2.1
Cash Percentage
2.1
Certificate of Merger
1.1
Closing Date
1.2
Closing
1.2
COBRA
3.14(b)
Code
2.6
Company Acquisition
8.3(b)(iv)
Company Balance Sheet
3.7(a)
Company Capital Stock
2.1
Company Certificate
2.1
Company Common Stock
2.1
Company Contract
3.13(a)
Company Disclosure Statement
Article III
Company Employee Benefit Plans
3.17(a)
Company Environmental Permits
3.18(c)
Company ERISA Affiliate
3.17(a)
Company Expenses
8.3(b)(ii)
Company Financial Statements
3.7(a)
Company Indemnified Persons
5.12(a)
Company IP Rights
3.15(a)
Company Material Adverse Effect
3.1(a)
Company Options
2.1
Company Preferred Stock
2.1
 
 
 
-v-
 
 
Company Preliminary Financial Statements
3.7(a)
Company Representative
5.3(a)
Company Series A Preferred Stock
2.1
Company Series B Preferred Stock
2.1
Company Special Meeting
5.5
Company Stock Plan
2.1
Company Stock
Recital D
Company Subsidiaries
3.1(a)
Company Superior Offer
5.5
Company Triggering Event
8.1(j)
Company Voting Agreement
5.16
Company Warrants
2.1
Company
Recitals
Confidentiality Agreement
5.4
Deferred Compensation Plan
3.17(n)
Delaware Secretary
1.2
DGCL
1.1
Dissenting Shares
2.7(a)
Effective Time
1.2
Employment Agreements
5.18(a)
ERISA
3.17(a)
Exchange Act
4.3
Exchange Agent
2.3(a)
Existing D&O Policy
5.12(c)
FCPA
3.6(b)
Financing Letter
4.23
Financing Transaction
4.23
Fully-Diluted Company Capital Stock
2.1
Fully-Diluted Company Series A Preferred Stock
2.1
Fully-Diluted Company Series B Preferred Stock
2.1
GAAP
3.7(a)
Government Entity
3.3
Hazardous Materials Activity
3.18(b)
Hazardous Materials
3.18(a)
Holder
2.1
HSR Act
3.3
IRS
3.17(j)
law
9.12
Letter of Transmittal
2.3(c)
Merger Consideration
2.1
Merger Sub
Recitals
Merger
Recital A
Net Exercise Shares
2.1
NYSE Amex
4.7
Option Exchange Ratio
2.4(a)
Option Shares Withheld
2.4(a)
 
 
 
-vi-
 
 
Outside Date
8.1(b)
Parent Acquisition
8.3(b)(iv)
Parent Balance Sheet
4.9(a)
Parent Certificate
2.1
Parent Common Stock
Recital D
Parent Contract
4.15(a)
Parent Disclosure Statement
Article IV
Parent Employee Benefit Plans
4.19(a)
Parent Environmental Permits
4.20(c)
Parent ERISA Affiliate
4.19(a)
Parent Expenses
8.3(b)(i)
Parent Financial Statements
4.9(a)
Parent Interim Financial Statements
4.9(a)
Parent IP Rights
4.17(a)
Parent Material Adverse Effect
4.1(a)
Parent Options
4.6(b)
Parent Proxy Statement
5.7(b)
Parent Representative
5.3(b)
Parent SEC Reports
4.7
Parent Special Meeting
5.6
Parent Stock Plans
4.6(b)
Parent Subsidiaries
4.1(a)
Parent Superior Offer
5.6
Parent Triggering Event
8.1(k)
Parent Voting Agreement
5.16
Parent
Recitals
Participating Amount Per Share
2.1
Pension Plans
3.17(a)
Person
2.1
Potential Acquiror
5.3(a)
Reference Date
3.9
Registration Statement
5.7(a)
Retention Option Pool
5.20
SEC
4.3
Securities Act
4.7
Series A Amount Per Share
2.1
Series A Liquidation Preference Per Share
2.1
Series B Amount Per Share
2.1
Series B Liquidation Preference Per Share
2.1
Share Percentage
2.1
Subsidiary
2.1
Surviving Corporation
1.1
Tax or Taxes
3.16(a)
Tax Return or Tax Returns
3.16(a)
Termination Fee
8.3(b)(iv)
Total Participating Consideration
2.1
 
 
-vii-
 
Total Preferred Liquidation Preference
2.1
Total Series A Consideration
2.1
Total Series A Liquidation Preference
2.1
Total Series A Participation
2.1
Total Series B Consideration
2.1
Total Series B Liquidation Preference
2.1
Total Series B Participation
2.1
Transaction Share Price
2.1
WARN Act
3.17(o)
Welfare Plans
3.17(a)
 
 
 
 
-viii-
 
 
AGREEMENT AND PLAN OF MERGER
 
This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of July 19, 2011 by and among Quepasa Corporation, a Nevada corporation (“ Parent ”), IG Acquisition Company, a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), and Insider Guides, Inc., a Delaware corporation (“ Company ”), with respect to the following facts:
 
A.            The board of directors of Parent has approved and declared advisable the merger of Company with and into Merger Sub (the “ Merger ”), upon the terms and subject to the conditions set forth herein, and has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, its shareholders.
 
B.            Parent, as the sole stockholder of Merger Sub, has approved and declared advisable the Merger, upon the terms and subject to the conditions set forth herein, and has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, Parent.
 
C.            The Board of Directors of Company have approved and declared advisable the Merger, upon the terms and subject to the conditions set forth herein, and have determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, the shareholders of Company.
 
D.            In connection with the Merger, among other things, the outstanding stock of Company (“ Company Stock ”) will be converted into the right to receive shares of Parent Common Stock, $0.001 par value (“ Parent Common Stock ”), and cash at the rate set forth herein.
 
The parties agree as follows:
 
ARTICLE I
 
THE MERGER
 
1.1            The Merger .  At the Effective Time (as defined in Section  1.2 ) and subject to and upon the terms and conditions of this Agreement, the Certificate of Merger in substantially the form attached hereto as Exhibit C (the “ Certificate of Merger ”) and the applicable provisions of the General Corporation Law of the State of Delaware (“ DGCL ”), (i) Company shall be merged with and into Merger Sub, (ii) the separate corporate existence of Company shall cease, and (iii) Merger Sub shall be the surviving corporation and a wholly-owned subsidiary of Parent.  Merger Sub, as the surviving corporation of the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation ” and shall succeed to and assume all the rights and obligations of Company in accordance with the DGCL.
 
1.2            Closing; Effective Time .  Unless this Agreement is terminated pursuant to Article VIII hereof, the closing of the Merger and the other transactions contemplated hereby (the “ Closing ”) will take place at 10:00 a.m., local time, on a date to be specified by the parties (the “ Closing Date ”), which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VI and Article VII , unless another time or date is agreed to by the parties hereto.  The Closing shall take place at such location as the parties hereto shall mutually agree.  At the Closing, the parties hereto shall cause the Merger to be effected by filing the Certificate of Merger with the Secretary of State of the State of Delaware (the “ Delaware Secretary ”), in accordance with the relevant provisions of the DGCL (the time of such filings, or such later time as may be agreed in writing by the parties and specified in the Certificate of Merger, being the “ Effective Time ”).  If the Delaware Secretary requires any changes in the Certificate of Merger as a condition to filing or issuing a certificate to the effect that the Merger is effective, Merger Sub, Parent and/or Company shall execute any necessary document incorporating such changes, provided such changes are not inconsistent with and do not result in any material change in the terms of this Agreement.
 
 
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1.3            Effects of the Merger .  The effects of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL.  Without limiting the foregoing, at the Effective Time, by virtue of the Merger and in accordance with the DGCL, all the property, rights, privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
 
1.4            Certificate of Incorporation; Bylaws .
 
(a)           At the Effective Time, the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by the DGCL and such certificate of incorporation; provided , however , that at the Effective Time the certificate of incorporation of the Surviving Corporation shall be amended so that the name of the Surviving Corporation shall be “Insider Guides, Inc.”.  The Parties acknowledge that the Surviving Corporation shall do business as “myYearbook.com”.
 
(b)           At the Effective Time the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided by the DGCL, the certificate of incorporation of the Surviving Corporation and such bylaws.
 
1.5            Directors and Officers of the Surviving Corporation .  The officers of Company immediately prior to the Effective Time shall serve as the initial officers of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified. The following Persons shall serve as the initial directors of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified:  Geoff Cook, John Abbott and Michael Matte.
 
ARTICLE II
 
CONVERSION OF SHARES
 
2.1            Certain Definitions .  As used in this Agreement, the following terms shall have the meanings indicated below.  Unless indicated otherwise, all mathematical calculations contemplated hereby shall be rounded to the fourth decimal place:
 
 
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“ Cash Consideration ” means Eighteen Million Dollars ($18,000,000).
 
“ Cash Percentage ” means the percentage equal to 100% multiplied by a fraction, the numerator of which is the Cash Consideration and the denominator of which is (A) $100 Million minus (B) the product of the aggregate number of shares of Parent Common Stock issued to the holders of Company Options pursuant to Section 2.4(a) multiplied by the Transaction Share Price.  The Cash Percentage shall be calculated to four (4) decimal places.
 
“ Company Capital Stock ” means, collectively, the Company Common Stock and the Company Preferred Stock.
 
“ Company Certificate ” means a certificate which immediately prior to the Effective Time represented shares of Company Capital Stock.
 
“ Company Common Stock ” means the common stock, par value $0.001 per share, of the Company.
 
“Company Option” means any option to purchase shares of Company Common Stock pursuant to the Company Stock Plan that is outstanding immediately prior to the Effective Time but only to the extent that such option is vested and exercisable immediately prior to the Effective Time.  For purposes of this Agreement, the term Company Option shall not include the portion of any option to purchase Company Common Stock that is not vested or exercisable immediately prior to the Effective Time.
 
“ Company Preferred Stock ” means, collectively, the Series A Preferred Stock and the Series B Preferred Stock.
 
“ Company Series A Preferred Stock ” means the Series A Preferred Stock, par value $0.001 per share, of the Company.
 
“ Company Series B Preferred Stock ” means the Series B Preferred Stock, par value $0.001 per share, of the Company.
 
“ Company Stock Plan” means the Insider Guides, Inc. 2006 Equity Incentive Plan.
 
“ Company Warrants ” means the warrants to purchase Company Capital Stock described in Schedule 3.5 of the Company Disclosure Statement .
 
“ Fully-Diluted Company Capital Stock ” means the sum, without duplication, of (a) the aggregate number of shares of Company Capital Stock that are issued and outstanding immediately prior to the Effective Time plus (B) the aggregate number of Net Exercise Shares issuable with respect to all Company Options that are outstanding immediately prior to the Effective Time plus (C) the aggregate number of shares of Company Capital Stock issuable upon exercise of Company Warrants or other direct or indirect rights to acquire shares of the Company Capital Stock that are issued and outstanding (and fully vested) immediately prior to the Effective Time.
 
 
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“ Fully-Diluted Company Series A Preferred Stock ” means the sum, without duplication, of the aggregate number of shares of Company Series A Preferred Stock that are issued and outstanding immediately prior to the Effective Time or issuable upon the exercise of Company Warrants or other direct or indirect rights to acquire shares of the Company Series A Preferred Stock that are issued and outstanding (and fully vested) immediately prior to the Effective Time.
 
“ Fully-Diluted Company Series B Preferred Stock ” means the sum, without duplication, of the aggregate number of shares of Company Series B Preferred Stock that are issued and outstanding immediately prior to the Effective Time or issuable upon the exercise of Company Warrants or other direct or indirect rights to acquire shares of the Company Series B Preferred Stock that are issued and outstanding (and fully vested) immediately prior to the Effective Time.
 
“ Holder ” means a Person who holds one or more Company Certificates as of the Effective Time.
 
“ Merger Consideration ” means, (A) in the case of each share of the Company Series A Preferred Stock, the Series A Amount Per Share, (B) in the case of each share of the Company Series B Preferred Stock, the Series B Amount Per Share, and (C) in the case of each share of the Company Common Stock, the Participating Amount Per Share.
 
“ Net Exercise Shares ” with respect to any Company Option means the number of shares of Company Common Stock that would be issued upon exercise of such Company Option immediately prior to the Effective Time minus the number of shares of Company Common Stock that have a fair market value (as determined pursuant to the next sentence) equal to the sum of (A) the aggregate exercise price of such Company Option plus (B) the minimum amount required to be withheld to satisfy applicable tax withholding requirements.  Solely for purposes of determining the number of Net Exercise Shares issuable with respect to any Company Option, the fair market value of a share of Company Common Stock shall equal the product of (i) the Participating Amount Per Share multiplied by (ii) a fraction, the numerator of which is the closing price of a share of Parent Common Stock on the last trading day ending prior to the Effective Time and the denominator of which is the Transaction Share Price.
 
“ Parent Certificate ” means a certificate representing shares of Parent Common Stock.
 
“ Participating Amount Per Share ” means (A) the Total Participating Consideration divided by (B) the Fully-Diluted Company Capital Stock.
 
“ Person ” means any individual, group, organization, corporation, partnership, joint venture, limited liability company, trust or entity of any kind.
 
“ Series A Amount Per Share ” means (A) the Total Series A Consideration divided by (B) the Fully-Diluted Company Series A Preferred Stock.
 
“ Series A Liquidation Preference Per Share ” means $1.0023.
 
 
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“ Series B Amount Per Share ” means (A) the Total Series B Consideration divided by (B) the Fully-Diluted Company Series B Preferred Stock.
 
“ Series B Liquidation Preference Per Share ” means $3.0400.
 
“ Share Percentage ” means 100% minus the Cash Percentage.
 
“ Subsidiary ,” when used with respect to any Person, means any corporation or other organization, whether incorporated or unincorporated, of which (A) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person (through ownership of securities, by contract or otherwise) or (B) such Person or any Subsidiary of such Person is a general partner of any general partnership or a manager of any limited liability company.
 
“ Total Participating Consideration ” means (A) $100 Million less (B) the Total Preferred Liquidation Preference.
 
“ Total Preferred Liquidation Preference ” means the sum of (A) Total Series A Liquidation Preference, plus (B) Total Series B Liquidation Preference.
 
“ Total Series A Consideration ” means the sum of (A) the Total Series A Liquidation Preference, plus (B) the Total Series A Participation.
 
“ Total Series A Liquidation Preference ” means the product of (A) the Fully-Diluted Company Series A Preferred Stock, multiplied by (B) the Series A Liquidation Preference Per Share.
 
“ Total Series A Participation ” means the product of (A) the Fully-Diluted Company Series A Preferred Stock, multiplied by (B) the Participating Amount Per Share.
 
“ Total Series B Consideration ” means the sum of (A) the Total Series B Liquidation Preference, plus (B) the Total Series B Participation.
 
“ Total Series B Liquidation Preference ” means the product of (A) the Fully-Diluted Company Series B Preferred Stock, multiplied by (B) the Series B Liquidation Preference Per Share.
 
“ Total Series B Participation ” means the product of (A) the Fully-Diluted Company Series B Preferred Stock, multiplied by (B) the Participating Amount Per Share.
 
“ Transaction Share Price ” shall be equal to the lesser of (A) $10.00 per share of Parent Common Stock and (B) the average of (i) $7.5715  per share and (ii) the average closing price of a share of Parent Common Stock during the 20 trading days ending with the trading day three days prior to the Effective Time.
 
 
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2.2            Effects on Capital Stock .  As of the Effective Time, by virtue of the Merger, and without any action on the part of the holders of any outstanding shares of capital stock or securities of Parent, Company or Merger Sub:
 
(a)           Each share of Company Capital Stock, held of record immediately prior to the Effective Time by Company, Merger Sub, Parent or any of their respective Subsidiaries shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.
 
(b)           Each share of capital stock of Merger Sub that is issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without further action on the part of the sole stockholder of Merger Sub, be converted into and become one share of common stock of the Surviving Corporation (and the shares of Surviving Corporation into which the shares of Merger Sub capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time).  Each certificate evidencing ownership of shares of Merger Sub common stock will evidence ownership of such shares of common stock of the Surviving Corporation.
 
(c)           Each issued and outstanding share of Company Capital Stock (other than shares to be canceled in accordance with Section  2.2(a) and Dissenting Shares (as defined in Section  2.7(a) ) shall be converted into the right to receive the applicable Merger Consideration in the form specified in this Section  2.2 .  As of the Effective Time, all such shares of Company Capital Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a Company Certificate shall cease to have any rights with respect thereto, except the right to receive the applicable Merger Consideration upon surrender of such Company Certificate in accordance with Section  2.3 .
 
(d)           As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any outstanding shares of capital stock or securities of Company or Merger Sub:
 
(i)           Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section  2.2(a) and Dissenting Shares) shall be automatically converted into, subject to and in accordance with Section  2.3 , (A) the right to receive an amount of cash (without interest) equal to the product of (x) the Cash Percentage multiplied by (y) the Series A Amount Per Share, and (B) (x) a certificate (or direct registration) representing the number of whole shares of Parent Common Stock equal to (i) the Share Percentage multiplied by (ii) the Series A Amount Per Share divided by (iii) the Transaction Share Price and (y) cash in lieu of fractional shares of Parent Common Stock in accordance with Section  2.2(f) , without interest.
 
(ii)           Each share of Company Series B Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section  2.2(a) and Dissenting Shares) shall be automatically converted into, subject to and in accordance with Section  2.3 , (A) the right to receive an amount of cash (without interest) equal to the product of (x) the Cash Percentage multiplied by (y) the Series B Amount Per Share, and (B) (x) a certificate (or direct registration) representing the number of whole shares of Parent Common Stock equal to (i) the Share Percentage multiplied by (ii) the Series B Amount Per Share divided by (iii) the Transaction Share Price and (y) cash in lieu of fractional shares of Parent Common Stock in accordance with Section  2.2(f) , without interest.
 
 
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(iii)           Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section  2.2(a) and Dissenting Shares) shall be automatically converted into, subject to and in accordance with Section  2.3 , (A) the right to receive an amount of cash (without interest) equal to the product of (x) the Cash Percentage multiplied by (y) the Participating Amount Per Share, and (B) (x) a certificate (or direct registration) representing the number of whole shares of Parent Common Stock equal to (i) the Share Percentage multiplied by (ii) the Participating Amount Per Share divided by (iii) the Transaction Share Price and (y) cash in lieu of fractional shares of Parent Common Stock in accordance with Section  2.2(f) , without interest.
 
(iv)           The amount of cash included in the Merger Consideration payable to each holder of Company Capital Stock shall be rounded to the nearest cent and computed after aggregating cash amounts for all shares of Company Capital Stock held by such stockholder.
 
(e)           In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Capital Stock or Parent Common Stock occurring after the date of this Agreement and before the Effective Time, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
 
(f)           No fraction of a share of Parent Common Stock will be issued pursuant to Section 2.2 or Section 2.4 .  Instead, each holder of shares of Company Capital Stock, Company Options or Company Warrants who would otherwise be entitled by virtue of the Merger to receive a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock which otherwise would be received by such holder) shall receive in lieu thereof from Parent an amount of cash (rounded to the nearest whole cent, with .5 being rounded up) equal to the product of (i) such fraction, multiplied by (ii) the Transaction Share Price.
 
(g)           The shares of Parent Common Stock included in the Merger Consideration will be subject to restrictions on transfer for a period of two (2) months following the Effective Time, as follows:  (i) during the one (1) month period following the Effective Time, no more than thirty percent (30%) of the shares of Parent Common Stock received by each Company shareholder as Merger Consideration may be transferred; and (ii) subject to the foregoing clause (i), during the two (2) month period following the Effective Time, no more than sixty-five percent (65%) of the shares of Parent Common Stock received by each Company shareholder as Merger Consideration may be transferred; provided that, Parent Common Stock may be transferred at any time to any Affiliate or family member of a Company shareholder if such transferee agrees to be bound by the foregoing restrictions prior to such transfer.  The restrictions on transfer contemplated by this Section 2.2(g) will be set forth in the Company Voting Agreements and Letters of Transmittal.
 
 
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2.3            Exchange of Stock Certificates.
 
(a)           At or prior to the Effective Time, Parent shall enter into an agreement with a bank or trust company selected by Parent and reasonably acceptable to Company to act as the exchange agent for the Merger Consideration (the “ Exchange Agent ”).
 
(b)           At or prior to the Effective Time, Parent shall supply or cause to be supplied to or for the account of the Exchange Agent in trust for the benefit of the holders of Company Capital Stock, for exchange pursuant to this Section  2.3(b) , (i) the Parent Certificates (or direct registration) evidencing the shares of Parent Common Stock issuable pursuant to Section  2.2 to be exchanged for outstanding shares of Company Capital Stock, (ii) cash in an aggregate amount sufficient to make the payments in lieu of fractional shares provided for in Section  2.2(f) , and (iii) the Cash Consideration.
 
(c)           Promptly after the Effective Time (and in no event later than five business days after the Effective Time), Parent shall mail or shall cause to be mailed to each Holder (as defined below) a letter of transmittal (the “Letter of Transmittal” ) in customary form and reasonably acceptable to the Company and instructions for surrender of the Company Certificates.  Upon surrender to the Exchange Agent of a Company Certificate, together with such Letter of Transmittal duly executed, the Holder shall be entitled to receive in exchange therefor:  (i) certificates (or confirmation of direct registration) evidencing that number of shares of Parent Common Stock issuable to such Holder in accordance with this Article II ; (ii) any dividends or other distributions that such Holder has the right to receive pursuant to Section  2.3(d) ; (iii) cash in respect of fractional shares as provided in Section  2.2(f) ; and (iv) the Cash Consideration payable to such Holder in accordance with Section  2.2 , and such Company Certificate so surrendered shall forthwith be canceled.  No certificate representing shares of Parent Common Stock will be issued to a Person who is not the registered owner of a surrendered Company Certificate unless (i) the Company Certificate so surrendered has been properly endorsed or otherwise is in proper form for transfer, and (ii) such Person shall either (A) pay any transfer or other tax required by reason of such issuance or (B) establish to the reasonable satisfaction of the Surviving Corporation that such tax has been paid or is not applicable.  Until surrendered in accordance with the provisions of this Section  2.3 , from and after the Effective Time, each Company Certificate shall be deemed to represent, for all purposes, the right to receive the number of full shares of Parent Common Stock as determined in accordance with this Article II , cash in lieu of fractional shares as provided in Section  2.2(f) and the applicable cash component of the Merger Consideration.
 
(d)           No dividend or other distribution declared with respect to Parent Common Stock with a record date after the Effective Time will be paid to Holders of unsurrendered Company Certificates until such Holders properly surrender their Company Certificates.  Upon the surrender of such Company Certificates, there shall be paid to such Holders, promptly after such surrender, the amount of dividends or other distributions, excluding interest, declared with a record date after the Effective Time and not paid because of the failure to surrender Company Certificates for exchange.
 
 
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(e)           Notwithstanding anything to the contrary in this Agreement, neither the Exchange Agent, Parent, the Surviving Corporation nor any party hereto shall be liable to any holder of shares of Company Capital Stock for shares of Parent Common Stock, dividends or distributions thereon, cash in lieu of fractional shares or any Cash Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
 
2.4            Company Options and Warrants .
 
(a)           As of the Effective Time, by virtue of the Merger, and without any action on the part of the holders of the Company Options, each Company Option shall be automatically converted into a right to receive as of the Effective Time, for each Net Exercise Share issuable with respect to such Company Option, (i) a number of whole shares of fully paid and nonassessable shares of Parent Common Stock equal to the Option Exchange Ratio plus (ii) cash in lieu of fractional shares of Parent Common Stock in accordance with Section 2.2(f) , without interest.  For purposes of this Agreement the “ Option Exchange Ratio ” shall be equal to the Participating Amount Per Share divided by the Transaction Share Price.
 
(b)           As of the Effective Time, by virtue of the Merger, and without any action on the part of the holders of the Company Warrants, each Company Warrant outstanding, vested and exercisable immediately before the Effective Time shall be automatically converted into a right to receive as of the Effective Time, the applicable Merger Consideration for the class and number of shares of Company Capital Stock for which such Company Warrant is so exercisable.
 
(c)           The provisions of Sections  2.2(e) , Section  2.2(f) , and Section  2.3(b) (i) shall apply to the conversion of Company Options and Company Warrants pursuant to Section  2.4(a) and 2.4(b) .
 
(d)           Any option or warrant to purchase Company Capital Stock that is outstanding but not vested or exercisable immediately prior to the Effective Time shall be terminated and cancelled in all respects.
 
2.5            Lost, Stolen or Destroyed Certificate s .  In the event that any Company Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue and pay in respect of such lost, stolen or destroyed Company Certificates, upon the making of an affidavit of that fact by the holder thereof, certificates representing the shares of Parent Common Stock as may be required pursuant to Section  2.2 , cash in lieu of fractional shares, if any, as may be required pursuant to Section  2.2(f) , the Cash Consideration payable with respect to such Company Certificates and any dividends or distributions payable pursuant to Section  2.3(d) ; provided, however, that Parent may, in its reasonable discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Company Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent with respect to the Company Certificates alleged to have been lost, stolen or destroyed.
 
2.6            Tax Consequences .  For United States federal income tax purposes, it is intended by the parties hereto that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and that this Agreement constitutes a “plan of reorganization” within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3.
 
 
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2.7            Dissenting Shares .

(a)           Notwithstanding the provisions of Section  2.2 , Section  2.3 or any other provision of this Agreement to the contrary, Dissenting Shares (as defined below), if any, shall not be converted into or be exchangeable for the right to receive the Merger Consideration at or after the Effective Time, but instead shall be converted into the right of the holder thereof to receive such consideration as may be determined to be due to the holder of the Dissenting Shares pursuant to the DGCL.  If, after the Effective Time, any holder shall effectively withdraw his, her or its demand for appraisal with respect to his, her or its Dissenting Shares or such holder shall (through failure to perfect or otherwise) lose his, her or its rights to demand appraisal as to such Dissenting Shares, then any such shares of Company stock shall immediately be converted into the right to receive payment, without interest, as provided in this Article II and in accordance with the DGCL.  For purposes of this Agreement, “ Dissenting Shares ” shall mean shares of Company stock held immediately prior to the Effective Time by a stockholder who did not vote in favor of the Merger (or consent thereto in writing) and with respect to which demand to Company for purchase of such shares is duly made and perfected in accordance with Section 262 of the DGCL and not subsequently and effectively withdrawn or forfeited.
 
(b)           Prior to the Closing, Company shall conduct the defense of any claim of appraisal or dissenters’ rights under the DGCL.  Company shall give Parent (i) prompt notice of its receipt of any written demands for appraisal of any shares of Company stock, withdrawals of such demands, and any other instruments relating to the Merger served on Company pursuant to applicable law and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL.  Company shall not, without the prior written consent of Parent, or as otherwise required under the DGCL, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares.  From and after the Closing, Parent and the Surviving Corporation shall conduct the defense of any claim of appraisal or dissenters’ rights under the DGCL.
 
2.8            Required Withholdings .  The Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration such amounts as may be required to be deducted or withheld therefrom under the Code or under any applicable provision of state, local or foreign tax law or under any other applicable legal requirement.  To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been delivered or otherwise paid to the Person to whom such amounts would otherwise have been delivered or otherwise paid pursuant to the Merger and this Agreement.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF COMPANY
 
Company makes to Parent and Merger Sub the representations and warranties contained in this Article III , in each case subject to the exceptions set forth in the disclosure statement dated as of the date hereof (the “ Company Disclosure Statement ”).  The Company Disclosure Statement shall be arranged in schedules corresponding to the numbered and lettered Sections of this Article III , and the disclosure in any Schedule of the Company Disclosure Statement shall qualify only the corresponding Section of this Article III ; provided , however , that disclosure in any section of the Company Disclosure Statement shall also qualify other Sections of this Article III , but only to the extent it is reasonably apparent from a reading of the disclosure set forth in such Section that such disclosure is applicable to such other Section or Sections.
 
 
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3.1            Organization, Etc.
 
(a)           Each of Company and its Subsidiaries, all of which are listed on Schedule 3.1(b) of the Company Disclosure Statement (the “ Company Subsidiaries ”), is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority or qualification has not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.  Each of Company and the Company Subsidiaries is duly qualified as a foreign Person to do business, and is in good standing (with respect to jurisdictions that recognize such concept), in each jurisdiction where the character of its owned or leased properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing has not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
 
For the purposes of this Agreement, “ Company Material Adverse Effect ” means any change, effect or circumstance that, individually or when taken together with all other such similar or related changes, effects or circumstances that have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect (i) is materially adverse to the business, financial condition, results of operations, or assets and liabilities, taken as a whole, of Company, including the Company Subsidiaries, or (ii) would reasonably be expected to prevent the Company from consummating the Merger or any of the transactions contemplated by the Agreement or to perform any of its obligations under the Agreement before the Effective Time, or (iii) materially and adversely affects Parent’s ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the Surviving Corporation.  Notwithstanding the foregoing, with respect to item (i) above, none of the following shall be deemed (either alone or in combination) to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Company Material Adverse Effect: (A) any adverse change, event or effect arising from or relating to general business or economic conditions and (B) any adverse change, event or effect relating to or affecting social networking/internet retail industry generally, in either case which does not disproportionately affect Company.
 
(b)           Neither Company nor any of the Company Subsidiaries is in violation of any provision of its certificate of incorporation or bylaws or, in the case of any Company Subsidiary that is not a corporation, any equivalent charter document.   Schedule 3.1(b) of the Company Disclosure Statement sets forth (i) the full name of each Company Subsidiary and any other entity in which Company has an equity interest, its capitalization and the ownership interest of Company and each other Person (if any) therein, (ii) the jurisdiction in which each such Company Subsidiary is organized, (iii) each jurisdiction in which Company and each of the Company Subsidiaries is qualified to do business as a foreign Person, and (iv) the names of the current directors and officers of Company and of each Company Subsidiary (or their equivalents if the Company or a Company Subsidiary is not a corporation).  Company has made available to Parent accurate and complete copies of the articles of incorporation and bylaws and, in the case of any Company Subsidiary that is not a corporation, any other equivalent charter documents, as currently in effect, of Company and each of the Company Subsidiaries.
 
 
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3.2            Authority Relative to This Agreement .  Company has full corporate power and authority to (i) execute and deliver this Agreement, and (ii) assuming the approval of the adoption of the Agreement and the approval of the Merger by at least a majority of the outstanding shares of Company Common Stock and 70% of the outstanding shares of Company Preferred Stock at the Company Special Meeting or any adjournment or postponement thereof in accordance with the DGCL, consummate the Merger and the other transactions contemplated hereby.  The execution and delivery of this Agreement, and the consummation of the Merger and the other transactions contemplated hereby, have been duly and validly authorized by the board of directors of Company, and no other corporate proceedings on the part of Company are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated hereby (other than, with respect to the Merger, the approval of the adoption of the Agreement and approval of the Merger by at least a majority of the outstanding shares of Company Common Stock and 70% of the outstanding shares of Company Preferred Stock at the Company Special Meeting or any adjournment or postponement thereof in accordance with the DGCL).  The Agreement has been duly and validly executed and delivered by Company and, assuming due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding agreement of Company, enforceable against Company in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
 
3.3            No Violations, Etc.   No filing with or notification to, and no permit, authorization, consent or approval of, any court, administrative agency, commission, or other governmental or regulatory body, authority or instrumentality (“ Government Entity ”) is necessary on the part of Company or any Company Subsidiary for the consummation by Company of the Merger and the other transactions contemplated hereby except (i) for the filing of the Certificate of Merger as required by the DGCL, (ii)  for compliance with any applicable state takeover laws, (iii) any required compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and (iv) where the failure to make such filing or notification or to obtain such permit, authorization, consent or approval has not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.  Neither the execution and delivery of the Agreement, nor the consummation of the Merger or the other transactions contemplated hereby, nor compliance by Company with all of the provisions hereof and thereof, will, subject to obtaining the approval of the adoption of this Agreement and the approval of the Merger by the holders of at least a majority of the outstanding shares of Company Common Stock and 70% of the outstanding shares of Company Preferred Stock at the Company Special Meeting or any adjournment or postponement thereof in accordance with the DGCL, (i) conflict with or result in any breach of any provision of the articles of incorporation or bylaws of Company or any Company Subsidiary (or, in the case of any Company Subsidiary that is not a corporation, the equivalent charter documents of such Company Subsidiary), (ii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Company or any Company Subsidiary, or by which any of their properties or assets may be bound, or (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or result in any material change in, or give rise to any right of termination, cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or provisions of any Company Contract (as defined below), except in the case of clauses (ii) or (iii) for any violation, breach or default that has not had, or could not reasonably be expected to have, a Company Material Adverse Effect.   Schedule 3.3 of the Company Disclosure Statement lists all consents, notices, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby under any Company Contracts, or any of Company’s or any Company Subsidiaries’ notes, bonds, mortgages, indentures, deeds of trust, licenses or leases, contracts, agreements or other instruments or obligations, except for those whose failure to obtain will not have a Company Material Adverse Effect.
 
 
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3.4            Board Recommendation .  The board of directors of Company has (i) approved and adopted the Agreement, (ii) determined that this Agreement and the transactions contemplated hereby (including the Merger) are advisable and in the best interests of the stockholders of Company, (iii) resolved to recommend this Agreement to the stockholders of Company, and (iv) taken all action necessary to exempt the execution and delivery of this Agreement and the Company Voting Agreements and the consummation of the transactions contemplated hereby and thereby from the provisions of all applicable state anti-takeover statutes.
 
3.5            Capitalization .
 
(a)           The authorized capital of Company as of the date hereof consists of (i) 27,000,000 shares of Company Common Stock, of which 12,267,475 shares are outstanding, and (ii) 8,809,777 shares of Company Preferred Stock, of which (A) 4,490,794 shares have been designated Company Series A Preferred Stock, of which 4,096,700 shares are outstanding, and (B) 4,318,983 shares have been designated Company Series B Preferred Stock, of which 4,318,983 shares are outstanding.  The rights, privileges and preferences of the Preferred Stock are as stated in the certificate of incorporation of the Company and as provided by the DGCL.
 
(b)           Except for the Company Options and Company Warrants identified on Schedule 3.5(b) of the Company Disclosure Statement, there are no warrants, options, convertible securities, calls, rights, stock appreciation rights, preemptive rights, rights of first refusal, or agreements or commitments of any nature obligating Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests of Company, or obligating Company to grant, issue, extend, accelerate the vesting of, or enter into, any such warrant, option, convertible security, call, right, stock appreciation right, preemptive right, right of first refusal, agreement or commitment.  To the knowledge of Company, except as set forth in the Company Voting Agreements, there are no voting trusts, proxies or other agreements or understandings with respect to the capital stock of Company.  For purposes of this Agreement, the phrase “to the knowledge of Company,” or words of similar import, shall mean the actual knowledge of executive officers of the Company and such other persons set forth on Schedule 3.5(b) of the Company Disclosure Statement.
 
 
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(c)           True and complete copies of the Company Stock Plan, and of the forms of all agreements and instruments relating to or issued thereunder, have been made available to Parent.  Such agreements, instruments, and forms have not been further amended, modified or supplemented, and there are no agreements to amend, modify or supplement any such agreements, instruments or forms.
 
3.6            Compliance with Laws .

(a)           Neither Company nor any Company Subsidiary, in any material respect, has violated or failed to comply with any statute, law, ordinance, rule or regulation (including without limitation relating to the export or import of goods or technology) of any foreign, federal, state or local government or any other governmental department or agency.  Company and the Company Subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted and as proposed to be conducted, except for those the absence of which has not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
 
(b)           Neither the Company, nor any Company Subsidiary, nor any of their respective directors, officers, employees or agents has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended (such act, including the rules and regulations thereunder (the “ FCPA ”), including, without limitation, offered, paid, promised to payor authorized the payment of any money or offer, gift, promise to give, or authorized the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure continued compliance therewith.
 
3.7            Financial Statement s; Controls .
 
(a)            Schedule 3.7 contains copies of the audited consolidated financial statements (including, in each case, any related notes thereto) for the Company and the Company Subsidiaries for the years ended December 31, 2008, 2009 and 2010 and the interim unaudited consolidated financial statements for the Company and the Company Subsidiaries for the quarters ended March 31, 2011 and June 30, 2011 (collectively, the “ Company Financial Statements ”).  All of the Company Financial Statements  (x) were prepared in accordance with accounting principles generally accepted in the United States of America (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or on Schedule 3.7 ) and (y) fairly presented the consolidated financial position of Company and the Company Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, consistent with the books and records of Company and the Company Subsidiaries, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount.  The financial statements as of and for the two quarters ended June 30, 2011, included in Schedule 3.7 , are herein referred to as the “ Company Preliminary Financial Statements ” and the balance sheet of Company as of June 30, 2011 is herein referred to as the “ Company Balance Sheet .”
 
 
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(b)           The Company maintains a system of internal controls sufficient to provide reasonable assurance that (i) transactions are executed with management’s authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s authorization, and (iv) the recorded amount for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  There are no significant deficiencies or material weaknesses in the design or operation of the Company’s internal controls, and Company has not been informed by its independent auditors, accountants, consultants or others involved in the review of internal controls that any such significant deficiencies or material weaknesses exist, which could adversely affect the Company’s ability to record, process, summarize and report financial data.  There is no fraud in connection with the Company Financial Statements, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.
 
3.8            Absence of Undisclosed Liabilities .  Neither Company, nor any of the Company Subsidiaries or the entities listed on Schedule 3.1(b) has any liabilities (absolute, accrued, contingent or otherwise) other than (i) liabilities included in the Company Balance Sheet and the related notes to the financial statements, (ii) liabilities of a nature not required to be disclosed on a balance sheet or in the notes to the consolidated financial statements prepared in accordance with GAAP, (iii) normal or recurring liabilities incurred since June 30, 2011 in the ordinary course of business consistent with past practice which, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect, and (iv) liabilities under this Agreement.
 
3.9            Absence of Changes or Events .  Except as contemplated by this Agreement or as disclosed on Schedule 3.9 , since June 30, 2011 (the “ Reference Date ”), no state of facts, change, event or effect that has had or could reasonably be expected to have Company Material Adverse Effect has occurred and, in addition, Company, the Company Subsidiaries and the entities listed on Schedule 3.1(b) have not, directly or indirectly:
 
(a)           purchased, otherwise acquired, or agreed to purchase or otherwise acquire, any shares of capital stock of Company or any of the Company Subsidiaries, or declared, set aside or paid any dividend or otherwise made a distribution (whether in cash, stock or property or any combination thereof) in respect of their capital stock (other than dividends or other distributions payable solely to Company or a wholly-owned Subsidiary of Company);
 
(b)           authorized for issuance, issued, sold, delivered, granted or issued any options, warrants, calls, subscriptions or other rights for, or otherwise agreed or committed to issue, sell or deliver any shares of any class of capital stock of Company or the Company Subsidiaries or any securities convertible into or exchangeable or exercisable for shares of any class of capital stock of Company or the Company Subsidiaries other than pursuant to and in accordance with the Company Stock Plans;
 
 
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(c)           (i) created or incurred any indebtedness for borrowed money exceeding $100,000 in the aggregate, (ii) assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any other individual, firm or corporation, made any loans or advances to any other individual, firm or corporation exceeding $100,000 in the aggregate, (iii) entered into any oral or written material agreement or any material commitment or transaction or incurred any liabilities material to Company and the Company Subsidiaries taken as a whole, or involving in excess of $100,000;
 
(d)           instituted any material change in accounting methods, principles or practices other than as required by GAAP and disclosed in the notes to the Company Financial Statements;
 
(e)           revalued any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivable in excess in each case of an amount equal to $100,000 plus amounts previously reserved as reflected in the Company Balance Sheet;
 
(f)           suffered any damage, destruction or loss, whether covered by insurance or not, except for such as would not, individually and in the aggregate exceed $100,000;
 
(g)            increased in any manner the compensation of any of its directors, officers or, other than in the ordinary course of business and consistent with past practice, non-officer employees, (ii) granted any severance or termination pay to any Person other than in the ordinary course of business and consistent with past practice; (iii) other than in the ordinary course of business consistent with past practice entered into any oral or written employment, consulting, indemnification or severance agreement with any Person; (iv) other than as required by law, adopted, become obligated under, or amended any employee benefit plan, program or arrangement; or (v) repriced any Company Options;
 
(h)           sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer, lease, license, pledge, mortgage, encumber, or otherwise dispose of, any material properties (including intangibles, real, personal or mixed);
 
(i)           amended its articles of incorporation, bylaws, or any other charter document, or effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
 
(j)           made any capital expenditure in any calendar month which, when added to all other capital expenditures made by or on behalf of Company and the Company Subsidiaries in such calendar month resulted in such capital expenditures exceeding $100,000 in the aggregate;
 
(k)           paid, discharged or satisfied any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities (including accounts payable) in the ordinary course of business and consistent with past practice, or collected, or accelerated the collection of, any amounts owed (including accounts receivable) other than their collection in the ordinary course of business;
 
 
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(l)           waived, released, assigned, settled or compromised any material claim or litigation, or commenced a lawsuit other than for the routine collection of bills;
 
(m)           agreed or proposed to do any of the things described in the preceding clauses (a) through (l) other than as expressly contemplated or provided for in this Agreement.
 
3.10            Capital Stock of Subsidiaries .  Company is directly or indirectly the record and beneficial owner of all of the outstanding shares of capital stock or other equity interests of each of the Company Subsidiaries.  All of such shares have been duly authorized and are validly issued, fully paid, nonassessable and free of preemptive rights with respect thereto and are owned by Company free and clear of any claim, lien or encumbrance of any kind with respect thereto.  There are no proxies or voting agreements with respect to such shares, and there are not any existing options, warrants, calls, subscriptions, or other rights or other agreements or commitments obligating Company or any of the Company Subsidiaries to issue, transfer or sell any shares of capital stock of any Subsidiary or any other securities convertible into, exercisable for, or evidencing the right to subscribe for any such shares.  Company does not directly or indirectly own any interest in any Person except the Company Subsidiaries.
 
3.11            Litigation .
 
(a)           There is no private or governmental claim, action, suit (whether in law or in equity), or proceeding of any nature (“ Action ”) pending and, to the knowledge of Company, there is not any private or governmental investigation, or any of the foregoing threatened against Company, any of the Company Subsidiaries or any of their respective officers and directors (in their capacities as such), or involving any of their assets or capital stock, before any court, governmental or regulatory authority or body, or arbitration tribunal.  There is no Action pending or, to the knowledge of Company, threatened which in any manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
 
(b)           There is no outstanding judgment, order, writ, injunction or decree of any court, governmental or regulatory authority, body or agency, or arbitration tribunal in a proceeding to which Company, any Subsidiary of Company, or any of their assets is or was a party or by which Company, any Subsidiary of Company, or any of their assets is bound.
 
3.12            Insurance .   Schedule 3.12 of the Company Disclosure Statement lists all insurance policies (including without limitation workers’ compensation insurance policies) covering the business, properties or assets of Company and the Company Subsidiaries, the premiums and coverages of such policies, and all claims in excess of $100,000 made against any such policies since January 1, 2008.  All such policies are in effect, and true and complete copies of all such policies have been made available to Parent.  Company has not received notice of the cancellation or threat of cancellation of any of such policy.
 
 
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3.13            Contracts and Commitments .
 
(a)           Except as set forth on Schedule 3.13 , or except as contemplated by this Agreement, neither Company, nor the Company Subsidiaries, nor the entities listed on Schedule 3.1(b) 3.1(b) is a party to or bound by any oral or written contract, obligation or commitment of any type in any of the following categories:
 
(i)           agreements or arrangements that provide for employment other than at will or that contain severance pay, understandings with respect to tax arrangements, understandings with respect to expatriate benefits, or post-employment liabilities or obligations;
 
(ii)           agreements or plans under which benefits will be increased or accelerated by the occurrence of any of the transactions contemplated by this Agreement, or under which the value of the benefits will be calculated on the basis of any of the transactions contemplated by this Agreement;
 
(iii)           agreements, contracts or commitments currently in force relating to the disposition or acquisition of assets other than in the ordinary course of business, or relating to an ownership interest in any corporation, partnership, joint venture or other business enterprise;
 
(iv)           agreements, contracts or commitments for the purchase of materials, supplies or equipment, under which the aggregate payments for the past twelve (12) months exceeded $100,000, which are with sole or single source suppliers;
 
(v)           guarantees or other agreements, contracts or commitments under which Company or any of the Company Subsidiaries is absolutely or contingently liable for (A) the performance of any other Person, firm or corporation (other than Company or the Company Subsidiaries), (B) the whole or any part of the indebtedness or liabilities of any other Person, firm or corporation (other than Company or the Company Subsidiaries), or (C) indemnification obligations to officers and directors;
 
(vi)           powers of attorney authorizing the incurrence of a material obligation on the part of Company or the Company Subsidiaries;
 
(vii)           agreements, contracts or commitments which limit or restrict (A) where Company or any of the Company Subsidiaries may conduct business, (B) the type or lines of business (current or future) in which they may engage, or (C) any acquisition of assets or stock (tangible or intangible) by Company or any of the Company Subsidiaries;
 
(viii)           agreements, contracts or commitments, under which the aggregate payments or receipts for the past 12 months exceeded $100,000, containing any agreement with respect to a change of control of Company or any of the Company Subsidiaries;
 
(ix)           agreements, contracts or commitments for the borrowing or lending of money, or the availability of credit (except credit extended by Company or any of the Company Subsidiaries to customers in the ordinary course of business and consistent with past practice);
 
(x)           any hedging, option, derivative or other similar transaction and any foreign exchange position or contract for the exchange of currency; or
 
 
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(xi)           any agreement, contract or commitment that would be otherwise required to be filed as an exhibit to a periodic report under the Exchange Act, as provided by Rule 601 of Regulation S-K promulgated under the Exchange Act.
 
Each contract, agreement or commitment of the type described in this Section  3.13 is referred to herein as a “ Company Contract ” and each such Company Contract identified in Section  3.13(a)(i) through Section  3.13(a)(x) is identified by name and date on Schedule 3.13(a) to the Company Disclosure Statement.
 
(b)           Neither Company nor any of the Company Subsidiaries, nor to the knowledge of Company any other party to a Company Contract, has breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, (nor does there exist any condition under which, with the passage of time or the giving of notice or both, could reasonably be expected to cause such a breach, violation or default under), any Company Contract, other than any breaches, violations or defaults which have not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
 
(c)           Each Company Contract is a valid, binding and enforceable obligation of Company and to the knowledge of Company, of the other party or parties thereto, in accordance with its terms, and in full force and effect, except where the failure to be valid, binding, enforceable and in full force and effect has not had, or could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect and to the extent enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights governing or by general principles of equity.
 
(d)           An accurate and complete copy of each Company Contract has been made available to Parent.
 
3.14            Labor Matters; Employment and Labor Contracts .
 
(a)           None of Company or any of the Company Subsidiaries is a party to any union contract or other collective bargaining agreement, nor to the knowledge of Company or any of the Company Subsidiaries are there any activities or proceedings of any labor union to organize any of its employees.  Each of Company and the Company Subsidiaries is in compliance with all applicable (i) laws, regulations and agreements respecting employment and employment practices and (ii) occupational health and safety requirements.
 
(b)           There is no labor strike, slowdown or stoppage pending (or any labor strike or stoppage threatened) against Company or any of the Company Subsidiaries.  No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Company or any of the Company Subsidiaries who are not currently organized.  Neither Company nor any of the Company Subsidiaries has any material obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), with respect to any former employees or qualifying beneficiaries thereunder.  There are no controversies pending or, to the knowledge of Company or any of the Company Subsidiaries, threatened, between Company or any of the Company Subsidiaries and any of their respective employees.  The employment of each of the employees of Company and each Company Subsidiary is “at will” (except for non-U.S. employees) and Company and each Company Subsidiary does not have any obligation to provide any particular form or period of notice (except as otherwise required by applicable law) prior to terminating the employment of any of their respective employees.  Neither Company nor any Company Subsidiary is currently engaged, or has ever engaged in, any arrangement whereby it leases employees or other service providers from another Person.
 
 
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3.15            Intellectual Property Rights .
 
(a)           To the knowledge of Company, Company and the Company Subsidiaries own or have the right to use all intellectual property used to conduct their respective businesses (such intellectual property and the rights thereto are collectively referred to herein as the “ Company IP Rights ”).  No royalties or other payments are payable to any Person with respect to commercialization of any products presently sold or under development by Company or the Company Subsidiaries.
 
(b)           Except as has not had, or could not reasonably be expected to have, a Company Material Adverse Effect, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) constitute a breach of any instrument or agreement governing any Company IP Rights, (ii) cause the modification of any term of any license or agreement relating to any Company IP Rights including but not limited to the modification of the effective rate of any royalties or other payments provided for in any such license or agreement, (iii) cause the forfeiture or termination of any Company IP Rights, (iv) give rise to a right of forfeiture or termination of any Company IP Rights or (v) impair the right of Company or the Surviving Corporation to use, sell or license any Company IP Rights or portion thereof.
 
(c)           Neither the manufacture, marketing, license, sale or intended use of any product or technology currently licensed or sold or under development by Company or any of the Company Subsidiaries (i) violates in any material respect any license or agreement between Company or any of the Company Subsidiaries and any third party or (ii) infringes in any material respect any patents or other intellectual property rights of any other party; and there is no pending or, to the knowledge of Company, threatened claim or litigation contesting the validity, ownership or right to use, sell, license or dispose of any Company IP Rights, or asserting that any Company IP Rights or the proposed use, sale, license or disposition thereof, or the manufacture, use or sale of any Company products, conflicts or will conflict with the rights of any other party.
 
(d)            Schedule 3.15(d) of the Company Disclosure Statement lists all patents, trade names, domain names, registered trademarks and service marks, and applications for any of the foregoing owned or possessed by Company or any of the Company Subsidiaries and true and complete copies of such materials have been made available to Parent.
 
(e)           Company has provided to Parent a true and complete copy of its standard form of employee confidentiality agreement and Company has used its commercially reasonable efforts to cause all employees of Company and the Company Subsidiaries to execute such an agreement.  Company has taken all commercially reasonably necessary steps to ensure that all consultants or third parties with access to material proprietary information of Company have executed appropriate non-disclosure agreements that adequately protect the Company IP Rights.
 
 
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Company has taken all commercially reasonably necessary steps to ensure that Company’s and the Company Subsidiaries’ material source codes and material trade secrets have not been used, distributed or otherwise commercially exploited under circumstances which would cause the loss of copyright prior to the statutory expiration date or the loss of trade secret status.
 
(f)           To the knowledge of Company, none of the employees or consultants of Company or any of the Company Subsidiaries is obligated under any contract, covenant or other agreement or commitment of any nature, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee’s or consultant’s best efforts to promote the interests of Company and the Company Subsidiaries or that would conflict with the business of Company as presently conducted or proposed to be conducted.  Neither Company nor any of the Company Subsidiaries has entered into any agreement to indemnify any other Person, including but not limited to any employee or consultant of Company or any of the Company Subsidiaries, against any charge of infringement, misappropriation or misuse of any intellectual property, other than indemnification provisions contained in purchase orders, customer agreements, reseller agreements or distribution agreements, arising in the ordinary course of business.  All current and former employees and consultants of Company or any of the Company Subsidiaries have signed valid and enforceable written assignments to Company or the Company Subsidiaries of any and all rights or claims in any intellectual property that any such employee or consultant has or may have by reason of any contribution, participation or other role in the development, conception, creation, reduction to practice or authorship of any invention, innovation, development or work of authorship or any other intellectual property that is used in the business of Company, and Company and the Company Subsidiaries possess signed copies of all such written assignments by such employees and consultants except where failure to obtain such assignments would not have a Company Material Adverse Effect.  With respect to assignments of patents or application for patents, Company and the Company Subsidiaries possess signed copies of assignments from the inventors of the intellectual property covered by the patents and applications.
 
3.16            Taxes .
 
(a)           For the purposes of this Agreement, “ Tax ” or “ Taxes ” refers to any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or measured by gross receipts, income (gross or net), profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations imposed by law for the Taxes of another Person, including under Treasury Regulations Section 1.1502-6 and analogous provisions of foreign, state and local law, and including any liability for taxes of a predecessor entity or by virtue of being a transferee of any other Person.  For purposes of this Agreement, “ Tax Return ” or “ Tax Returns ” refers to all federal, state and local and foreign returns, schedules, estimates, information statements and reports relating to Taxes.
 
 
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(b)           Company and each of the Company Subsidiaries have filed all material Tax Returns required to be filed by them, and all such Tax Returns are true, correct, and complete except with respect to immaterial items.  Company and each of the Company Subsidiaries have paid (or Company has paid on behalf of each of the Company Subsidiaries) all Taxes due and payable as shown on such Tax Returns.  True and correct copies of all Tax Returns filed by Company and the Company Subsidiaries for the period beginning January 1, 2003 through the date hereof have been provided to Parent.  The Company Balance Sheet reflects an adequate reserve (which reserves were established in accordance with GAAP) for the payment of all Taxes of Company and the Company Subsidiaries, accrued through the date of such financial statement.  No deficiencies for any Taxes have been proposed, asserted or assessed against Company or any of the Company Subsidiaries, other than deficiencies that are reflected by reserves maintained in accordance with GAAP and are being contested in good faith and by appropriate procedures.
 
(c)           None of Company and the Company Subsidiaries (i) has received any notice that it is being audited by any taxing authority; (ii) has granted any presently operative waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax; (iii) has granted to any Person a power of attorney with respect to Taxes, which power of attorney will be in effect as of or following the Closing; (iv) has received an inquiry regarding the filing of Tax Returns from a jurisdiction where it is not presently filing Tax Returns; or (v) has availed itself of any Tax amnesty or similar relief in any taxing jurisdiction.  All audits of federal, state, local and foreign Tax Returns by the relevant taxing authorities have been completed.
 
(d)           None of Company and the Company Subsidiaries has assumed liability for the Taxes of another Person under any contract, agreement, arrangement or course of dealing.  None of the Company and the Company Subsidiaries are, or will be after the Effective Time, bound by any tax sharing agreement (including any indemnity arrangements) or similar arrangements.
 
(e)           There is no lien for Taxes on any of the assets of Company or any of the Company Subsidiaries, except for inchoate liens for Taxes not yet due and payable.
 
(f)           No payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, as a direct or indirect result of the transactions contemplated by this Agreement, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the regulations thereunder (and any comparable provisions of state, local or foreign tax law).  All compensation payable to any employee of the Company or any Company Subsidiary is deductible under Section 162(m) of the Code (and any comparable provisions of state, local or foreign tax law).
 
(g)           Company and each of the Company Subsidiaries have properly withheld on all amounts paid to consultants or employees, or to Persons located outside the United States and have paid over all such amounts to the appropriate taxing authorities.
 
(h)           All material elections with respect to Taxes affecting the Company or any Company Subsidiary or any asset owned by the Company or any Company Subsidiary as of the date of this Agreement are set forth on Schedule 3.16(h) of the Company Disclosure Statement.  Neither the Company nor any Company Subsidiary has:  (i) agreed to or is  required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (ii) acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (iii) made, and will not make, a consent dividend election under Section 565 of the Code; (iv) elected at any time to be treated as an S corporation within the meaning of Sections 1361 or 1362 of the Code; or (v) made any of the foregoing elections and is required to apply any of the foregoing rules under any comparable state or local Tax provision.
 
 
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(i)           Neither the Company nor any Company Subsidiary (i) is a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes, (ii) owns a single member limited liability company or other entity which is treated as a disregarded entity, (iii) is a stockholder of a “controlled foreign corporation” as defined in Section 957 of the Code or a “passive foreign investment company” as defined in Section 1297 of the Code (or any similar provision of state, local or foreign Tax law), or (iv) is a “personal holding company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign Tax law).
 
(j)           Neither Company nor any Company Subsidiary is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) other than a group the common parent of which is or was Company.
 
3.17            Employee Benefit Plans; ERISA .
 
(a)            Schedule 3.17(a) of the Company Disclosure Statement lists all (i) “employee pension benefit plans” as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) (“ Pension Plans ”); (ii) “welfare benefit plans” as defined in Section 3(1) of ERISA (“ Welfare Plans ”); (iii) stock bonus, stock option, restricted stock, phantom stock, stock appreciation right, stock purchase or other equity compensation plan; bonus, profit-sharing plan or other incentive plan; deferred compensation arrangement; severance plan; holiday or vacation plan; retirement or supplemental retirement plan; sabbatical program; medical, heath-related, life or other insurance plan; relocation arrangement; cafeteria (Code Section 125) or dependent care (Code Section 129) benefit; or any other fringe benefit program; and (iv) other employee benefit or compensation plan, agreement (including individual agreement), program, policy or arrangement covering employees, directors and consultants of the Company, any Company Subsidiary any of its or their Company ERISA Affiliates (as hereinafter defined) that either is maintained or contributed to by Company or any of the Company Subsidiaries or any of their Company ERISA Affiliates or to which Company or any of the Company Subsidiaries or any of their Company ERISA Affiliates is obligated to make payments or otherwise may have any liability (collectively, the “ Company Employee Benefit Plans ”) with respect to employees or other service-providers or former employees or other service-providers of Company, the Company Subsidiaries, or any of their ERISA Affiliates.  For purposes of this Agreement, “ Company ERISA Affiliate ” shall mean any person (as defined in Section 3(9) of ERISA) that is or has been a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code, including without limitation Company or any of the Company Subsidiaries.
 
 
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(b)           Company and each of the Company Subsidiaries, and each of the Company Employee Benefit Plans, are in compliance with, has performed all material obligations required under, and is not subject to liability under, the applicable provisions of ERISA, the Code and other applicable laws, and with the terms of each Company Employee Benefit Plan.  Each Company Employee Benefit Plan can be amended, terminated or otherwise discontinued at or after the Effective Time in accordance with its terms, without liability to Parent or the Surviving Corporation, and no Company Employee Benefit Plan will be subject to any surrender fees or service fees upon termination other than the normal and reasonable administrative fees associated with the termination of benefit plans.
 
(c)           All contributions to, and payments from, the Pension Plans which are required to have been made in accordance with the Pension Plans have been timely made, and timely deposits of employee contributions have been made.
 
(d)           To the knowledge of Company, all of Company’s Pension Plans and Company’s Subsidiaries’ Pension Plans intended to qualify under Section 401 of the Code so qualify, and no event has occurred and no condition exists with respect to the form or operation of such Pension Plans which would cause the loss of such qualification or the imposition of any material liability, penalty or tax under ERISA or the Code, except for such insignificant operational failures as may be self-corrected under the Internal Revenue Service Employee Plans Compliance Resolution System without cost to the Company.
 
(e)           To the knowledge of Company, there are no (i) investigations pending by any governmental entity involving the Company Employee Benefit Plans, nor (ii) pending or threatened claims (other than routine claims for benefits), suits or proceedings against any Company Employee Benefit Plans, against the assets of any of the trusts under any Company Employee Benefit Plans or, against any fiduciary of any Company Employee Benefit Plans or against Company, any Company Subsidiary or any of its or their Company ERISA Affiliates with respect to the operation of such plan or asserting any rights or claims to benefits under any Company Employee Benefit Plans or against the assets of any trust under such plan.  To the knowledge of Company, there are no facts which would give rise to any liability under this Section  3.17(e) in the event of any such investigation, claim, suit or proceeding.
 
(f)           None of Company, any of the Company Subsidiaries nor any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other “party in interest” or “disqualified person” with respect to the Pension Plans or Welfare Plans, has engaged in a “prohibited transaction” (as such term is defined in Section 4975 of the Code or Section 406 of ERISA).
 
(g)           None of Company, any of the Company Subsidiaries, or any of their Company ERISA Affiliates maintains or contributes to, nor have they ever maintained or contributed to, any pension plan subject to Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA.
 
 
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(h)           Neither Company nor any Subsidiary of Company nor any Company ERISA Affiliate has incurred any liability under Title IV of ERISA or under Code Section 4-13 that has not been satisfied in full.
 
(i)           Neither Company, any of the Company Subsidiaries nor any of their Company ERISA Affiliates has any liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA, or any multiple employer plan, within the meaning of Code Section 413(c).
 
(j)           With respect to each of the Company Employee Benefit Plans, true, correct and complete copies of the following documents have been made available to Parent:  (i) the plan document and any related trust agreement, including amendments thereto, (ii) any current summary plan descriptions and other material communications to participants relating to the Company Employee Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most recent United States Internal Revenue Service (“ IRS ”) determination letter, if applicable.  Company or any Company Subsidiary has timely filed and delivered or made available to Parent the three most recent annual reports (Form 5500) and all schedules attached thereto for each Company Employee Benefit Plan that is subject to ERISA and Code reporting requirements, and all material communications with participants, the IRS, the U.S. Department of Labor, or any other governmental authority, administrators, trustees, beneficiaries and alternate payees relating to any Company Employee Benefit Plan.
 
(k)           None of the Welfare Plans maintained by Company or any of the Company Subsidiaries provides for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under COBRA, or except at the expense of the participant or the participant’s beneficiary.  Company and each of the Company Subsidiaries which maintain a “group health plan” within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder.
 
(l)           No liability under any Pension Benefit Plan or Welfare Plan has been funded or satisfied with the purchase of a contract from, and no self-insured plan receives administrative services from, an insurance company as to which Company or any of the Company Subsidiaries has received notice that such insurance company is in rehabilitation or a comparable proceeding.
 
(m)           Neither the consummation of the transactions contemplated by this Agreement, nor any termination of employment or any other service relationship, will result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee, director or consultant of Company or any of the Company Subsidiaries.  There has been no amendment to, written interpretation or announcement (whether or not written) by Company, any Company Subsidiary or other Company ERISA Affiliate relating to, or change in participation or coverage under, any Company Employee Benefit Plan which would materially increase the expense of maintaining such Company Employee Benefit Plan above the level of expense incurred with respect to such Company Employee Benefit Plan for the most recent fiscal year included in the Company Financial Statements.
 
 
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(n)           To the knowledge of the Company, (i) no Company Employee Benefit Plan is a nonqualified deferred compensation plan within the meaning of Section 409A(d)(1) of the Code (each such Employee Plan, a “ Deferred Compensation Plan ”); (ii) each Deferred Compensation Plan satisfies the requirements to avoid the consequences set forth in Section 409A(a)(1) of the Code; and (iii) neither the Company nor any of its Affiliates has (i) since October 4, 2004, granted to any person an interest in any Deferred Compensation Plan which interest has been or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be subject to the additional tax (including interest) imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (ii) granted to any person an interest in any Deferred Compensation Plan which interest has or will, because of the lapse of a substantial risk of forfeiture with respect to such interest after December 31, 2004 or because such interest is earned after December 31, 2004, be subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (iii) since October 4, 2004, modified the terms of any Deferred Compensation Plan in a manner that could cause an interest previously granted under such plan to become subject to the additional tax (including interest) imposed by Section 409A(a)(1)(B) or (b)(4) of the Code.
 
(o)           Company and each Company Subsidiary is in compliance in all material respects with the Worker Adjustment Retraining Notification Act of 1988, as amended (“ WARN Act ”), or any similar state or local law.  In the past two years, (i) neither Company nor any Company Subsidiary has effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business; (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of Company and Company Subsidiaries; and (iii) neither Company nor any Company Subsidiary has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.  Neither Company nor any Company Subsidiary has caused any of its employees to suffer an “employment loss” (as defined in the WARN Act) during the 90 day period prior to the effective date of this Agreement.
 
3.18            Environmental Matters .
 
(a)           Except for such cases that, individually or in the aggregate, have not and would not reasonably be expected to have a Company Material Adverse Effect, no underground storage tanks and no amount of any substance that has been designated by any Government Entity or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to said laws which term shall not include office and janitorial supplies (insofar as they are stored or used in the ordinary course of business) (a “ Hazardous Material ”), are present, as a result of the actions of Company or any of the Company Subsidiaries or, to the knowledge of Company, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Company or any of the Company Subsidiaries has at any time owned, operated, occupied or leased.
 
 
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(b)           Except for such cases that, individually or in the aggregate, have not and would not reasonably be expected to have a Company Material Adverse Effect, neither Company nor any of the Company Subsidiaries has transported, stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has Company or any of the Company Subsidiaries disposed of, transported, sold, used, released, exposed its employees or others to or manufactured any product containing a Hazardous Material (collectively “ Hazardous Materials Activities ”) in violation of any rule, regulation, treaty or statute promulgated by any Government Entity in effect prior to or as of the date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material Activity.
 
(c)           Company and the Company Subsidiaries currently hold all environmental approvals, permits, licenses, clearances and consents (the “ Company Environmental Permits ”) necessary for the conduct of Company’s and the Company Subsidiaries’ Hazardous Material Activities and other businesses of Company and the Company Subsidiaries as such activities and businesses are currently being conducted.  To the knowledge of Company, there are no facts or circumstances indicating that any Company Environmental Permit will or may be revoked, suspended, canceled or not renewed.  All appropriate action in connection with the renewal or extension of any Company Environmental Permit has been taken.
 
(d)           No material action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to the knowledge of Company, threatened concerning any Company Environmental Permit, Hazardous Material or any Hazardous Materials Activity of Company or any of the Company Subsidiaries.  Company does not have knowledge of any fact or circumstance which could involve Company or any of the Company Subsidiaries in any environmental litigation reasonably expected to have a Company Material Adverse Effect.  Company and the Company Subsidiaries have not received notice, nor to the knowledge of Company is there a threatened notice, that Company or the Company Subsidiaries are responsible, or potentially responsible, for the investigation, remediation, clean-up, or similar action at property presently or formerly used by Company or any of the Company Subsidiaries for recycling, disposal, or handling of waste.
 
3.19            Affiliates .   Schedule 3.19 to the Company Disclosure Statement identifies all persons who to the knowledge of Company may be deemed to be “affiliates” of Company for purposes of Rule 145 under the Securities Act (“ Affiliates ”).
 
3.20            Finders or Brokers .  Except as listed on Schedule 3.19 of Company Disclosure Statement, neither Company nor any of the Company Subsidiaries has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission the receipt of which is conditioned upon consummation of the Merger.
 
3.21            Title to Property .  Company and the Company Subsidiaries have good and valid title to all of their respective properties, interests in properties and assets, real and personal, reflected in the Company Balance Sheet or acquired after the Reference Date, and have valid leasehold interests in all leased properties and assets, in each case free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except (i) liens for current taxes not yet due and payable, (ii) such imperfections of title, liens and easements as do not and will not materially detract from or interfere with the use of the properties subject thereto or affected thereby, or otherwise materially impair business operations involving such properties, (iii) liens securing debt reflected on the Company Balance Sheet, (iv) liens recorded pursuant to any Environmental law or (v) liens or failures to have good and valid title which have not had, or could not reasonably be expected to have, individually or in the aggregate a Company Material Adverse Effect.   Schedule 3.21 of the Company Disclosure Statement identifies each parcel of real property owned or leased by Company or any of the Company Subsidiaries.
 
 
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3.22            No Existing Discussions .  As of the date hereof, neither Company nor any of its representatives is engaged, directly or indirectly, in any discussions or negotiations with any other Person relating to any Acquisition Proposal (as defined in Section  5.3(c) .
 
3.23            Negative Assurances .  No representation or warranty made by the Company in Article III   of this Agreement or in the Company Disclosure Statement contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or necessary to make the statements contained herein not misleading.
 
3.24             No Aggregate Company Material Adverse Effec t .  Without giving effect to any materiality exceptions contained in this Article III , the failure of the representations and warranties of the Company contained in this Article III , in the aggregate, to be true and correct have not had, and could not be reasonably expected to have, a Company Material Adverse Effect.
 
ARTICLE IV
 
REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB
 
Parent and Merger Sub make to Company the representations and warranties contained in this Article IV , in each case subject to the exceptions set forth in the disclosure statement dated as of the date hereof (the “ Parent Disclosure Statement ”).  The Parent Disclosure Statement shall be arranged in schedules corresponding to the numbered and lettered Sections of this Article IV , and the disclosure in any schedule of the Parent Disclosure Statement shall qualify only the corresponding Section of this Article IV ; provided , however , that disclosure in any section of the Parent Disclosure Statement shall also qualify other Sections of this Article IV , but only to the extent it is reasonably apparent from a reading of the disclosure set forth in such Section that such disclosure is applicable to such other Section or Sections.
 
4.1            Organization, Etc.
 
(a)           Each of Parent and its Subsidiaries, all of which are listed on Schedule 4.1(b) of the Parent Disclosure Statement (the “ Parent Subsidiaries ”), and Merger Sub is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority or qualification has not had, or could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.  Parent and each Parent Subsidiary are duly qualified as a foreign Person to do business, and are each in good standing, in each jurisdiction where the character of its owned or leased properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing has not had, or could not reasonably be expected to have, individually and in the aggregate, a Parent Material Adverse Effect.
 
 
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For the purposes of this Agreement, “ Parent Material Adverse Effect ” means any change, effect or circumstance that, individually or when taken together with all other such similar or related changes, effects or circumstances that have occurred prior to the date of determination of the occurrence of the Parent Material Adverse Effect (i) is materially adverse to the business, financial condition, results of operations, or assets and liabilities, taken as a whole, of Parent, including the Parent Subsidiaries, or (ii) would reasonably be expected to prevent the Parent from consummating the Merger or any of the transactions contemplated by the Agreement or to perform any of its obligations under the Agreement before the Effective Time.  Notwithstanding the foregoing, with respect to item (i) above, none of the following shall be deemed (either alone or in combination) to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Parent Material Adverse Effect:  (A) any adverse change, event or effect arising from or relating to general business or economic conditions; and (B) any adverse change, event or effect relating to or affecting the social networking/internet retail industry generally, in either case which does not disproportionately affect Parent.
 
(b)           Neither Parent, the Parent Subsidiaries or Merger Sub is in violation of any provision of its certificate of incorporation, bylaws or other charter documents.   Schedule 4.1(b) of the Parent Disclosure Statement sets forth (i) the full name of each Parent Subsidiary and any other entity in which Parent has an equity interest, its capitalization and the ownership interest of Parent and each other Person (if any) therein, (ii) the jurisdiction in which each such Parent Subsidiary is organized, (iii) each jurisdiction in which Parent and each of the Parent Subsidiaries is qualified to do business as a foreign Person, and (iv) the names of the current directors and officers of Parent and of each Parent Subsidiary.  Parent has made available to Company accurate and complete copies of the certificate of incorporation, bylaws and any other charter documents, as currently in effect, of Parent and each of the Parent Subsidiaries.
 
4.2            Authority Relative to This Agreement .  Each of Parent and Merger Sub has full corporate power and authority to (i) execute and deliver this Agreement and (ii) assuming the approval of the issuance of the Parent Common Stock in connection with the Merger and issuance of the shares pursuant to the Financing Transaction by at least a majority of the shares of Parent Common Stock present in person or represented by proxy and entitled to vote at the Parent Special Meeting or any adjournment or postponement thereof in accordance with Nevada Law, to consummate the Merger and the other transactions contemplated hereby.  The execution and delivery of the Agreement, and the consummation of the Merger and the other transactions contemplated hereby have been duly and validly authorized by a vote of the board of directors of each of Parent and Merger Sub and no other corporate proceedings on the part of either Parent or Merger Sub are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated hereby (other than approval of the issuance of the shares in connection with the Merger and the Financing Transaction by at least a majority vote of the number of shares of Parent Common Stock entitled to vote represented at the Parent Special Meeting, or any adjournment or postponement thereof in accordance with Nevada Law, at the time of the vote, and the adoption of this Agreement by Parent as sole stockholder of Merger Sub, which will occur immediately after the execution and delivery hereof).  The Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and, assuming due authorization, execution and delivery by Company, constitutes a valid and binding agreement of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
 
 
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4.3            No Violations, Etc.   No filing with or notification to, and no permit, authorization, consent or approval of, any Government Entity is necessary on the part of either Parent or Merger Sub for the consummation by Parent or Merger Sub of the Merger or the other transactions contemplated hereby, except (i) for the filing of the Certificate of Merger as required by the DGCL, (ii) for the filing with the Securities and Exchange Commission (“ SEC ”) of, and the effectiveness of, the Registration Statement, (iii) for compliance with the applicable requirements of the Securities Exchange Act of 1934, as amended (“ Exchange Act ”), state securities or “blue sky” laws, state takeover laws and the relevant listing requirements, (iv) any required compliance with the HSR Act, or (v) where the failure to make such filing or notification or to obtain such permit, authorization, consent or approval has not had, or could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.  Neither the execution and delivery of the Agreement, nor the consummation of the Merger or the other transactions contemplated hereby, nor compliance by Parent and Merger Sub with all of the provisions hereof and thereof will, subject to approval of the issuance of the shares in connection with the Merger and Financing Transaction by at least a majority vote of the number of shares of Parent Common Stock entitled to vote represented at the Parent Special Meeting, or any adjournment or postponement thereof in accordance with Nevada Law, at the time of the vote, and the adoption of this Agreement by parent as sole stockholder of Merger Sub, which will occur immediately after the execution and delivery hereof, (i) conflict with or result in any breach of any provision of the certificate of incorporation, bylaws or other charter documents of Parent or any Parent Subsidiary, (ii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any Parent Subsidiary, or by which any of their properties or assets may be bound, or (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or result in any material change in, or give rise to any right of termination, cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or provisions of any Parent Contract (as defined below), except in the case of clauses (ii) or (iii), for any violation, breach or default that  has not had, or could not reasonably be expected to have, a Parent Material Adverse Effect.   Schedule 4.3 of the Parent Disclosure Statement lists all consents, notices, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby under any Parent Contracts, or any of Parent’s or any Parent Subsidiaries’ notes, bonds, mortgages, indentures, deeds of trust, licenses or leases, contracts, agreements or other instruments or obligations, except for those whose failure to obtain will not have a Parent Material Adverse Effect.
 
 
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4.4            Board Approval .  The board of directors of Parent has (i) approved and adopted the Agreement, (ii) determined that this Agreement and the Financing Transaction is fair to and in the best interests of the stockholders of Parent, and (iii) resolved to recommend the issuance of shares of Parent Common Stock pursuant to this Agreement and the Financing Transaction to the stockholders of Company.  The board of directors of Merger Sub has approved and adopted this Agreement and determined that this Agreement is fair to and in the best interests of its stockholder.
 
4.5            Fairness Opinion .  Parent’s Board of Directors has received the written opinion of Raymond James & Associates, Inc. prior to or concurrently with the execution of this Agreement, that, subject to the assumptions and qualifications set forth therein, as of such date, the aggregate Merger Consideration to be paid by Parent pursuant to this Agreement is fair from a financial point of view to Parent.
 
4.6            Capitalization .
 
(a)           The authorized capital stock of Parent consists of 50,000,000 shares of Parent Common Stock.  As of the date of this Agreement, there were (i) 16,632,448 shares of Parent Common Stock outstanding and (ii) no treasury shares.  The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock, $0.001 par value.  As of the date hereof, there were (i) 1,000 shares of Merger Sub which are held of record and beneficially by Parent.  Merger Sub was formed for the purpose of consummating the Merger and has no material assets or liabilities, except as necessary for such purpose.
 
(b)           Except for the stock options of Parent outstanding immediately prior to the Effective Time under the Parent Stock Plans (as defined below) (the “ Parent Options ”), and except for shares of capital stock that may be issued pursuant to the exercise of outstanding warrants described in Schedule 4.6(b) of the Parent Disclosure Statement, there are no warrants, options, convertible securities, calls, rights, stock appreciation rights, preemptive rights, rights of first refusal, or agreements or commitments of any nature obligating Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests of Parent, or obligating Parent to grant, issue, extend, accelerate the vesting of, or enter into, any such warrant, option, convertible security, call, right, stock appreciation right, preemptive right, right of first refusal, agreement or commitment. For purposes of this Agreement, “ Parent Stock Plans ” means the Parent’s 2006 Stock Incentive Plan which is in effect on the date hereof.  To the knowledge of Parent, except for the Parent Voting Agreements, there are no voting trusts, proxies or other agreements or understandings with respect to the capital stock of the Parent.  For purposes of this Agreement, “to the knowledge of Parent,” or words of similar import, shall mean the actual knowledge of executive officers and directors of Parent and such other persons set forth on Schedule 4.6(b) of the Parent Disclosure Statement.
 
(c)           True and complete copies of the Parent Stock Plan, and of the forms of all agreements and instruments relating to or issued under thereof, have been made available to Company.  Such agreements, instruments, and forms have not been further amended, modified or supplemented, and there are no agreements to amend, modify or supplement any such agreements, instruments or forms.
 
 
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4.7            SEC Filings .  Since July 1, 2006, Parent has filed with the SEC all required forms, reports, registration statements and documents required to be filed by it with the SEC (collectively, all such forms, reports, registration statements and documents filed after January 1, 2007 are referred to herein as the “ Parent SEC Reports ”).  All of the Parent SEC Reports complied as to form, when filed, in all material respects with the applicable provisions of the Securities Act of 1933, as amended (“ Securities Act ”) and the Exchange Act.  Accurate and complete copies of the Parent SEC reports have been made available (including via EDGAR) to Company.  As of their respective dates the Parent SEC Reports (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  Parent has responded to all comment letters of the staff of the SEC relating to Parent SEC Reports, and the SEC has not advised Parent that any final responses are inadequate, insufficient or otherwise non-responsive. Parent has made available to the Company true, correct and complete copies of all correspondence between the SEC, on the one hand, and Parent and any of its Subsidiaries, on the other, including all SEC comment letters and responses to such comment letters by or on behalf of Parent. To Parent’s Knowledge, none of Parent’s SEC Reports is the subject of ongoing SEC review or outstanding SEC comment. Parent is in compliance with (i) the applicable provisions of the Sarbanes-Oxley Act and the related rules and regulations promulgated under or pursuant to such act and (ii) the applicable listing and corporate governance rules and regulations of NYSE Amex LLC (“ NYSE Amex ”). Each required form, report and document containing financial statements that has been filed with or submitted to the SEC by Parent was accompanied by the certifications required to be filed or submitted by Parent’s chief executive officer and/or chief financial officer, as required, pursuant to the Sarbanes-Oxley Act and, at the time of filing or submission of each such certification, such certification was true and accurate and complied with the Sarbanes-Oxley Act.
 
4.8            Compliance with Laws .
 
(a)           Neither Parent nor any Parent Subsidiary, in any material respect, has violated or failed to comply with any statute, law, ordinance, rule or regulation (including, without limitation, relating to the export or import of goods or technology) of any foreign, federal, state or local government or any other governmental department or agency.  Parent, the Parent Subsidiaries and Merger Sub have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted and as proposed to be conducted, except for those the absence of which has not had, or could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
 
(b)           Neither Parent nor any Parent Subsidiary, nor Merger Sub, nor any of their respective directors, officers, employees or agents has taken any action, directly or indirectly, that would result in a violation by such persons of the FCPA, including, without limitation, offered, paid, promised to payor authorized the payment of any money or offer, gift, promise to give, or authorized the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, and the Parent and, to the knowledge of the Parent, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure continued compliance therewith.
 
 
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4.9            Financial Statement; Controls .
 
(a)           Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Parent SEC Reports and each of the Parent Interim Financial Statements (the “ Parent Financial Statements ”), (x) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (y) fairly presented the consolidated financial position of Parent and the Parent Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, consistent with the books and records of Parent, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount. The interim financial statements as of and for the two quarters ended June 30, 2011, provided to the Company prior to the date hereof, are herein referred to as the “ Parent Interim Financial Statements ” and the balance sheet of Parent as of the Reference Date is herein referred to as the “ Parent Balance Sheet .”
 
(b)           The Parent maintains a system of internal controls sufficient to provide reasonable assurance that (i) transactions are executed with management’s authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s authorization, and (iv) the recorded amount for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  There are no significant deficiencies or material weaknesses in the design or operation of the Parent’s internal controls, and Parent has not been informed by its independent auditors, accountants, consultants or others involved in the review of internal controls that any such significant deficiencies or material weaknesses exist, which could adversely affect the Parent’s ability to record, process, summarize and report financial data.  There is no fraud in connection with the Financial Statements, whether or not material, that involves management or other employees who have a significant role in the Parent’s internal controls.
 
4.10            Absence of Undisclosed Liabilities .  Neither Parent, nor any of the Parent Subsidiaries or the entities listed on Schedule 4.1(b) has any liabilities (absolute, accrued, contingent or otherwise) other than (i) liabilities included in the Parent Balance Sheet and the related notes to the financial statements, (ii) liabilities of a nature not required to be disclosed on a balance sheet or in the notes to the consolidated financial statements prepared in accordance with GAAP, (iii) normal or recurring liabilities incurred since June 30, 2011 in the ordinary course of business consistent with past practice which, individually or in the aggregate, would not be reasonably likely to have a Parent Material Adverse Effect, and (iv) liabilities under this Agreement
 
4.11            Absence of Changes or Events .  Except as contemplated by this Agreement, since June 30, 2011, no state of facts, change, event or effect that has had or could reasonably be expected to have a Parent Material Adverse Effect has occurred and, in addition, Parent, the Parent Subsidiaries and the entities listed on Schedule 4.1(b) have not, directly or indirectly:
 
 
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(a)           purchased, otherwise acquired, or agreed to purchase or otherwise acquire, any shares of capital stock of Parent, or declared, set aside or paid any dividend or otherwise made a distribution (whether in cash, stock or property or any combination thereof) in respect of their capital stock (other than dividends or other distributions payable solely to Parent or a wholly-owned Subsidiary of Parent);
 
(b)           authorized for issuance, issued, sold, delivered, granted or issued any options, warrants, calls, subscriptions or other rights for, or otherwise agreed or committed to issue, sell or deliver any shares of any class of capital stock of Parent or the Parent Subsidiaries or any securities convertible into or exchangeable or exercisable for shares of any class of capital stock of Parent or the Parent Subsidiaries, other than pursuant to and in accordance with the Parent Stock Plans;
 
(c)           (i) created or incurred any indebtedness for borrowed money exceeding $100,000 in the aggregate, (ii) assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any other individual, firm or corporation, made any loans or advances to any other individual, firm or corporation exceeding $100,000 in the aggregate, or (iii) entered into any oral or written material agreement or any material commitment or transaction or incurred any liabilities material to Parent taken as a whole, or involving in excess of $100,000;
 
(d)           instituted any material change in accounting methods, principles or practices other than as required by GAAP or the rules and regulations promulgated by the SEC and disclosed in the notes to the Parent Financial Statements;
 
(e)           revalued any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivable in excess in each case of an amount equal to $100,000 plus amounts previously reserved as reflected in the Parent Balance Sheet;
 
(f)           suffered any damage, destruction or loss, whether covered by insurance or not, except for such as would not, individually and in the aggregate exceed $100,000;
 
(g)           (i) increased in any manner the compensation of any of its directors, officers or, other than in the ordinary course of business and consistent with past practice, non-officer employees, (ii) granted any severance or termination pay to any Person other than in the ordinary course of business and consistent with past practice; (iii) other than in the ordinary course of business consistent with past practice, entered into any oral or written employment, consulting, indemnification or severance agreement with any Person; (iv) other than as required by law, adopted, become obligated under, or amended any employee benefit plan, program or arrangement; or (v) repriced any Parent Options;
 
(h)           sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer, lease, license, pledge, mortgage, encumber, or otherwise dispose of, any material properties (including intangibles, real, personal or mixed);
 
 
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(i)           amended its certificate of incorporation, bylaws, or any other charter document, or effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction; or
 
(j)           made any capital expenditure in any calendar month which, when added to all other capital expenditures made by or on behalf of Parent and the Parent Subsidiaries in such calendar month resulted in such capital expenditures exceeding $100,000 in the aggregate;
 
(k)           paid, discharged or satisfied any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities (including accounts payable) in the ordinary course of business and consistent with past practice, or collected, or accelerated the collection of, any amounts owed (including accounts receivable) other than their collection in the ordinary course of business;
 
(l)           waived, released, assigned, settled or compromised any material claim or litigation, or commenced a lawsuit other than for the routine collection of bills; or
 
(m)           agreed or proposed to do any of the things described in the preceding clauses (a) through (l) other than as expressly contemplated or provided for in this Agreement.
 
4.12            Capital Stock of Subsidiaries .  Parent is directly or indirectly the record and beneficial owner of all of the outstanding shares of capital stock or other equity interests of each of the Parent Subsidiaries.  All of such shares have been duly authorized and are validly issued, fully paid, nonassessable and free of preemptive rights with respect thereto and are owned by Parent free and clear of any claim, lien or encumbrance of any kind with respect thereto.  There are no proxies or voting agreements with respect to such shares, and there are not any existing options, warrants, calls, subscriptions, or other rights or other agreements or commitments obligating Parent or any of the Parent Subsidiaries to issue, transfer or sell any shares of capital stock or other equity securities of any Subsidiary or any other securities convertible into, exercisable for, or evidencing the right to subscribe for any such shares.  Parent does not directly or indirectly own any interest in any Person except the Parent Subsidiaries.
 
4.13            Litigation .
 
(a)           Except as disclosed in the Parent’s SEC Reports, there is no Action pending and, to the knowledge of Parent, there is not any private or governmental investigation, or any of the foregoing threatened against Parent, any of the Parent Subsidiaries, or any of their respective officers and directors (in their capacities as such), or involving any of their assets or capital stock, before any court, or governmental or regulatory authority or body, or arbitration tribunal.  There is no Action pending or, to the knowledge of Parent, threatened which in any manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
 
(b)           There is no outstanding judgment, order, writ, injunction or decree of any court, governmental or regulatory authority, body, or agency or arbitration tribunal in a proceeding to which Parent, any Parent Subsidiary, or any of their assets is or was a party, or by which Parent, any Parent Subsidiary, or any of their assets is bound.
 
 
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4.14            Insurance .   Schedule 4.14 of the Parent Disclosure Statement lists all insurance policies (including without limitation workers’ compensation insurance policies) covering the business, properties or assets of Parent, the premiums and coverages of such policies, and all claims in excess of $100,000 made against any such policies since January 1, 2007.  All such policies are in effect, and true and complete copies of all such policies have been made available to Company.  Parent has not received notice of the cancellation or threat of cancellation of any of such policy.
 
4.15            Contracts and Commitments .
 
(a)           Except as filed as an exhibit to Parent’s SEC Reports or set forth on Schedule 4.15 , and except as contemplated by this Agreement, neither Parent, nor the Parent Subsidiaries, nor the entities listed on Schedule 4.1(b) is a party to or bound by any oral or written contract, obligation or commitment of any type in any of the following categories:
 
(i)           agreements or arrangements that provide for employment other than at will or that contain severance pay, understandings with respect to tax arrangements, understandings with respect to expatriate benefits, or post-employment liabilities or obligations;
 
(ii)           agreements or plans under which benefits will be increased or accelerated by the occurrence of any of the transactions contemplated by this Agreement, or under which the value of the benefits will be calculated on the basis of any of the transactions contemplated by this Agreement;
 
(iii)           agreements, contracts or commitments currently in force relating to the disposition or acquisition of assets other than in the ordinary course of business, or relating to an ownership interest in any corporation, partnership, joint venture or other business enterprise;
 
(iv)           agreements, contracts or commitments for the purchase of materials, supplies or equipment, under which the aggregate payments for the past twelve (12) months exceeded $100,000, which are with sole or single source suppliers;
 
(v)           guarantees or other agreements, contracts or commitments under which Parent or any of the Parent Subsidiaries is absolutely or contingently liable for (A) the performance of any other Person, firm or corporation (other than Parent or the Parent Subsidiaries), (B) the whole or any part of the indebtedness or liabilities of any other Person, firm or corporation (other than Parent or the Parent Subsidiaries), or (C) indemnification obligations to officers and directors;
 
(vi)           powers of attorney authorizing the incurrence of a material obligation on the part of Parent or the Parent Subsidiaries;
 
(vii)           agreements, contracts or commitments which limit or restrict (A) where Parent or any of the Parent Subsidiaries may conduct business, (B) the type or lines of business (current or future) in which they may engage, or (C) any acquisition of assets or stock (tangible or intangible) by Parent or any of the Parent Subsidiaries;
 
 
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(viii)           agreements, contracts or commitments, under which the aggregate payments or receipts for the past 12 months exceeded $100,000, containing any agreement with respect to a change of control of Parent or any of the Parent Subsidiaries;
 
(ix)           agreements, contracts or commitments for the borrowing or lending of money, or the availability of credit (except credit extended by Parent or any of the Parent Subsidiaries to customers in the ordinary course of business and consistent with past practice);
 
(x)           any hedging, option, derivative or other similar transaction and any foreign exchange position or contract for the exchange of currency; or
 
(xi)           any agreement, contract or commitment that would be otherwise required to be filed as an exhibit to a periodic report under the Exchange Act, as provided by Rule 601 of Regulation S-K promulgated under the Exchange Act.
 
Each contract, agreement or commitment of the type described in this Section  4.15 is referred to herein as a “ Parent Contract .”
 
(b)           Neither Parent nor any of the Parent Subsidiaries, nor to the knowledge of Parent any other party to a Parent Contract, has breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under (nor does there exist any condition under which, with the passage of time or the giving of notice, or both, could reasonably be expected to cause such a breach, violation or default under) any Parent Contract, other than any breaches, violations or defaults which have not had, or could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
 
(c)           Each Parent Contract is a valid, binding and enforceable obligation of Parent and to the knowledge of Parent, of the other party or parties thereto, in accordance with its terms, and in full force and effect, except where the failure to be valid, binding, enforceable and in full force and effect has not had, or could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect and to the extent enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights governing or by general principles of equity.
 
(d)           An accurate and complete copy of each Parent Contract has been made available (including via EDGAR) to Company.
 
4.16            Labor Matters; Employment and Labor Contracts .
 
(a)           Neither Parent nor any Parent Subsidiary is a party to any union contract or other collective bargaining agreement, nor to the knowledge of Parent are there any activities or proceedings of any labor union to organize any of its employees.  Each of Parent and any Parent Subsidiary is in compliance with all applicable (i) laws, regulations and agreements respecting employment and employment practices and (ii) occupational health and safety requirements.
 
 
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(b)           There is no labor strike, slowdown or stoppage pending (or any labor strike or stoppage threatened) against Parent or any Parent Subsidiary.  No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Parent or any Parent Subsidiary who are not currently organized.  Each of Parent and any Parent Subsidiary has no material obligations under COBRA, with respect to any former employees or qualifying beneficiaries thereunder.  There are no controversies pending or, to the knowledge of Parent or any Parent Subsidiary, threatened, between Parent or any Parent Subsidiary and any of their respective employees.  The employment of each of the employees of Parent and each Parent Subsidiary is “at will” (except for non-U.S. employees located in a jurisdiction which that does not recognize the “at will” employment concept) and Parent and each Parent Subsidiary does not have any obligation to provide any particular form or period of notice (except as otherwise required by applicable law) prior to terminating the employment of any of their respective employees.  Neither Parent nor any Parent Subsidiary is currently engaged, or has ever engaged in, any arrangement whereby it leases employees or other service providers from another Person.
 
4.17            Intellectual Property Rights .
 
(a)           To the knowledge of Parent, Parent owns or has the right to use all intellectual property used to conduct its businesses (such intellectual property and the rights thereto are collectively referred to herein as the “ Parent IP Rights ”) except where failure to have such right would not create a Parent Material Adverse Effect.  No royalties or other payments are payable to any Person with respect to commercialization of any products presently sold or under development by Parent.
 
(b)           Except as has not had, or could not reasonably be expected to have, a Parent Material Adverse Effect, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) constitute a breach of any instrument or agreement governing any Parent IP Rights, (ii) cause the modification of any term of any license or agreement relating to any Parent IP Rights including but not limited to the modification of the effective rate of any royalties or other payments provided for in any such license or agreement,  (iii) cause the forfeiture or termination of any Parent IP Rights, or (iv) give rise to a right of forfeiture or termination of any Parent IP Rights.
 
(c)           Neither the manufacture, marketing, license, sale or intended use of any product or technology currently licensed or sold or under development by Parent or any Parent Subsidiary (i) violates in any material respect any license or agreement between Parent and any third party or (ii) infringes in any material respect any patents or other intellectual property rights of any other party; and there is no pending or, to the knowledge of Parent, threatened claim or litigation contesting the validity, ownership or right to use, sell, license or dispose of any Parent IP Rights, or asserting that any Parent IP Rights or the proposed use, sale, license or disposition thereof, or the manufacture, use or sale of any Parent products, conflicts or will conflict with the rights of any other party or impair the right of Parent to use, sell or license any Intellectual Property rights or portion thereof.
 
(d)            Schedule 4.17(d) of the Parent Disclosure Statement lists all patents, trade names, domain names, registered trademarks and service marks, and applications for any of the foregoing owned or possessed by Parent or any of the Parent Subsidiaries and true and complete copies of such materials have been made available to Company.
 
 
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(e)           Parent has provided to Company a true and complete copy of its standard form of employee confidentiality agreement and Parent has used its commercially reasonable efforts to cause all employees of Parent to execute such an agreement.  Parent has taken all commercially reasonably necessary steps to ensure that all consultants or third parties with access to material proprietary information of Parent have executed appropriate non-disclosure agreements that adequately protect the Parent IP Rights.
 
(f)           Parent has taken all commercially reasonably necessary steps to ensure that Parent’s and each Parent Subsidiary’s material source codes and material trade secrets have not been used, distributed or otherwise commercially exploited under circumstances which would cause the loss of copyright prior to the statutory expiration date or the loss of trade secret status.
 
(g)           To the knowledge of Parent, none of the employees or consultants of Parent is obligated under any contract, covenant or other agreement or commitment of any nature, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee’s or consultant’s best efforts to promote the interests of Parent and each Parent Subsidiary or that would conflict with the business of Parent as presently conducted or proposed to be conducted.  Neither Parent nor any Parent Subsidiary has entered into any agreement to indemnify any other Person, including but not limited to any employee or consultant of Parent or any Parent Subsidiary, against any charge of infringement, misappropriation or misuse of any intellectual property, other than indemnification provisions contained in purchase orders, customer agreements, reseller agreements or distribution agreements, arising in the ordinary course of business.  All current and former employees and consultants of Parent and each Parent Subsidiary have signed valid and enforceable written assignments to Parent or the Parent Subsidiaries of any and all rights or claims in any intellectual property that any such employee or consultant has or may have by reason of any contribution, participation or other role in the development, conception, creation, reduction to practice or authorship of any invention, innovation, development or work of authorship or any other intellectual property that is used in the business of Parent, and Parent and each Parent Subsidiary possesses signed copies of all such written assignments by such employees and consultants except where failure to obtain such assignments would not have a Parent Material Adverse Effect.  With respect to assignments of patents or application for patents, Parent and each Parent Subsidiary possesses signed copies of assignments from the inventors of the intellectual property covered by the patents and applications.
 
4.18            Taxes .
 
(a)           Parent and each of the Parent Subsidiaries have filed all material Tax Returns required to be filed by them, and all such Tax Returns are true, correct, and complete except with respect to immaterial items.  Parent and each of the Parent Subsidiaries have paid (or Parent has paid on behalf of each of the Parent Subsidiaries) all Taxes due and payable as shown on such Tax Returns.  True and correct copies of all Tax Returns filed by Parent and the Parent Subsidiaries for the period beginning January 1, 2003 through the date hereof have been provided to Company.  The most recent financial statements contained in the Parent SEC Reports filed prior to the date of this Agreement reflect an adequate reserve (which reserves were established in accordance with GAAP) for the payment of all Taxes of Parent and the Parent Subsidiaries, accrued through the date of such financial statements.  No deficiencies for any Taxes have been proposed, asserted or assessed against Parent or any of the Parent Subsidiaries, other than deficiencies that are reflected by reserves maintained in accordance with GAAP and are being contested in good faith and by appropriate procedures.
 
 
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(b)           None of Parent and the Parent Subsidiaries (i) has received any notice that it is being audited by any taxing authority; (ii) has granted any presently operative waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax; (iii) has granted to any Person a power of attorney with respect to Taxes, which power of attorney will be in effect as of or following the Closing; (iv) has received an inquiry regarding the filing of Tax Returns from a jurisdiction where it is not presently filing Tax Returns; or (v) has availed itself of any Tax amnesty or similar relief in any taxing jurisdiction.  All audits of federal, state, local and foreign Tax Returns by the relevant taxing authorities have been completed.
 
(c)           None of Parent and the Parent Subsidiaries has assumed liability for the Taxes of another Person under any contract, agreement, arrangement or course of dealing.  None of the Parent and the Parent Subsidiaries are, or will be after the Effective Time, bound by any tax sharing agreement (including any indemnity arrangements) or similar arrangements.
 
(d)           There is no lien for Taxes on any of the assets of Parent or any of the Parent Subsidiaries, except for inchoate liens for Taxes not yet due and payable.
 
(e)           All compensation payable to any employee of the Parent or any Parent Subsidiary is deductible under Section 162(m) of the Code (and any comparable provisions of state, local or foreign tax law).
 
(f)           Parent and each of the Parent Subsidiaries have properly withheld on all amounts paid to consultants or employees, or to Persons located outside the United States and have paid over all such amounts to the appropriate taxing authorities.
 
(g)           All material elections with respect to Taxes affecting the Parent or any Parent Subsidiary or any asset owned by the Parent or any Parent Subsidiary as of the date of this Agreement are set forth on Schedule 4.18(g) of the Parent Disclosure Statement.  Neither the Parent nor any Parent Subsidiary has:  (i) agreed to or is  required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (ii) acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (iii) made, and will not make, a consent dividend election under Section 565 of the Code; (iv) elected at any time to be treated as an S corporation within the meaning of Sections 1361 or 1362 of the Code; or (v) made any of the foregoing elections and is required to apply any of the foregoing rules under any comparable state or local Tax provision.
 
 
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(h)           Neither the Parent nor any Parent Subsidiary (i) is a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes, (ii) owns a single member limited liability company or other entity which is treated as a disregarded entity, (iii) is a stockholder of a “controlled foreign corporation” as defined in Section 957 of the Code or a “passive foreign investment company” as defined in Section 1297 of the Code (or any similar provision of state, local or foreign Tax law), or (iv) is a “personal holding company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign Tax law).
 
(i)           Neither Parent nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) other than a group the common parent of which is or was Parent.
 
4.19            Employee Benefit Plans; ERISA .
 
(a)            Schedule 4.19(a) of the Parent Disclosure Statement lists all of Parent’s (i) Pension Plans; (ii) Welfare Plans; (iii) stock bonus, stock option, restricted stock, phantom stock, stock appreciation right, stock purchase or other equity compensation plan; bonus, profit-sharing plan or other incentive plan; deferred compensation arrangement; severance plan; holiday or vacation plan; retirement or supplemental retirement plan; sabbatical program; medical, heath-related, life or other insurance plan; relocation arrangement; cafeteria (Code Section 125) or dependent care (Code Section 129) benefit; or any other fringe benefit program; and (iv) other employee benefit or compensation plan, agreement (including individual agreement), program, policy or arrangement covering employees, directors and consultants of the Parent, any Parent Subsidiary any of its or their Parent ERISA Affiliates (as hereinafter defined) that either is maintained or contributed to by Parent or any of the Parent Subsidiaries or any of their Parent ERISA Affiliates or to which Parent or any of the Parent Subsidiaries or any of their Parent ERISA Affiliates is obligated to make payments or otherwise may have any liability (collectively, the “ Parent Employee Benefit Plans ”) with respect to employees or other service-providers or former employees or other service-providers of Parent, the Parent Subsidiaries, or any of their ERISA Affiliates.  For purposes of this Agreement, “ Parent ERISA Affiliate ” shall mean any person (as defined in Section 3(9) of ERISA) that is or has been a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code, including without limitation Parent or any of the Parent Subsidiaries.
 
(b)           Parent and each of the Parent Subsidiaries, and each of the Parent Employee Benefit Plans, are in compliance with, has performed all material obligations required under, and is not subject to liability under, the applicable provisions of ERISA, the Code and other applicable laws, and with the terms of each Parent Employee Benefit Plan.  Each Parent Employee Benefit Plan can be amended, terminated or otherwise discontinued at or after the Effective Time in accordance with its terms, without liability to Parent or the Surviving Corporation, and no Parent Employee Benefit Plan will be subject to any surrender fees or service fees upon termination other than the normal and reasonable administrative fees associated with the termination of benefit plans.
 
 
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(c)           All contributions to, and payments from, the Pension Plans which are required to have been made in accordance with the Pension Plans have been timely made, and timely deposits of employee contributions have been made.
 
(d)           To the knowledge of Parent, all of Parent’s Pension Plans and Parent’s Subsidiaries’ Pension Plans intended to qualify under Section 401 of the Code so qualify, and no event has occurred and no condition exists with respect to the form or operation of such Pension Plans which would cause the loss of such qualification or the imposition of any material liability, penalty or tax under ERISA or the Code, except for such insignificant operational failures as may be self-corrected under the Internal Revenue Service Employee Plans Compliance Resolution System without cost to the Parent.
 
(e)           To the knowledge of Parent, there are no (i) investigations pending by any governmental entity involving the Parent Employee Benefit Plans, nor (ii) pending or threatened claims (other than routine claims for benefits), suits or proceedings against any Parent Employee Benefit Plans, against the assets of any of the trusts under any Parent Employee Benefit Plans or, against any fiduciary of any Parent Employee Benefit Plans or against Parent, any Parent Subsidiary or any of its or their Parent ERISA Affiliates with respect to the operation of such plan or asserting any rights or claims to benefits under any Parent Employee Benefit Plans or against the assets of any trust under such plan.  To the knowledge of Parent, there are no facts which would give rise to any liability under this Section  4.19(e) in the event of any such investigation, claim, suit or proceeding.
 
(f)           None of Parent, any of the Parent Subsidiaries nor any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other “party in interest” or “disqualified person” with respect to the Pension Plans or Welfare Plans, has engaged in a “prohibited transaction” (as such term is defined in Section 4975 of the Code or Section 406 of ERISA).
 
(g)           None of Parent, any of the Parent Subsidiaries, or any of their Parent ERISA Affiliates maintains or contributes to, nor have they ever maintained or contributed to, any pension plan subject to Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA.
 
(h)           Neither Parent nor any Subsidiary of Parent nor any Parent ERISA Affiliate has incurred any liability under Title IV of ERISA or under Code Section 4.13 that has not been satisfied in full.
 
(i)           Neither Parent, any of the Parent Subsidiaries nor any of their Parent ERISA Affiliates has any liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA, or any multiple employer plan, within the meaning of Code Section 4-13(c).
 
(j)           With respect to each of the Parent Employee Benefit Plans, true, correct and complete copies of the following documents have been made available to the Company:  (i) the plan document and any related trust agreement, including amendments thereto, (ii) any current summary plan descriptions and other material communications to participants relating to the Parent Employee Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most recent IRS determination letter, if applicable.  Parent or any Parent Subsidiary has timely filed and delivered or made available to Parent the three most recent annual reports (Form 5500) and all schedules attached thereto for each Parent Employee Benefit Plan that is subject to ERISA and Code reporting requirements, and all material communications with participants, the IRS, the U.S. Department of Labor, or any other governmental authority, administrators, trustees, beneficiaries and alternate payees relating to any Parent Employee Benefit Plan.
 
 
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(k)           None of the Welfare Plans maintained by Parent or any of the Parent Subsidiaries provides for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under COBRA, or except at the expense of the participant or the participant’s beneficiary.  Parent and each of the Parent Subsidiaries which maintain a “group health plan” within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder.
 
(l)           No liability under any Pension Benefit Plan or Welfare Plan has been funded or satisfied with the purchase of a contract from, and no self insured plan receives administrative services from, an insurance company as to which Parent or any of the Parent Subsidiaries has received notice that such insurance company is in rehabilitation or a comparable proceeding.
 
(m)           Neither the consummation of the transactions contemplated by this Agreement, nor any termination of employment or any other service relationship, will result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee, director or consultant of Parent or any of the Parent Subsidiaries.  There has been no amendment to, written interpretation or announcement (whether or not written) by Parent, any Parent Subsidiary or other Parent ERISA Affiliate relating to, or change in participation or coverage under, any Parent Employee Benefit Plan which would materially increase the expense of maintaining such Parent Employee Benefit Plan above the level of expense incurred with respect to such Parent Employee Benefit Plan for the most recent fiscal year included in the Parent Financial Statements.
 
(n)           To the knowledge of the Parent, (i) no Parent Employee Benefit Plan is a Deferred Compensation Plan; (ii) each Deferred Compensation Plan satisfies the requirements to avoid the consequences set forth in Section 409A(a)(1) of the Code; and (iii) neither the Parent nor any of its Affiliates has (i) since October 4, 2004, granted to any person an interest in any Deferred Compensation Plan which interest has been or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be subject to the additional tax (including interest) imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (ii) granted to any person an interest in any Deferred Compensation Plan which interest has or will, because of the lapse of a substantial risk of forfeiture with respect to such interest after December 31, 2004 or because such interest is earned after December 31, 2004, be subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (iii) since October 4, 2004, modified the terms of any Deferred Compensation Plan in a manner that could cause an interest previously granted under such plan to become subject to the additional tax (including interest) imposed by Section 409A(a)(1)(B) or (b)(4) of the Code.
 
 
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(o)           Parent and each Parent Subsidiary is in compliance in all material respects with the WARN Act, or any similar state or local law.  In the past two years, (i) neither Parent nor any Parent Subsidiary has effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business; (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of Parent and Parent Subsidiaries; and (iii) neither Parent nor any Parent Subsidiary has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.  Neither Parent nor any Parent Subsidiary has caused any of its employees to suffer an “employment loss” (as defined in the WARN Act) during the 90 day period prior to the effective date of this Agreement.
 
4.20            Environmental Matters .
 
(a)           Except for such cases that, individually or in the aggregate, have not and would not reasonably be expected to have a Parent Material Adverse Effect, no Hazardous Materials are present, as a result of the actions of Parent or any of the Parent Subsidiaries or, to the knowledge of Parent, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Parent or any of the Parent Subsidiaries has at any time owned, operated, occupied or leased.
 
(b)           Except for such cases that, individually or in the aggregate, have not and would not reasonably be expected to have a Parent Material Adverse Effect, neither Parent nor any of the Parent Subsidiaries has transported, stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has Parent or any of the Parent Subsidiaries engaged in any Hazardous Materials Activity in violation of any rule, regulation, treaty or statute promulgated by any Government Entity in effect prior to or as of the date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material Activity.
 
(c)           Parent and the Parent Subsidiaries currently hold all environmental approvals, permits, licenses, clearances and consents (the “ Parent Environmental Permits ”) necessary for the conduct of Parent’s and the Parent Subsidiaries’ Hazardous Material Activities and other businesses of Parent and the Parent Subsidiaries as such activities and businesses are currently being conducted.  To the knowledge of Parent, there are no facts or circumstances indicating that any Parent Environmental Permit will or may be revoked, suspended, canceled or not renewed.  All appropriate action in connection with the renewal or extension of any Parent Environmental Permit has been taken.
 
(d)           No material action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to the knowledge of Parent, threatened concerning any Parent Environmental Permit, Hazardous Material or any Hazardous Materials Activity of Parent or any of the Parent Subsidiaries.  Parent does not have knowledge of any fact or circumstance which could involve Parent or any of the Parent Subsidiaries in any environmental litigation reasonably expected to have a Parent Material Adverse Effect.  Parent and the Parent Subsidiaries have not received notice, nor to the knowledge of Parent is there a threatened notice, that Parent or the Parent Subsidiaries are responsible, or potentially responsible, for the investigation, remediation, clean-up, or similar action at property presently or formerly used by Parent or the Parent Subsidiaries for recycling, disposal, or handling of waste.
 
 
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4.21            Finders or Brokers .  Parent has not employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission the receipt of which is conditioned upon consummation of the Merger.
 
4.22            Title to Property .  Parent and the Parent Subsidiaries have good and valid title to all of their respective properties, interests in properties and assets, real and personal, reflected in the Parent Balance Sheet or acquired after the Reference Date, and have valid leasehold interests in all leased properties and assets, in each case free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except (i) liens for current taxes not yet due and payable, (ii) such imperfections of title, liens and easements as do not and will not materially detract from or interfere with the use of the properties subject thereto or affected thereby, or otherwise materially impair business operations involving such properties, (iii) liens securing debt reflected on the Parent Balance Sheet, (iv) liens recorded pursuant to any Environmental law or (v) liens or failures to have good and valid title which have not had, or could not reasonably be expected to have, individually or in the aggregate a Parent Material Adverse Effect.   Schedule 4.23 of the Parent Disclosure Statement identifies each parcel of real property owned or leased by Parent or any of the Parent Subsidiaries.
 
4.23            Third Party Financing of Cash Consideration .  On or prior to the date hereof, Parent has entered into a letter agreement (the “ Financing Letter ”) with MATT Inc. and/or its Affiliates which contemplates MATT Inc.’s or its Affiliates’ purchase of up to $5 million of Parent Common Stock in connection with Parent’s sale of an aggregate of between $10 million and $18 million of Parent Common Stock concurrently with the Closing (the “ Financing Transaction ”).  True and correct copies of the Financing Letter have been provided to Company.
 
4.24            No Existing Discussions .  As of the date hereof, neither Parent nor any of its representatives is engaged, directly or indirectly, in any discussions or negotiations with any other Person relating to any Acquisition Proposal (as defined in Section  5.3(c) ).
 
4.25            Negative Assurances .  No representation or warranty made by the Parent, the Parent Subsidiaries or Merger Sub in Article IV of this Agreement or in the Parent Disclosure Statement contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or necessary to make the statements contained herein not misleading.
 
4.26            No Aggregate Parent Material Adverse Effect .  Without giving effect to any materiality exceptions contained in this Article IV , the failure of the representations and warranties of the Parent or Merger Sub contained in this Article IV , in the aggregate, to be true and correct have not had, and could not be reasonably expected to have, a Parent Material Adverse Effect.
 
 
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ARTICLE V
COVENANTS
 
5.1            Conduct of Company Business During Interim Period .  During the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time, each of Company and the Company Subsidiaries, except as contemplated or required by this Agreement or as expressly consented to in writing by the Parent, will (i) conduct its operations according to its ordinary and usual course of business and consistent with past practices, (ii) use commercially reasonable efforts to preserve intact its business, to keep available the services of its officers and employees in each business function and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it, and (iii) not take any action which would adversely affect its ability to consummate the Merger or the other transactions contemplated hereby.  Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement and except as set forth on Schedule 5.1 of the Company Disclosure Statement, prior to the earlier of the termination of this Agreement or Effective Time Company will not, and will not permit the Company Subsidiaries, without the prior written consent of the Parent, directly or indirectly, do any of the following:
 
(a)           grant any severance or termination pay to any officer or employee except payments in amounts consistent with policies and past practices or pursuant to written agreements outstanding, or policies existing, on the date hereof and as previously disclosed in writing to the other, or adopt any new severance plan;
 
(b)           declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
 
(c)           repurchase or otherwise acquire, directly or indirectly, any shares of capital stock except pursuant to rights of repurchase of any such shares under any employee, consultant or director stock plan existing on the date hereof;
 
(d)           cause, permit or propose any amendments to the articles of incorporation or bylaws of Company (or similar governing instruments of any Company Subsidiaries);
 
(e)           sell, lease, license, encumber or otherwise dispose of any properties or assets which are material, individually or in the aggregate, to the business of Company, except in the ordinary course of business consistent with past practice;
 
(f)           except in the ordinary course of business pursuant to its existing line of credit, incur any indebtedness for borrowed money (other than ordinary course trade payables or pursuant to existing credit facilities in the ordinary course of business) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire debt securities of Company, as the case may be, or guarantee any debt securities of others;
 
(g)           adopt or amend any employee benefit or employee equity purchase or employee option plan, or enter into any employment contract, pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates of its officers or employees other than salary increases for non-officer employees in the ordinary course of business, consistent with past practice, or change in any material respect any management policies or procedures;
 
 
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(h)           pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of claims, liabilities or obligations in the ordinary course of business;
 
(i)           split, combine or reclassify any shares of its capital stock;
 
(j)           except as permitted by Section 5.5(b) of this Agreement, authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with any other Person with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities (having an aggregate value of over $1 million), any disposition of a material amount of assets (having an aggregate value of over $1 million), any material change in capitalization, or any partnership, association or joint venture;
 
(k)           fail to renew any insurance policy naming it as a beneficiary or a loss payee, or take any steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary or a loss payee to be canceled, terminated or materially altered, except in the ordinary course of business and consistent with past practice and following written notice to the other party;
 
(l)           maintain its books and records in a manner other than in the ordinary course of business and consistent with past practice;
 
(m)           enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of currency other than in the ordinary course of business and consistent with past practice;
 
(n)           institute any change in its accounting methods, principles or practices other than as required by GAAP, or the rules and regulations promulgated by the SEC, or revalue any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivables;
 
(o)           in respect of any Taxes, (i) except as required by applicable law make or change any material election, change any accounting method, enter into any closing agreement, settle any material claim or assessment, or consent to any extension or waiver of the limitation period applicable to any material claim or assessment, or (ii) enter into any Tax sharing agreement (including any indemnity arrangement) or similar arrangement;
 
(p)           issue any capital stock or other equity securities or other options, warrants or other rights to purchase or acquire capital stock or other equity securities except for (i) the customary grant of stock options in accordance with past practice and the issuance of Company Common Stock upon exercise of stock options granted prior to the date hereof under the Company Stock Plan; (ii) the issuance of Company Common Stock upon exercise of warrants issued prior to the date hereof and disclosed on the Company Disclosure Statement; and (iii) issuances of capital stock or other equity securities to existing stockholders of the Company on the date hereof for capital-raising purposes only; or
 
 
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(q)           take or agree to take any action which could reasonably be expected to result in any condition contained in Section  7.2 of this Agreement not being satisfied immediately prior to the Effective Time.
 
5.2            Conduct of Parent Business During Interim Period .  During the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time, each of Parent and the Parent Subsidiaries, except as contemplated or required by this Agreement or as expressly consented to in writing by the Company, (i) will conduct its operations according to its ordinary and usual course of business and consistent with past practices and (ii) not take any action which would adversely affect its ability to consummate the Merger or the other transactions contemplated hereby.  Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, and except as set forth in Schedule 5.2 of this Parent Disclosure Statement, and except for the Financing Transaction, prior to the earlier of the termination of this Agreement or Effective Time, Parent will not, and will not permit Parent Subsidiaries to, without the prior written consent of the Company, directly or indirectly, do any of the following:
 
(a)           grant any severance or termination pay to any officer or employee except payments in amounts consistent with policies and past practices or pursuant to written agreements outstanding, or policies existing, on the date hereof and as previously disclosed in writing to the other, or adopt any new severance plan;
 
(b)           declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
 
(c)           repurchase or otherwise acquire, directly or indirectly, any shares of capital stock except pursuant to rights of repurchase of any such shares under any employee, consultant or director stock plan existing on the date hereof;
 
(d)           cause, permit or propose any amendments to the articles of incorporation or bylaws of Parent (or similar governing instruments of any Parent Subsidiaries);
 
(e)           sell, lease, license, encumber or otherwise dispose of any properties or assets which are material, individually or in the aggregate, to the business of Parent, except in the ordinary course of business consistent with past practice;
 
(f)           except in the ordinary course of business pursuant to its existing line of credit, incur any indebtedness for borrowed money (other than ordinary course trade payables or pursuant to existing credit facilities in the ordinary course of business) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire debt securities of Parent, as the case may be, or guarantee any debt securities of others;
 
 
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(g)           adopt or amend any employee benefit or employee equity purchase or employee option plan, or enter into any employment contract, pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates of its officers or employees other than salary increases for non-officer employees in the ordinary course of business, consistent with past practice, or change in any material respect any management policies or procedures;
 
(h)           pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of claims, liabilities or obligations in the ordinary course of business;
 
(i)           split, combine or reclassify any shares of its capital stock;
 
(j)           except as permitted by Section 5.6(b) of this Agreement, authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with any other Person with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities (having an aggregate value of over $1 million), any disposition of a material amount of assets (having an aggregate value of over $1 million), any material change in capitalization, or any partnership, association or joint venture;
 
(k)           fail to renew any insurance policy naming it as a beneficiary or a loss payee, or take any steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary or a loss payee to be canceled, terminated or materially altered, except in the ordinary course of business and consistent with past practice and following written notice to the other party;
 
(l)           maintain its books and records in a manner other than in the ordinary course of business and consistent with past practice;
 
(m)           enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of currency other than in the ordinary course of business and consistent with past practice;
 
(n)           institute any change in its accounting methods, principles or practices other than as required by GAAP, or the rules and regulations promulgated by the SEC, or revalue any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivables;
 
(o)           in respect of any Taxes, (i) except as required by applicable law make or change any material election, change any accounting method, enter into any closing agreement, settle any material claim or assessment, or consent to any extension or waiver of the limitation period applicable to any material claim or assessment, or (ii) enter into any Tax sharing agreement (including any indemnity arrangement) or similar arrangement;
 
(p)           issue any capital stock or other equity securities or other options, warrants or other rights to purchase or acquire capital stock or other equity securities except for (i) the customary grant of stock options in accordance with past practice and the issuance of Parent Common Stock upon exercise of stock options granted prior to the date hereof under the Parent Stock Plans; (ii) the issuance of Parent Common Stock upon exercise of warrants issued prior to the date hereof and disclosed on the Parent Disclosure Statement; and (iii) issuances of Parent Common Stock or other equity securities (x) to existing stockholders of the Parent on the date hereof for capital-raising purposes only or (y) to any Person pursuant to the Financing Transaction; or
 
 
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(q)           take or agree to take any action which could reasonably be expected to result in any condition contained in Section  7.1 of this Agreement not being satisfied immediately prior to the Effective Time.
 
5.3            No Solicitation .
 
(a)           From and after the date of this Agreement until the Effective Time or termination of this Agreement pursuant to Article VIII , Company and the Company Subsidiaries will not, nor will they authorize or permit any of their respective officers, managers, directors, affiliates, employees, investment bankers, attorneys, accountants or other advisors or representatives (each a “ Company Representative ”) to, directly or indirectly, (i) solicit, initiate or induce the making, submission or announcement, directly or indirectly, of any proposal that constitutes or is reasonably likely to lead to any Acquisition Proposal (as hereinafter defined), (ii) participate in any discussions or negotiations regarding, or furnish to any Person any information or data with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any Person with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Transaction (as hereinafter defined); provided, however, that this Section  5.3(a) shall not prohibit Company from contacting any Person that has made an unsolicited Acquisition Proposal (that is not withdrawn) (a “ Potential Acquiror ”) for the sole purpose of clarifying such proposal and any material contingencies and the capability of consummation; provided, further, however, that this Section  5.3(a) shall not prohibit Company from furnishing information to, or entering into discussions or negotiations with, any Potential Acquiror if (A) neither Company nor the Company Subsidiaries nor any of their respective officers, directors, affiliates or employees or any investment banker, attorney or other advisor or representative retained by any of them and acting on their behalf shall have breached or taken any action inconsistent with any of the provisions set forth in this Section  5.3(a) , (B) Company’s board of directors is advised by its financial advisor that the Potential Acquiror submitting such Acquisition Proposal has the financial wherewithal to be reasonably capable of consummating such an Acquisition Proposal, and the board determines in good faith (x) after receiving advice from its financial advisor, that such Acquisition Proposal is or is reasonably likely to result in a Company Superior Offer (as hereafter defined), and (y) based upon advice of outside legal counsel, that the failure to participate in such discussions or negotiations or to furnish such information or approve an Acquisition Proposal would constitute a breach of the board’s fiduciary duties under applicable law; (C) at least three (3) business days prior to furnishing any such nonpublic information to, or entering into discussions with a Potential Acquiror, Company gives Parent written notice of the identity of such Potential Acquiror and of Company’s intention to furnish nonpublic information to, or enter into discussions with, such Potential Acquiror and (D) Company receives from such Potential Acquiror an executed confidentiality, standstill and nonsolicitation agreement containing provisions at least as favorable to Company as the confidentiality, standstill and nonsolicitation provisions of the Confidentiality Agreement (as defined in Section  5.4 ); and (E) at least three (3) business days prior to furnishing any such nonpublic information to such Potential Acquiror, Company furnishes such nonpublic information to Parent (to the extent such nonpublic information has not been previously furnished by Company to Parent).  Company shall, and shall direct or cause any Company Subsidiary and Company Representatives to (X) immediately cease and cause to be terminated any discussions or negotiations with any parties that may have been conducted heretofore with respect to an Acquisition Proposal and (Y) cause any physical or virtual data room no longer to be accessible to or by any person other than Parent and Parent Representatives. Company shall not release any third person from or waive any provision of, any confidentiality or standstill agreement to which it or any Company Subsidiary is a party unless the board determines in good faith based upon advise of outside legal counsel that a failure to proved such release or waiver would constitute a breach of the board’s fiduciary duties under applicable law. Without limiting the generality of the foregoing, it is understood and agreed by the parties hereto that any violation of the restrictions set forth in this Section  5.3(a) by any Company Subsidiary or any Company Representative shall be deemed to be a breach of this Section  5.3(a) by the Company.
 
 
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(b)           From and after the date of this Agreement until the Effective Time or termination of this Agreement pursuant to Article VIII , Parent and the Parent Subsidiaries will not, nor will they authorize or permit any of their respective officers, managers, directors, affiliates, employees, investment bankers, attorneys, accountants or other advisors or representatives (each a “ Parent Representative ”) to, directly or indirectly, (i) solicit, initiate or induce the making, submission or announcement, directly or indirectly, of any proposal that constitutes or is reasonably likely to lead to any Acquisition Proposal (as hereinafter defined), (ii) participate in any discussions or negotiations regarding, or furnish to any Person any information or data with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any Person with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Transaction (as hereinafter defined); provided, however, that this Section  5.3(b) shall not prohibit Parent from contacting any Potential Acquiror for the sole purpose of clarifying such proposal and any material contingencies and the capability of consummation; provided, further, however, that this Section  5.3(b) shall not prohibit Parent from furnishing information to, or entering into discussions or negotiations with, any Potential Acquiror if (A) neither Parent nor the Parent Subsidiaries nor any of their respective officers, directors, affiliates or employees or any investment banker, attorney or other advisor or representative retained by any of them and acting on their behalf shall have breached or taken any action inconsistent with any of the provisions set forth in this Section  5.3(b) , (B) Parent’s board of directors is advised by its financial advisor that the Potential Acquiror submitting such Acquisition Proposal has the financial wherewithal to be reasonably capable of consummating such an Acquisition Proposal, and the board determines in good faith (x) after receiving advice from its financial advisor, that such Acquisition Proposal is or is reasonably likely to result in a Parent Superior Offer (as hereafter defined), and (y) based upon advice of outside legal counsel, that the failure to participate in such discussions or negotiations or to furnish such information or approve an Acquisition Proposal would constitute a breach of the board’s fiduciary duties under applicable law; (C) at least three (3) business days prior to furnishing any such nonpublic information to, or entering into discussions with a Potential Acquiror, Parent gives Company written notice of the identity of such Potential Acquiror and of Parent’s intention to furnish nonpublic information to, or enter into discussions with, such Potential Acquiror; and (D) Parent receives from such Potential Acquiror an executed confidentiality, standstill and nonsolicitation agreement containing provisions at least as favorable to Parent as the confidentiality, standstill and nonsolicitation provisions of the Confidentiality Agreement (as defined in Section  5.4 ).  Parent shall, and shall direct or cause any Parent Subsidiary and Parent Representatives to (X) immediately cease and cause to be terminated any discussions or negotiations with any parties that may have been conducted heretofore with respect to an Acquisition Proposal and (Y) cause any physical or virtual data room no longer to be accessible to or by any person other than Company and Company Representatives. Parent shall not release any third person from or waive any provision of, any confidentiality or standstill agreement to which it or any Parent Subsidiary is a party unless the board determines in good faith based upon advise of outside legal counsel that a failure to proved such release or waiver would constitute a breach of the board’s fiduciary duties under applicable law. Without limiting the generality of the foregoing, it is understood and agreed by the parties hereto that any violation of the restrictions set forth in this Section  5.3(b) by any Parent Subsidiary or any Parent Representative shall be deemed to be a breach of this Section  5.3(b) by the Parent.
 
 
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(c)           For purposes of this Agreement, “ Acquisition Proposal ” with respect to an entity shall mean any offer or proposal (other than an offer or proposal by the other party) relating to any Acquisition Transaction.  For purposes of this Agreement, “ Acquisition Transaction ” shall mean any transaction or series of related transactions involving:  (A) any purchase from the entity or acquisition by any Person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than a 20% interest in the total outstanding voting securities of the entity or of any Subsidiary or any tender offer or exchange offer that if consummated would result in any Person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) beneficially owning 20% or more of the total outstanding voting securities of the entity or of any Subsidiary or any merger, consolidation, business combination or similar transaction involving the entity pursuant to which such entity’s stockholders immediately preceding such transaction hold less than 80% of the aggregate equity interests in the surviving or resulting entity of such transaction; (B) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of more than 20% of the assets of the entity; (C) any liquidation or dissolution of the entity; or (D) any combination of the foregoing.
 
(d)           In addition to the obligations of Company set forth in Section  5.3(a) , Company shall promptly (and in no event later than twenty-four (24) hours after receipt of any Acquisition Proposal or any inquiry or indication of interest that Company reasonably believes could lead to an Acquisition Proposal) advise Parent orally and in writing of any Acquisition Proposal or any request for nonpublic information or inquiry which Company reasonably believes would lead to an Acquisition Proposal or to any Acquisition Transaction, the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the Person or group making any such Acquisition Proposal, request or inquiry.  Company will keep Parent informed as promptly as practicable in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry made after the date hereof.
 
 
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(e)           In addition to the obligations of Parent set forth in Section  5.3(b) , Parent shall promptly (and in no event later than twenty-four (24) hours after receipt of any Acquisition Proposal or any inquiry or indication of interest that Parent reasonably believes could lead to an Acquisition Proposal) advise Company orally and in writing of any Acquisition Proposal or any request for nonpublic information or inquiry which Parent reasonably believes would lead to an Acquisition Proposal or to any Acquisition Transaction, the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the Person or group making any such Acquisition Proposal, request or inquiry.  Parent will keep Company informed as promptly as practicable in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry made after the date hereof.
 
5.4            Access to Information .  From the date of this Agreement until the Effective Time, each of Parent and Company will afford to the other party and its authorized representatives (including counsel, financial advisors, consultants, accountants, auditors and agents) reasonable access during normal business hours and upon reasonable notice to all of its facilities, personnel and operations and to all of its and its Subsidiaries books and records, will permit the other party and its authorized representatives to conduct inspections as they may reasonably request and will instruct its officers and those of its Subsidiaries to furnish the other party with such financial and operating data and other information with respect to its business and properties as the other party may from time to time reasonably request, subject to the restrictions set forth in the Mutual Nondisclosure Agreement, dated as of April 1, 2011 between Parent and Company (the “ Confidentiality Agreement ”).  Parent and Company agree that each of them will treat any such information in accordance with the Confidentiality Agreement, which shall remain in full force and effect in accordance with its terms.
 
5.5            Company Special Meeting; Board Recommendations .
 
(a)           Promptly after the effective date of the Registration Statement, Company will take all action necessary in accordance with the DGCL and its certificate of incorporation and bylaws to convene a meeting of Company’s stockholders to consider adoption and approval of this Agreement and approval of the Merger (the “ Company Special Meeting ”).  Company will use its commercially reasonable efforts to solicit from its stockholders proxies in favor of the adoption and approval of this Agreement and the approval of the Merger and will take all other action necessary or advisable to secure the vote or consent of its stockholders required by the DGCL and its certificate of incorporation and bylaws to obtain such approvals.  Company shall ensure that the Company Special Meeting is called, noticed, convened, held and conducted, and that all proxies solicited by Company in connection with the Company Special Meeting are solicited, in compliance with the DGCL and its certificate of incorporation and bylaws and all other applicable legal requirements.
 
 
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(b)           If prior to the Company Special Meeting the board of directors of Company determines in good faith, after consultation with its financial and legal advisors, that any Acquisition Proposal received by it constitutes a Company Superior Offer (as hereinafter defined) and the board of directors of Company determines in its good faith judgment, after receiving advice of its outside legal counsel, that failing to take such action with respect to the Company Superior Offer would constitute a breach of its fiduciary duties under applicable Law, nothing in this Agreement shall prevent the board of directors of Company from withholding, withdrawing, amending or modifying its recommendation in favor of the Merger; provided, that (i) a Company Superior Offer is made to Company and is not withdrawn, (ii) Company shall have provided written notice to Parent (a “ Company Notice of Superior Offer ”) advising Parent that Company has received a Company Superior Offer, specifying the material terms and conditions of such Company Superior Offer and identifying the Person or entity making such Superior Offer, and (iii) Parent shall not have, within three (3) business days of Parent’s receipt of the Company Notice of Superior Offer, made an offer that Company board of directors by a majority vote determines in its good faith judgment, after consultation with its financial advisor, to be at least as favorable to Company’s stockholders as such Company Superior Offer (it being agreed that the Company board of directors shall convene a meeting to consider any such offer by Parent promptly following the receipt thereof).  In the event the board of directors of the Company determines in good faith to withhold, withdraw, amend or modify its recommendation of the Merger in accordance with this Section, the Company may cancel the Company Special Meeting, terminate this Agreement pursuant to Section 8.1(e) and, if applicable, pay the fees in accordance with Section 8.3(b) .  Company shall provide Parent with at least three (3) business days prior notice of any meeting of Company’s board of directors at which Company’s board of directors is reasonably expected to consider any Acquisition Transaction.
 
For purposes of this Agreement “ Company Superior Offer ” shall mean an unsolicited, bona fide written offer or proposal made by a third party to consummate any of the following transactions:  (i) a merger or consolidation involving Company pursuant to which the stockholders of Company immediately preceding such transaction hold less than a majority of the equity interest in the surviving or resulting entity of such transaction, (ii) the acquisition by any Person or group (including by way of a tender offer or an exchange offer or a two step transaction involving a tender offer followed with reasonable promptness by a merger involving Company), directly or indirectly, of ownership of 51% or more of the then outstanding shares of capital stock of Company, or (iii) any sale, transfer or disposition of all or substantially all of the assets of Company, in each case on terms that the board of directors of Company determines, in its reasonable judgment (after consultation with its financial advisor) to be more favorable to its stockholders than the terms of the Merger; provided, however, that any such offer shall not be deemed to be a “Company Superior Offer” if any financing required to consummate the transaction contemplated by such offer is not committed and is not likely in the reasonable judgment of Company’s board of directors (after consultation with its financial advisor) to be obtained by such third party on a timely basis.
 
(c)           Nothing contained in this Agreement shall prohibit Company or its board of directors from taking and disclosing to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
 
 
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5.6            Parent Special Meeting; Board Recommendations .
 
(a)           After the date hereof, Parent will take all action necessary in accordance with Nevada law and its certificate of incorporation and bylaws to convene a meeting of Parent’s stockholders (the “ Parent Special Meeting ”) to consider the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction.  Parent will use its commercially reasonable efforts to solicit from its stockholders proxies in favor of the issuance of shares of Parent Common Stock in connection with the Merger and will take all other action necessary or advisable to secure the vote or consent of its stockholders required by Nevada law, the rules of NYSE Amex and its certificate of incorporation and bylaws to obtain such approvals.  Notwithstanding anything to the contrary contained in this Agreement, Parent may adjourn or postpone the Parent Special Meeting to the extent necessary to ensure that any necessary supplement or amendment to the Parent Proxy Statement is provided to Parent’s stockholders in advance of a vote on the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction or, if as of the time for which the Parent Special Meeting is originally scheduled (as set forth in the Parent Proxy Statement) there are insufficient shares of Parent Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Parent Special Meeting.  Parent shall ensure that the Parent Special Meeting is called, noticed, convened, held and conducted, and that all proxies solicited by Parent in connection with the Parent Special Meeting are solicited in compliance with Nevada law and the Exchange Act, Parent’s certificate of incorporation and bylaws and all other applicable legal requirements.
 
(b)           If prior to the Parent Special Meeting the board of directors of Parent determines in good faith, after consultation with its financial and legal advisors, that any Acquisition Proposal constitutes a Parent Superior Offer (as hereinafter defined) and the board of directors of Parent determines in its good faith judgment, after receiving advice of its outside legal counsel, that failing to take such action with respect to the Parent Superior Offer would constitute a breach of its fiduciary duties under applicable law, nothing in this Agreement shall prevent the board of directors of Parent from withholding, withdrawing, amending or modifying its recommendation in favor of the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction; provided, that (i) a Parent Superior Offer is made to Parent and is not withdrawn, and (ii) Parent shall have provided written notice to Company (a “ Parent Notice of Superior Offer ”) advising Company that Parent has received a Parent Superior Offer, specifying the material terms and conditions of such Parent Superior Offer and identifying the Person or entity making such Parent Superior Offer.  In the event the board of directors of the Parent determines in good faith to withhold, withdraw, amend or modify its recommendation in favor of the issuance of shares of Parent Common Stock in connection with the Merger and Financing Transaction in accordance with this Section, the Parent may cancel the Parent Special Meeting, terminate this Agreement pursuant to Section 8.1(j) and, if applicable, pay the fees in accordance with Section 8.3(b) .  Parent shall provide Company with at least three (3) business days prior notice of any meeting of Parent’s board of directors at which Parent’s board of directors is reasonably expected to consider any Acquisition Transaction.
 
 
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For purposes of this Agreement “ Parent Superior Offer ” shall mean an unsolicited, bona fide written offer or proposal made by a third party to consummate any of the following transactions:  (i) a merger or consolidation involving Parent pursuant to which the stockholders of Parent immediately preceding such transaction hold less than a majority of the equity interest in the surviving or resulting entity of such transaction, (ii) the acquisition by any Person or group (including by way of a tender offer or an exchange offer or a two step transaction involving a tender offer followed with reasonable promptness by a merger involving Parent), directly or indirectly, of ownership of 51% or more of the then outstanding shares of capital stock of Parent, or (iii) any sale, transfer or disposition of all or substantially all of the assets of Parent, in each case on terms that the board of directors of Parent determines, in its reasonable judgment (after consultation with its financial advisor) to be more favorable to its stockholders than the terms of the Merger; provided, however, that any such offer shall not be deemed to be a “Parent Superior Offer” if any financing required to consummate the transaction contemplated by such offer is not committed and is not likely in the reasonable judgment of Parent’s board of directors (after consultation with its financial advisor) to be obtained by such third party on a timely basis.
 
(c)           Nothing contained in this Agreement shall prohibit Parent or its board of directors from taking and disclosing to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
 
5.7            Registration Statement ; Proxy Statement/Prospectus .
 
(a)           After the execution of this Agreement, Company and Parent shall mutually prepare, and Parent shall file a Registration Statement on Form S-4 registering the Parent Common Stock to be issued in connection with the Merger (the “ Registration Statement ”) with the SEC.  Following receipt of SEC comments on such Registration Statement, Parent and Company shall mutually prepare a response to such comments.  Parent and Company shall use all commercially reasonable efforts to have the Registration Statement declared effective by the SEC as promptly as practicable.  Parent shall also take any action required to be taken under applicable state blue sky or securities laws in connection with Parent Common Stock to be issued in exchange for the shares of Company Capital Stock.  Parent and Company shall promptly furnish to each other all information, and take such other actions (including without limitation using all commercially reasonable efforts to provide any required consents of their respective independent auditors), as may reasonably be requested in connection with any action by any of them in connection with the preceding sentences of this Section  5.7 .  Whenever any party learns of the occurrence of any event which is required to be set forth in an amendment or supplement to the Parent Proxy Statement, the Registration Statement or any other filing made pursuant to this Section  5.7 , Parent or Company, as the case may be, shall promptly inform the other of such occurrence and cooperate in filing with the SEC or its staff and/or mailing to stockholders of Company and Parent such amendment or supplement.
 
(b)           The information supplied by Company for inclusion or incorporation by reference in the Registration Statement as it relates to Company, at the time the Registration Statement is declared effective by the SEC, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading.  The information supplied by Company for inclusion in the proxy statement to be sent to the stockholders of Parent (the “ Parent Proxy Statement ”), at the date the Parent Proxy Statement is first mailed to stockholders of Parent, at the time of the Parent Special Meeting and at the Effective Time will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  If at any time prior to the Effective Time any event with respect to Company or any of the Company Subsidiaries shall occur which is required to be described in the Registration Statement or Parent Proxy Statement, such event shall be so described, and an amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of Parent.
 
 
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(c)           The information supplied by Parent for inclusion or incorporation by reference in the Registration Statement as it relates to Parent, at the time the Registration Statement is declared effective by the SEC, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading.  The information supplied by Parent for inclusion in the Parent Proxy Statement, at the date the Parent Proxy Statement is first mailed to the Parent’s stockholders, at the time of the Parent Special Meeting and at the Effective Time will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  If at any time prior to the Effective Time any event with respect to Parent or any of the Parent Subsidiaries shall occur which is required to be described in the Parent Proxy Statement, such event shall be so described, and an amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of Company.
 
5.8            Other SEC Filings .  Parent shall file with the SEC all annual, quarterly and current reports required to be filed by Parent under the Exchange Act for any and all periods ending prior to the Effective Time, which such annual, quarterly and current reports shall (i) be made on a timely basis pursuant to the requirements applicable to each such type of report and (ii) comply in all material respects with the rules and regulations of the SEC applicable to each such type of report.
 
5.9            Commercially Reasonable Efforts .
 
(a)           Subject to the terms and conditions herein provided, Parent, Merger Sub and Company shall use commercially reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or appropriate under this Agreement, applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (i) using commercially reasonable efforts to obtain all necessary governmental and private party consents, approvals or waivers, (ii) using commercially reasonable efforts to lift any legal bar to the Merger, (iii) if applicable, furnishing all information required under the HSR Act, and (iv) in the case of Parent, fulfilling its obligations and using commercially reasonable efforts to consummate and make effective the Financing Transaction.  Parent shall cause Merger Sub to perform all of its obligations under this Agreement.
 
(b)           Notwithstanding anything to the contrary in this Agreement, neither Parent, the Surviving Corporation, nor Company nor any of their Subsidiaries shall be required to (i) divest, hold separate or license (through a trust or otherwise) any business(es), product line(s) or asset(s), (ii) take any action or accept any limitation that would reasonably be expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect, or (iii) agree to any of the foregoing.
 
 
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5.10            Public Announcements .  Before issuing any press release or otherwise making any public statement with respect to the Merger or any of the other transactions contemplated hereby, Parent, Merger Sub and Company agree to consult with each other as to its form and substance, and agree not to issue any such press release or general communication to employees or make any public statement prior to obtaining the consent of the other (which shall not be unreasonably withheld or delayed), except to the extent that Parent, Merger Sub or Company, as the case may be, is advised by outside counsel that such public statement is required by applicable law or by the rules and regulations of or listing agreement with NYSE Amex, or as may otherwise be required by NYSE Amex or the SEC.
 
5.11            Notification of Certain Matters .  Company shall give prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give prompt notice to Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time, (ii) any material failure of Company, Parent or Merger Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder, (iii) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, or (iv) any facts or circumstances arise that could reasonably be expected to result in a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be.
 
5.12            Indemnification .
 
(a)           The certificate of incorporation and bylaws of the Surviving Corporation will contain provisions with respect to exculpation and indemnification that are, to the extent permitted by the DGCL, at least as favorable as those contained in the certificate of incorporation and bylaws of Company immediately prior to the Effective Time, which provisions will not be amended, repealed or otherwise modified for a period of six (6) years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who are or were directors, officers, employees or agents of Company at any time prior to the Effective Time (“ Company Indemnified Persons ”) unless such modification is required by law.  In addition, from and after the Effective Time, Parent shall, and shall cause Company or the Surviving Corporation, as applicable, and its Subsidiaries to, advance expenses (including reasonable legal fees and expenses) incurred in the defense of any claim, action, suit, proceeding or investigation with respect to any matters subject to indemnification pursuant to this Section  5.12 pursuant to the procedures set forth, and to the fullest extent provided in the certificate of incorporation and bylaws in effect immediately prior to the Effective Time or existing indemnification agreements; provided , however , that, prior to any such advance, any Company Indemnified Party to whom expenses are advanced shall sign a written undertaking to repay such advanced expenses to the Surviving Corporation as soon as reasonably practicable if it is ultimately determined that such Company Indemnified Party is not entitled to indemnification or advancement.  Further, from and after the Effective Time, Parent shall not, and shall cause Company or the Surviving Corporation, as applicable, and its Subsidiaries not to, settle, compromise or consent to the entry of any judgment in any proceeding or threatened action, suit, proceeding, investigation or claim, with respect to any matter arising out of, relating to, or in connection with any acts or omissions occurring or alleged to have occurred prior to the Effective Time (with respect to which indemnification could be sought by such Company Indemnified Party under the DGCL, the indemnification provisions in Company’s certificate of incorporation and bylaws in effect immediately prior to the Effective Time or his or her indemnification agreement), brought against any Company Indemnified Party, unless such settlement, compromise or consent includes an unconditional release of such Company Indemnified Party from all liability arising out of such action, suit, proceeding, investigation or claim or such Company Indemnified Party otherwise consents in writing and Parent, Company and the Surviving Corporation shall, and shall cause its or their Subsidiaries to, cooperate in the defense of any such matter.
 
 
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(b)           Parent will cause the Surviving Corporation to honor and fulfill the obligations of Company and Parent pursuant to any written indemnification agreements identified on Schedule 3.12(a) to the Company Disclosure Statement.
 
(c)           Parent shall obtain, on behalf of Company or the Surviving Corporation, as applicable, a “tail” insurance policy to become effective at the Effective Time with a claims period of six years following the Effective Time with respect to directors’ and officers’ liability insurance covering each person currently covered by Company’s directors’ and officers’ liability insurance policy in effect on the date of this Agreement (the “ Existing D&O Policy ”) for acts or omissions occurring prior to the Effective Time, including in connection with the approval of this Agreement and the Merger, and such insurance policy shall be on terms at least as favorable to Company and the beneficiaries of the Existing D&O Policy as those of Company’s Existing D&O Policy.
 
(d)           At or prior to the Effective Time, Parent shall increase Parent’s directors’ and officers’ liability insurance coverage to $25 million.
 
(e)           In the event Parent, Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent, Company or the Surviving Corporation shall assume the obligations set forth in this Section  5.12 .
 
(f)           This Section  5.12 is intended for the irrevocable benefit of, and to grant third party rights to, Company Indemnified Parties and shall be binding on all successors and assigns of the Company, Parent and Surviving Corporation.  This Section  5.12 shall not be amended in a manner that is adverse to the Company Indemnified Parties (including their successors and heirs) or terminated without the consent of each of the Company Indemnified Parties (including their successors and heirs) affected thereby.  Each of the Company Indemnified Parties shall be entitled to enforce the covenants contained in this Section  5.12 .  Parent and the Surviving Corporation shall pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any Indemnified Person in enforcing the indemnity and other obligations provided in this Section  5.12 .  The provisions of this Section  5.12 shall survive the consummation of the Merger.
 
5.13            Stock Exchange Listing .  Prior to the Effective Time, Parent shall cause the shares of Parent Common Stock issuable, and those required to be reserved for issuance in connection with the Merger, to be eligible for trading on the NYSE Amex, subject to official notice of the issuance.
 
 
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5.14            Resignation of Directors and Officers .  Prior to the Effective Time, Company shall use its best efforts to deliver to Parent the resignations of such directors and officers of Company and its Subsidiaries as Parent shall specify at least ten business days prior to the Closing, effective at the Effective Time.
 
5.15            Consents of Parent’s and Company’s Accountants .  Each of Parent and Company shall use commercially reasonable efforts to cause its independent accountants to deliver to Parent such consents required to be included in registration statements on Form S-4 under the Securities Act in form and substance required by Regulation S-X promulgated by the SEC.
 
5.16            Voting Agreements .  Concurrently with the execution hereof, Company shall deliver to Parent the Voting and Lockup Agreements in substantially the form of Exhibit A attached hereto (the “Company Voting Agreements” )   executed by each director, executive officer and shareholder of Company identified on Schedule 5.16 of the Company Disclosure Statement.  Concurrently with the execution hereof, Parent shall deliver to Company Voting Agreements in substantially the form of Exhibit B attached hereto (the “Parent Voting Agreements” ) executed by each director, executive officer and shareholder of Parent identified on Schedule 5.16 of the Parent Disclosure Statement.
 
5.17            Tax Treatment .  Each of Parent and Company shall use its commercially reasonable efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code.
 
5.18             Employee Benefit Matters .
 
(a)           All employees of the Company immediately prior to the Effective Time shall be employees of the Surviving Corporation immediately after the Effective Time.  At the Effective Time, Parent shall enter into an employment agreement with Geoff Cook and each other Company employee listed on Schedule 5.18 , in the form agreed between Parent and each such employee on or before the date hereof (the “ Employment Agreements ”).  The Employment Agreements shall be executed on the date hereof, to be effective as of the Effective Time.
 
(b)           Following the Merger, during the term of Geoff Cook’s employment, all recommendations for compensation and termination decisions relating to the Company employees will be made by Geoff Cook, subject to the approval of the Chief Executive Officer of Parent, such approval not to be unreasonably withheld.
 
(c)           Parent agrees to cause all Company employees to be eligible to participate in the Parent Stock Plans consistent with the eligibility criteria applied by Parent to other employees of Parent.  The Surviving Corporation shall continue to maintain in effect the Company’s health, life insurance and other benefit plans following the Effective Time.  At such time, if any, as Parent’s Board of Directors determines to include Company employees in Parent’s health, life insurance and other benefit plans, the Company employees shall receive full credit for prior years of service with Company and shall not be subject to any preexisting conditions exclusions or limitations.  The Company employees shall receive parity with Parent employees with respect to eligibility to participate in all Parent employee benefit plans, programs and policies.
 
 
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5.19            Representation on Parent Board and Executive Committee .  Parent shall take such action as may be necessary to appoint Geoff Cook, Rick Lewis and Terry Herndon (or such replacement designees as may be selected by the Company) to the Parent’s eight (8) member Board of Directors commencing as of the Effective Time.  In addition, Parent covenants and agrees to include three designees of the Company on the slate of directors recommended for election by Parent’s Stockholders for a period of three years following the Effective Time.  Parent shall take such action as may be necessary to appoint Geoff Cook to the Parent’s three (3) member Executive Committee commencing as of the Effective Time and for not less than 3 years thereafter.  At or prior to the Effective Time, Parent shall enter into indemnification agreements with each of Messrs. Cook, Lewis and Herndon (or such replacement designees as may be selected by the Company) on substantially the terms set forth in Parent’s standard form of directors’ indemnification agreement.
 
5.20            Parent Stock Options .  Promptly following the Effective Time, Parent shall issue to the Company employees, pursuant to the terms and conditions of the Parent Option Plan, options to purchase 1,332,500 shares of Parent Common Stock (the “ Retention Option Pool ”).  The Retention Option Pool shall be allocated among the Company employees as determined by Geoff Cook.
 
5.21            Sale Rights Agreement .  Concurrently with the execution hereof, Company and Parent and certain Affiliates of Company shall execute and deliver the Sale Rights Agreement in the form of Exhibit D attached hereto.
 
5.22            Parent Reincorporation in Delaware .  Parent shall use its commercially reasonable efforts to obtain approval of its stockholders for, and upon receipt of such approval shall promptly take all necessary steps to cause, the Parent to be reincorporated in the State of Delaware.
 
5.23            Tax Free Reorganization .   None of Company, Parent, Merger Sub or Surviving Corporation will, nor will they permit any of their respective Subsidiaries to, take any action prior to or following the Closing that would reasonably be expected to cause the Merger to fail to qualify as a reorganization with the meaning of  Section 368(a) of the Code.
 
5.24             Lock-up Provision/Letter of Transmittal.   The parties shall cause the Letter of Transmittal to contain a provision substantially identical to the following:  “The undersigned hereby agrees not to sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale (“Post Merger Sale”), of any Parent securities received pursuant to the terms of the Merger Agreement and held by Shareholder other than as follows:  (a) during the one (1) month period following the Effective Time (as defined in the Merger Agreement) of the Merger, the undersigned may conduct Post Merger Sales of no more than thirty percent (30%) of any Parent securities received by him/her pursuant to the Merger Agreement; and (b) subject to clause (a) of this sentence, during the two (2) month period following the Effective Time of the Merger, the undersigned may conduct Post Merger Sales of no more than sixty-five percent (65%) of any Parent securities received by him/her pursuant to the Merger Agreement.  Notwithstanding the foregoing, the undersigned may consummate a Post Merger Sale at any time and for any amount of Parent securities received pursuant to the terms of the Merger Agreement with any affiliate or family member of the undersigned if such transferee, prior to the Post Merger Sale, agrees to be bound by this provision.”  Notwithstanding the foregoing, in the case of any conflict between the terms of this Agreement or the Letter of Transmittal and the Company Voting Agreement, the Company Voting Agreement shall control as between Parent, Merger Sub and the Surviving Corporation, on the one hand, and the Company and those Company stockholders who are parties to the Company Voting Agreement, on the other hand.
 
 
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5.25             Change of Control Provisions .   Prior to the Effective Time, Parent shall amend the Parent Stock Plan and the employment agreements of each of John Abbott, Michael Matte, Louis Bardov and Brian Garret so that the Merger will not be deemed to be a “Change of Control” thereunder.
 
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
 
The respective obligations of each party to this Agreement to effect the Merger shall be subject to the fulfillment on or before the Effective Time of each of the following conditions, any one or more of which may be waived in writing by all the parties hereto:
 
6.1            Registration Statement/Listing of Parent Common Stock .  The Registration Statement shall have become effective in accordance with the provisions of the Securities Act.  No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and remain in effect and no proceedings for such purpose shall be pending before or threatened by the SEC.  The Parent Common Stock issuable in connection with the Merger shall have been authorized for listing on NYSE Amex, subject to official notice of the issuance, if required by the rules of NYSE Amex.
 
6.2            Parent Stockholder Approval .  The holders of at least a majority of the shares of Parent Common Stock represented in person or by proxy at a duly-convened Parent Special Meeting or any adjournments or postponements thereof shall have approved the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction.
 
6.3            Company Shareholder Approval .  The holders of at least a majority of the outstanding shares of capital stock of Company and 70% of the outstanding shares of Company Preferred Stock shall have approved the Agreement and the Merger at the Company Special Meeting or any adjournments or postponements thereof.
 
6.4            Governmental Clearances .  Other than the filing of the Certificate of Merger which shall be accomplished as provided in Section  1.2 , all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Government Entity the failure of which to obtain or comply with would be reasonably likely to have a Company Material Adverse Effect or a Parent Material Adverse Effect shall have been obtained or filed.
 
6.5            Statute or Decree .  No statute, rule, regulation, writ, order, temporary restraining order or preliminary or permanent injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority, which remains in effect, and prohibits the consummation of the Merger or otherwise makes it illegal, nor shall any Person or governmental agency have instituted any action, suit or proceeding which remains pending and which seeks, and which is reasonably likely, to enjoin, restrain or prohibit the consummation of the Merger in accordance with the terms of this Agreement.
 
 
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6.6            Financing Transaction .  Parent shall have closed the Financing Transaction (which for the avoidance of doubt, need not include participation by MATT Inc. or its Affiliates) or an alternate financing transaction on terms and conditions which are no less favorable to Parent than those contained in the Financing Transaction, in either case in the amount of at least $10 million.  The parties agree that any difference between the Cash Consideration to be paid by Parent pursuant to this Agreement and the amount raised in the Financing Transaction (or another mutually agreed alternate financing transaction) shall be funded by Parent from cash on hand.
 
6.7            Share Price .  The closing price of a share of Parent Common Stock on NYSE Amex on the day three (3) days prior to the Closing Date shall not be less than $5.00 per share.
 
6.8            Exchange Ratio .  The Transaction Share Price shall not be less than $5.00 per share.
 
6.9             Dissenting Shares.   The total number of Dissenting Shares shall not exceed five percent (5%) of the total number of issued and outstanding shares of the Company’s capital stock.
 
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF COMPANY AND PARENT
 
7.1            Additional Conditions To The Obligations Of Company .  The obligations of Company to effect the Merger shall be subject to the fulfillment of each of the following additional conditions, any one or more of which may be waived in writing by Company:
 
(a)           The representations and warranties of Parent and Merger Sub contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Effective Time, with the same force and effect as if made at the Effective Time, except (i) for changes specifically permitted by the terms of this Agreement and (ii) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date.
 
(b)           Parent and Merger Sub shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by them on or prior to the Closing Date.
 
(c)           Parent and Merger Sub shall have furnished a certificate or certificates of Parent and Merger Sub executed on behalf of one or more of their respective officers to evidence compliance with the conditions set forth in Sections  7.1(a) and 7.1(b) of this Agreement.
 
(d)           There shall not have occurred any Parent Material Adverse Effect (or any change, event or development that could reasonably be expected to have a Parent Material Adverse Effect) between the date of this Agreement and the Closing Date.
 
 
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(e)           Company shall have received executed counterparts of the Sale Rights Agreement in substantially the form set forth on Exhibit D .
 
7.2            Additional Conditions To The Obligations Of Parent And Merger Sub .  The obligations of Parent and Merger Sub to effect the Merger shall be subject to the fulfillment of each of the following additional conditions, any one or more of which may be waived in writing by Parent:
 
(a)           The representations and warranties of Company, contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Effective Time, with the same force and effect as if made at the Effective Time, except (i) for changes specifically permitted by the terms of this Agreement and (ii) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date.
 
(b)           Company shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
 
(c)           Company shall have furnished a certificate of Company executed by one of its officers to evidence compliance with the conditions set forth in Sections  7.2(a) and 7.2(b) of this Agreement.
 
(d)           There shall not have occurred any Company Material Adverse Effect (or any change, event or development that could reasonably be expected to have a Company Material Adverse Effect) between the date of this Agreement and the Closing Date.
 
ARTICLE VIII
TERMINATION
 
8.1            Termination .  This Agreement may be terminated at any time prior to the Effective Time, whether before or after the requisite approval of Company’s and Parent’s members or stockholders:
 
(a)           by mutual written consent duly authorized by the boards of directors of Parent and Company;
 
(b)           by either Company or Parent if the Merger shall not have been consummated by January 19, 2012 (the “ Outside Date ”), which date may be extended by mutual consent of the parties hereto, for any reason; provided, however, that the right to terminate this Agreement under this Section  8.1(b) shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a material breach of this Agreement;
 
(c)           by either Company or Parent if (i) a statute, rule, regulation or executive order shall have been enacted or entered prohibiting the consummation of the Merger substantially on the terms contemplated hereby or (ii) a court of competent jurisdiction or other Government Entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger (provided that the party seeking to terminate pursuant to this Section  8.1(c) shall have complied with its obligations under Section  5.9 and used its reasonable best efforts to have any such order, decree, ruling or other action vacated or lifted);
 
 
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(d)           by Parent if at any time prior to the adoption and approval of this Agreement and the Merger by the required vote of the stockholders of Company, a Company Triggering Event (as hereinafter defined) shall have occurred;
 
(e)           by Company, if, prior to the Company Special Meeting, the board of directors of Company has determined in good faith after receiving the advice of outside legal counsel, to withhold, withdraw, amend or modify its recommendation or approval of the Merger in order to approve and permit Company to accept a Company Superior Offer; provided, however, that Company may not terminate this Agreement pursuant to this Section  8.1(e) if either the Company, any Company Subsidiary or any Company Representative shall have breached Section  5.3(a) ; and provided, further, however, that Company may not terminate this Agreement pursuant to this Section  8.1(e) unless and until (A) three business days have elapsed following delivery to Parent of a written notice of such determinations by the board of directors of Company and during such three business day period Company has cooperated with Parent, including, without limitation, informing Parent of the terms and conditions of such Company Superior Offer, and the identity of the Person making such Company Superior Offer, with the intent of enabling the parties hereto agree to a modification of the terms and conditions of this Agreement so that the transactions contemplated hereby on such modified terms and conditions may be effected; (B) at the end of such three business day period the Company Superior Offer continues in the good faith determination of the board of directors of Company to constitute a Company Superior Offer and the board of directors of Company confirms in good faith its determination, after receiving the advice of outside legal counsel, that the failure to take the action set forth in this Section and enter into an agreement to effect the Company Superior Offer would constitute a breach of its fiduciary duties under applicable law; and (C) as and when applicable, the Company pays the fees required by Section  8.3(b) ;
 
(f)           by Company, upon a breach of any representation, warranty, covenant or agreement on the part of Parent set forth in this Agreement, or if any representation or warranty of Parent shall have become untrue, in either case such that the conditions set forth in Section  7.1(a) or Section  7.1(b) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that such inaccuracy in Parent’s representations and warranties or breach by Parent remains uncured on the date which is twenty (20) business days following written notice of such breach or inaccuracy from Company to Parent (it being understood that Company may not terminate this Agreement pursuant to this Section  8.1(f) if it shall have materially breached this Agreement and remains in breach of this Agreement as of the date of such termination);
 
(g)           by Parent, upon a breach of any representation, warranty, covenant or agreement on the part of Company set forth in this Agreement, or if any representation or warranty of Company shall have become untrue, in either case such that the conditions set forth in Section  7.2(a) or Section  7.2(b) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that such inaccuracy in Company’s representations and warranties or breach by Company remains uncured on the date which is twenty (20) business days following written notice of such breach or inaccuracy from Parent to Company (it being understood that Parent may not terminate this Agreement pursuant to this Section  8.1(g) if it shall have materially breached this Agreement and remains in breach of this Agreement as of the date of such termination);
 
 
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(h)           by Parent, if, prior to the Parent Special Meeting, the board of directors of Parent has determined in good faith after receiving the advice of outside legal counsel, to withhold, withdraw, amend or modify its recommendation for approval of the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction in order to approve and permit Parent to accept a Parent Superior Offer; provided, however, that Parent may not terminate this Agreement pursuant to this Section  8.1(h) if either the Parent, any Parent Subsidiary or any Parent Representative shall have breached Section  5.3(b) ; and provided, further, however, that Parent may not terminate this Agreement pursuant to this Section  8.1(h) unless and until (A) three business days have elapsed following delivery to Company of a written notice of such determinations by the board of directors of Parent and during such three business day period Parent has cooperated with Company, including, without limitation, informing Company of the terms and conditions of such Parent Superior Offer, and the identity of the Person making such Parent Superior Offer; (B) at the end of such three business day period the Parent Superior Offer continues in the good faith determination of the board of directors of Parent to constitute a Parent Superior Offer and the board of directors of Parent confirms in good faith its determination, after receiving the advice of outside legal counsel, that the failure to take the action set forth in this Section and enter into an agreement to effect the Parent Superior Offer would constitute a breach of its fiduciary duties under applicable law; and (C) if and when applicable, the Parent pays the fees required by Section  8.3(b) ; and
 
(i)           by Company if at any time prior to approval of the issuance of shares of Parent Common Stock in connection with the Merger and Financing Transaction by the required vote of the stockholders of Parent at the Parent Special Meeting, a Parent Triggering Event (as hereinafter defined) shall have occurred.
 
(j)           For the purposes of this Agreement, a “ Company Triggering Event ” shall be deemed to have occurred if:  (i) the board of directors of Company or any committee thereof shall for any reason have withdrawn or shall have amended or modified in a manner adverse to Parent its recommendation that Company’s stockholders vote in favor of the adoption and approval of the Agreement or the approval of the Merger; (ii) the board of directors of Company or any committee thereof fails to reaffirm its recommendation that Company’s stockholders vote in favor of the adoption and approval of the Agreement and the approval of the Merger within ten (10) business days after Parent requests in writing that such recommendation be reaffirmed; (iii) the board of directors of Company or any committee thereof shall have approved or recommended any Acquisition Proposal with respect to Company; (iv) Company shall have entered into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal; or (v) a tender or exchange offer relating to securities of Company shall have been commenced by a Person unaffiliated with Parent and Company shall not have sent to its security holders, within ten (10) business days after such tender or exchange offer is first published, sent or given, a statement disclosing that Company recommends rejection of such tender or exchange offer.
 
 
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(k)           For the purposes of this Agreement, a “ Parent Triggering Event ” shall be deemed to have occurred if:  (i) the board of directors of Parent or any committee thereof shall for any reason have withdrawn or shall have amended or modified in a manner adverse to Company its recommendation that Parent’s stockholders vote in favor of the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction; (ii) Parent shall have failed to include in the Parent Proxy Statement the recommendation of the board of directors of Parent that Parent’s stockholders vote in favor of the issuance of shares of Parent Common Stock in connection with the Merger and the Financing Transaction; (iii)  the board of directors of Parent or any committee thereof shall have approved or recommended any Acquisition Proposal with respect to Parent; (iv) Parent shall have entered into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal; or (v) a tender or exchange offer relating to securities of Parent shall have been commenced by a Person unaffiliated with Company and Parent shall not have sent to its security holders pursuant to Rule 14e-2 promulgated under the Securities Act, within ten (10) business days after such tender or exchange offer is first published, sent or given, a statement disclosing that Parent recommends rejection of such tender or exchange offer.
 
8.2            Notice of Termination; Effect of Termination .  Except as otherwise provided in this Agreement, any termination of this Agreement pursuant to Section  8.1 will be effective immediately upon the delivery of a valid written notice of the terminating party to the other parties hereto.  In the event of the termination of this Agreement as provided in Section  8.1 , this Agreement shall be of no further force or effect, except (i) as set forth in Section  8.2 , Section  8.3 and Article IX, each of which shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any fraud or any material breach of this Agreement.  No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms.
 
8.3            Fees and Expenses .
 
(a)           Except as set forth in this Section  8.3 , all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Merger is consummated.
 
(b)            Payments .
 
(i)           In the event that this Agreement is terminated by reason of a Company Triggering Event, Company shall reimburse Parent for all documented expenses incurred by Parent in connection with this Agreement and the transactions contemplated hereby (“ Parent Expenses ”) not to exceed an amount of $1 million in the aggregate, in immediately available funds not later than ten (10) business days after termination of this Agreement. 
 
(ii)           In the event that this Agreement is terminated by reason of a Parent Triggering Event, Parent shall reimburse Company for all documented expenses incurred by Company in connection with this Agreement and the transactions contemplated hereby (“ Company Expenses ”) not to exceed an amount of $1 million in the aggregate, in immediately available funds not later than ten (10) business days after termination of this Agreement. 
 
 
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(iii)           In the event that (A) this Agreement is terminated by reason of a Company Triggering Event and (B) within twelve (12) months following the termination of this Agreement, a Company Acquisition (as hereinafter defined) is consummated or Company enters into an agreement providing for a Company Acquisition by a third party, Company shall pay Parent the Termination Fee.  Such payment shall be made promptly, but in no event later than two (2) business days after the consummation of such Company Acquisition (regardless of when such consummation occurs if Company has entered into such an agreement with such third party within such twelve (12) month period) in immediately available funds.
 
(iv)           In the event that (A) this Agreement is terminated by reason of a Parent Triggering Event and (B) within twelve (12) months following the termination of this Agreement, a Parent Acquisition (as hereinafter defined)  is consummated or Parent enters into an agreement providing for a Parent Acquisition by a third party, Parent shall pay Company the Termination Fee.  Such payment shall be made promptly, but in no event later than two (2) business days after the consummation of such Parent Acquisition (regardless of when such consummation occurs if Parent has entered into such an agreement with such third party within such twelve (12) month period) in immediately available funds.
 
Each of Parent and Company acknowledges that the agreements contained in this Section  8.3(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other party would not enter into this Agreement; accordingly, if Parent or Company (as applicable, the “ Breaching Party ”) fails to pay in a timely manner the amounts due pursuant to this Section  8.3(b) , and, in order to obtain such payment, the other party (the  “ Aggrieved Party ”) makes a claim that results in a judgment against the Breaching Party for any or all of the amounts set forth in this Section  8.3(b) , the Breaching Party shall pay to the Aggrieved Party its reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with such suit, together with interest on the amounts set forth in this Section  8.3(b) at the prime rate published in The Wall Street Journal (Eastern Edition) in effect on the date such payment was required to be made.
 
For the purposes of this Agreement, “ Termination Fee ” shall mean $3 million, less any previously paid Parent Expenses or Company Expenses, as applicable.
 
For the purposes of this Agreement, “ Company Acquisition ” shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Company pursuant to which Company’s stockholders immediately preceding such transaction hold less than 80% of the aggregate equity interests in the surviving or resulting entity of such transaction, (ii) a sale or other disposition by Company of assets representing in excess of 20% of the aggregate fair market value of Company’s business immediately prior to such sale, or (iii) the acquisition by any Person (including by way of a tender offer or an exchange offer or issuance by Company), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 20% of the voting power of the then outstanding shares of capital stock of Company; provided, however, that the term “Company Acquisition” shall not include a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction solely among Company and one or more of its subsidiaries or among its subsidiaries.
 
 
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For the purposes of this Agreement, “ Parent Acquisition ” shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Parent pursuant to which Parent’s stockholders immediately preceding such transaction hold less than 80% of the aggregate equity interests in the surviving or resulting entity of such transaction, (ii) a sale or other disposition by Parent of assets representing in excess of 20% of the aggregate fair market value of Parent’s business immediately prior to such sale, or (iii) the acquisition by any Person (including by way of a tender offer or an exchange offer or issuance by Parent), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 20% of the voting power of the then outstanding shares of capital stock of Parent; provided, however, that the term “Parent Acquisition” shall not include a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction solely among Parent and one or more of its subsidiaries or among its subsidiaries
 
ARTICLE IX
MISCELLANEOUS
 
9.1            Amendment and Modification .  Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Parent, Merger Sub and Company at any time prior to the Effective Time.
 
9.2            Waiver of Compliance; Consents .  Any failure of Parent or Merger Sub, on the one hand, or Company, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Company (with respect to any failure by Parent or Merger Sub) or Parent or Merger Sub (with respect to any failure by Company), respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section  9.2 .
 
9.3            Survival; Investigations .  The respective representations and warranties of Parent, Merger Sub and Company contained in Articles III and IV hereof or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party hereto and such representations and warranties and the covenants contained in Sections 5.1 , 5.2 , 5.3 , 5.4 , 5.5 , 5.6 , 5.7 , 5.8 , 5.9 , 5.11 , 5.14 , 5.15 , 5.16 and 5.24 shall not survive the Effective Time.  For the avoidance of doubt, all other covenants contained in this Agreement, which by their terms are to be performed in whole or in part after the Effective Time, shall survive the Effective Time.
 
 
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9.4            Notices .  All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below or at such other address for a party as shall be specified by like notice.  Any such notice shall be effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile.  Notices, including oral notices, shall be delivered as follows:
 
 
If to Company: 
Insider Guides, Inc.
280 Union Square Drive
New Hope, PA  18938
Telephone:  (215) 862-1162
Facsimile:  (215) 862-1655
Attention:  Mr. Geoff Cook
 
 
With a copy to:   
SNR Denton US LLP
Two World Financial Center
225 Liberty Street
New York, NY 10281-2699
Telephone:  212-768-6700
Facsimile:  212-768-6800
Attention:  Lisa A. Weiss
 

 
If to Parent, or Merger Sub, to: 
Quepasa Corp.
324 Datura Street, Suite 114
West Palm Beach, FL  33401
Telephone:  561-366-1249
Facsimile:  561-651-9984
Attention:  John Abbott
 
 
With a copy to:  
Bradley Arant Boult Cummings LLP
1600 Division Street, Suite 700
Nashville, TN  37203
Telephone:  615-252-2388
Facsimile:  615-252-6388
Attention:  Jeffrey S. Buschmann
 
9.5            Assignment; Third Party Beneficiaries .  Neither this Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Agreement is not intended to confer any rights or remedies upon any Person other than the parties hereto and, with respect only to Section  5.12 , the Indemnified Parties, who may seek to enforce the provisions of Section  5.12 after the Effective Time.
 
 
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9.6            Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflicts of laws.
 
9.7            Specific Enforcement; Consent to Jurisdiction ; Waiver of Jury Trial .  The parties hereto agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement without proof of actual damages, this being in addition to, and not exclusive of, any other remedy or remedies to which such party is entitled at law or in equity.  Each party hereto agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that (i) any other party has an adequate remedy at law or (ii) an award of specific performance is not an appropriate remedy for any reason of law or equity.  Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Chancery Court of the State of Delaware and any appellate court thereof or, if under applicable law exclusive jurisdiction is vested in the Federal courts, of any Federal court located in the State of Delaware in any action or proceeding arising out of or relating to this Agreement or the agreements delivered herewith or the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the Chancery Court of the State of Delaware or, if under applicable law exclusive jurisdiction is vested in the Federal courts, a Federal court located in the State of Delaware. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER VOLUNTARILY, AND (iii) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS CONTAINED IN THIS SECTION  9.7 .
 
9.8            Counterparts .  This Agreement may be executed 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.
 
9.9            Severability .  In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a party hereto, it shall be adjusted if possible to effect the intent of the parties.  In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made.
 
 
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9.10            Interpretation .  The Article and Section headings contained in this Agreement are solely for the purpose of reference and shall not in any way affect the meaning or interpretation of this Agreement.  The word “including” shall be deemed to mean “including without limitation.”
 
9.11            Entire Agreement .  This Agreement, the Company Voting Agreements, the Parent Voting Agreements, the Sale Rights Agreement, the Employment Agreements and the Confidentiality Agreement including the exhibits hereto and the documents and instruments referred to herein (including the Company Disclosure Statement and the Parent Disclosure Statement), embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein.
 
9.12            Definition of “law” .  When used in this Agreement “law” refers to any applicable law (whether civil, criminal or administrative) including, without limitation, common law, statute, statutory instrument, treaty, regulation, directive, decision, code, order, decree, injunction, resolution or judgment of any government, quasi-government, supranational, federal, state or local government, statutory or regulatory body, court, or agency.
 
9.13            Rules of Construction .  Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement.
 
[ Signature Page Follows ]
 

 
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IN WITNESS WHEREOF, Quepasa Corporation, IG Acquisition Company and Insider Guides, Inc. have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.
 
 
QUEPASA CORPORATION
   
 
By:
/s/ John Abbott
 
Name:
John Abbott
 
Title:
Chief Executive Officer

 
 
IG ACQUISITION COMPANY
   
 
By:
/s/ John Abbott
 
Name:
John Abbott
 
Title:
Chief Executive Officer

 
 
INSIDER GUIDES, INC.
   
 
By:
/s/ Geoff Cook
 
Name:
Geoff Cook
 
Title:
Chief Executive Officer
 
 
[Signature Page to Agreement and Plan of Merger]
 
 
 
EXHIBIT A
 
Form of Company Voting Agreement
 
Please see attached.
 
 

 
-A-
 
EXHIBIT B
 
Form of Parent Voting Agreement
 
Please see attached.
 
 

 
-B-
 
EXHIBIT C
 
Certificate of Merger
 
Please see attached.
 
 
 
 
-C-
 
EXHIBIT D
 
Sale Rights Agreement
 
Please see attached.

 
 
 
-D-
 
Exhibit 10.1

VOTING AND LOCK-UP AGREEMENT
 
THIS VOTING AND LOCK-UP AGREEMENT (this “ Agreement ”) is made and entered into as of July 19, 2011, by and among Quepasa Corporation., a Nevada corporation (“ Parent ”), Insider Guides, Inc., a Delaware corporation (the “ Company ”), and the undersigned shareholder (“ Shareholder ”) of the Company.
 
RECITALS
 
A.            Concurrently with the execution of this Agreement, Parent and the Company have entered into an Agreement and Plan of Merger (the “ Merger Agreement ”), which provides for the merger (the “ Merger ”) of the Company with and into a wholly owned subsidiary of Parent.
 
B.             Pursuant to the Merger, all of the issued and outstanding shares of capital stock of the Company will be canceled and converted into the right to receive the consideration set forth in the Merger Agreement, all upon the terms and subject to the conditions set forth in the Merger Agreement.
 
C.            As of the date hereof, Shareholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of the number of shares of outstanding capital stock of the Company (the “ Shares ”) and other securities convertible into, or exercisable or exchangeable for, shares of capital stock of the Company, all as set forth on the signature page of this Agreement.
 
D.            As a material inducement to Parent to enter into and to consummate the transactions contemplated by the Merger Agreement, Parent has required that Shareholder agree, and Shareholder is willing to agree, to restrict the transfer or disposition of any of the Shares, or any other shares of capital stock of the Company acquired by Shareholder hereafter and prior to the Expiration Time (as defined in Section 1(a) hereof), and to vote the Shares and any other such shares of capital stock of the Company as set forth in this Agreement.
 
NOW, THEREFORE, the parties hereto hereby agree as follows:
 
1.            Agreement to Retain Shares .
 
(a)            Transfer .  Shareholder agrees that, at all times during the period beginning on the date hereof and ending at the Expiration Time, Shareholder shall not Transfer (as defined below) any of the Shares or any New Shares (as defined in Section 1(b) hereof), or make any agreement regarding any Transfer, in each case without the prior written consent of Parent.  Shareholder agrees that any Transfer in violation of this Agreement shall be void and of no force or effect.
 
 
1
 
 
As used herein, the term “ Expiration Time ” shall mean the earliest to occur of (i) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Merger Agreement, (ii) the termination of the Merger Agreement in accordance with the terms thereof or (iii) the occurrence of a Material Adverse Amendment.  As used herein (A) the term “Material Adverse Amendment” shall mean an amendment   to the Merger Agreement that (i) (1) directly or indirectly decreases the Merger Consideration (as defined in the Merger Agreement), (2) waives, amends or modifies any condition to the obligation of Company to consummate the Merger, (3) waives any breach of representation, warranty, covenant or agreement of Parent or Merger Sub contained in the Merger Agreement, (4) waives, amends or modifies any representation, warranty, covenant or agreement of Parent or Merger Sub so as to reduce the scope thereof, or the obligation thereunder, or (5) materially and adversely affects the Shareholder and (ii) is approved by the Company’s Board of Directors regardless of whether in such vote the Shareholder’s nominee (if any) on the Company’s Board of Directors (or the Shareholder in his capacity as a director) voted against such amendment.  As used herein, the term “ Transfer ” shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, pledge, hypothecation, or the gift, placement in trust, or the Constructive Sale (as defined below) or other disposition of such security (excluding transfers by testamentary or intestate succession or otherwise by operation of law) or any right, title or interest therein (including, but not limited to, any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer, Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing, excluding any Transfer (A) pursuant to a court order, (B) pursuant to the Merger, or (C) to any affiliate or family member of Shareholder if such transferee, prior to the Transfer, executes a binding agreement with Parent and the Company substantially in the form of this Agreement.  As used herein, the term “ Constructive Sale ” shall mean, with respect to any security, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership.
 
(b)            New Shares .  Shareholder agrees that any shares of capital stock of the Company that Shareholder purchases or with respect to which Shareholder otherwise acquires beneficial ownership after the date of this Agreement and prior to the Expiration Time, including, without limitation, shares issued or issuable upon the conversion, exercise or exchange, as the case may be, of all securities held by Shareholder which are convertible into, or exercisable or exchangeable for, shares of capital stock of the Company (“ New Shares ”), shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Shares as of the date hereof.
 
2.            Agreement to Vote Shares .  Until the Expiration Time, at every meeting of shareholders of the Company called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of shareholders of the Company with respect to any of the following, Shareholder shall vote, to the extent not voted by the person(s) appointed under the Proxy (as defined in Section 3 ), the outstanding Shares and any outstanding New Shares (to the extent any such New Shares may be voted):
 
 
2
 
 
(i)             in favor of approval and adoption of the Merger Agreement and in favor of each of the other actions contemplated by the Merger Agreement and the Proxy and any action required in furtherance thereof;
 
(ii)            against approval of any proposal made in opposition to, or in competition with, consummation of the Merger and the transactions contemplated by the Merger Agreement;
 
(iii)           against any action which the Company is prohibited from taking under Section 5.1 or 5.3 of the Merger Agreement; and
 
(iv)           in favor of waiving any notice that may have been or may be required relating to any reorganization of the Company or any subsidiary of the Company, any reclassification or recapitalization of the capital stock of the Company or any subsidiary of the Company, any sale of assets, change of control or acquisition of the Company or any subsidiary of the Company by any other person, or any consolidation or merger of the Company or any subsidiary of the Company with or into any other person..
 
Prior to the Expiration Time, Shareholder shall not enter into any agreement or understanding with any person to vote or give instructions in any manner inconsistent with this Section 2 .
 
3.             Irrevocable Proxy .  Concurrently with the execution of this Agreement, Shareholder agrees to deliver to Parent an irrevocable proxy in the form attached hereto as Appendix A (the “ Proxy ”), which shall be irrevocable to the fullest extent permitted by applicable law, covering the total number of Shares and New Shares.
 
4.              Representations, Warranties and Covenants of Shareholder .  Shareholder represents, warrants and covenants to Parent as follows:
 
(i)            Shareholder is the beneficial owner of the Shares, with full power to vote or direct the voting of the Shares for and on behalf of any and all beneficial owners of the Shares, subject to the terms of the Company’s Amended and Restated Voting Agreement dated July 16, 2008 (the “ Voting Agreement ”), a copy of which has been made available to Parent.
 
(ii)           As of the date hereof, the Shares are, and at all times up until the Expiration Time the Shares will be, free and clear of any rights of first refusal, co-sale rights, security interests, liens, pledges, claims, options, charges or other encumbrances of any kind or nature, in each case that would impair Shareholder’s ability to fulfill its obligations under Section 2 .  Parent acknowledges that the Shares are subject to the terms of the Voting Agreement, the Company’s Amended and Restated Right of First Refusal and Cosale Agreement dated July 16, 2008 (the “ ROFR and Cosale Agreement ”) and the Company’s Amended and Restated Investor Rights Agreement dated July 16, 2008 (the “ Investor Rights Agreement ”), copies of which agreements have been made available to Parent.  The execution and delivery of this Agreement by Shareholder do not, and Shareholder’s performance of its obligations under this Agreement will not conflict with or violate the Voting Agreement, the ROFR and Cosale Agreement or the Investor Rights Agreement or any order, decree, judgment or agreement known by the Shareholder to be applicable to such Shareholder or by which Shareholder or any of Shareholder’s properties or Shares is bound.
 
 
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(iii)           Shareholder does not beneficially own any shares of capital stock of the Company, or any securities convertible into, or exchangeable or exercisable for, shares of capital stock of the Company, other than as set forth on the signature page hereto.
 
(iv)           Shareholder has full power and authority to make, enter into and carry out the terms of this Agreement, the Proxy and any other related agreements to which Shareholder is a party.
 
(v)           In entering into this Agreement, Shareholder has relied solely on its, his or her own personal judgment and the Parent SEC Reports filed prior to the date hereof, and Shareholder has not relied upon any other statement, representation, or warranty relating to Company or Parent other than such Parent SEC Reports.
 
5.             Additional Documents .  Shareholder hereby covenants and agrees to execute and deliver any additional documents reasonably necessary or desirable to carry out the purpose and intent of this Agreement.
 
6.              Consents and Waivers .  Shareholder hereby gives any consents or waivers that are reasonably required for the consummation of the Merger under the terms of any agreement or instrument to which Shareholder is a party or subject or in respect of any rights Shareholder may have.
 
7.              Termination .  This Agreement and the Proxy delivered in connection herewith shall terminate automatically and shall have no further force or effect as of the Expiration Time; provided , however , that Section 9 shall survive the Effective Time for the period set forth therein and Section 10 shall survive the Effective Time.
 
8.              Company Covenants .  The Company agrees to make a notation on its records and give instructions to its transfer agent(s) to not permit, prior to the Expiration Time, the transfer of any Shares or New Shares, except as permitted pursuant to Section 1(a) .
 
9.              Lock-Up .  Shareholder hereby agrees not to sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale (“Post Merger Sale”), of any Parent securities received pursuant to the terms of the Merger Agreement and held by Shareholder other than pursuant to this Section 9 .
 
(a)           During the one (1) month period following the Effective Time (as defined in the Merger Agreement) of the Merger, Shareholder may conduct Post Merger Sales of no more than thirty percent (30%) of any Parent securities received by Shareholder pursuant to the Merger Agreement.
 
(b)           Subject to Section 9(a) , during the two (2) month period following the Effective Time (as defined in the Merger Agreement) of the Merger, Shareholder may conduct Post Merger Sales of no more than sixty-five percent (65%) of any Parent securities received by Shareholder pursuant to the Merger Agreement.
 
 
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(c)           Notwithstanding the foregoing, Shareholder may consummate a Post Merger Sale at any time and for any amount of Parent securities received pursuant to the terms of the Merger Agreement with any affiliate or family member of Shareholder if such transferee, prior to the Post Merger Sale, agrees to be bound by this Section 9 .
 
10.            Prohibited Transactions .  Shareholder understands that the Transaction Share Price (as defined in the Merger Agreement) is a function of the market price of the Parent Common Stock; therefore:
 
(a)           Shareholder represents and warrants that from the 20th trading day preceding June 21, 2011 to the date of this Agreement, Shareholder has not engaged in a Prohibited Transaction.
 
(b)           Shareholder covenants and agrees that from the date hereof to the Expiration Time, Shareholder shall not engage in a Prohibited Transaction.
 
(c)           “ Prohibited Transaction ” means collectively, (i) any Transfer (without giving effect to the exclusions contained in the definition of such term) of Parent Common Stock, or (ii) the establishment or increase of any “put equivalent position” (as defined in Rule 16a-1(h) promulgated under the Exchange Act) with respect to Parent Common Stock.
 
11.            Miscellaneous .
 
(a)            Directors and Officers .  Notwithstanding any provision of this Agreement to the contrary, Shareholder has entered into this Agreement in its, his or her capacity as a Shareholder of the Company, and nothing in this Agreement shall limit or restrict Shareholder or any affiliate of Shareholder from acting, if applicable, in the Shareholder’s or such affiliate’s capacity as a director or officer of the Company (it being understood that this Agreement shall apply to Shareholder solely in Shareholder’s capacity as a shareholder of the Company) or voting in Shareholder’s sole discretion on any matter other than those matters referred to in Section 2 .  Parent covenants that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) alleges that any action taken (or not taken) by Shareholder or Shareholder’s affiliate solely in Shareholder’s or such affiliate’s capacity as a director or officer of the Company breaches or violates or would breach or violate any provision of this Agreement or the Proxy or (ii) challenges the right of Shareholder to vote or challenges the validity of or seeks to enjoin any vote by Shareholder (or the grant of a proxy with respect thereto) on any matter other than those matters set forth in Section 2 .
 
(b)            Waiver; Release .
 
(i)      No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by the other party hereto.  The waiver of any breach of any term or provision of this Agreement shall not operate as or be con­strued to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement.  No delay or omission by Parent in exercising any right under this Agreement shall operate as a waiver of that right or any other right under this Agreement.
 
 
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(ii)      In the event Parent releases the obligations of any Shareholder stated herein or waives any breach by any Shareholder of any term or condition of this Agreement, each in accordance with Section 11(b)(i) above (in each case, a “Waived Shareholder”), Parent shall promptly provide to each other Shareholder a release or waiver, as appropriate, identical in all respects to such release or waiver previously granted to such Waived Shareholder.
 
(c)            Notices .  All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if sent via facsimile (receipt confirmed), or (iii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service.  All notices hereunder shall be delivered to the parties at the following addresses or facsimile numbers (or pursuant to such other instructions as may be designated in writing by the party to receive such notice):

  If to Company:
Insider Guides, Inc.
   
280 Union Square Drive
   
New Hope, PA  18938
   
Telephone:  (215) 862-1162
   
Facsimile:  (215) 862-1655
   
Attention: Mr. Geoff Cook
     
  With a copy to:
SNR Denton US LLP
   
Two World Financial Center
   
225 Liberty Street
   
New York, NY  10281-2699
   
Telephone: 212-768-6700
   
Facsimile: 212-768-6800
   
Attention: Lisa A. Weiss
     
  If to Parent:
Quepasa Corp.
   
324 Datura Street, Suite 114
   
West Palm Beach, FL 33401
   
Telephone: 561-366-1249
   
Facsimile: 561-651-9984
   
Attention: John Abbott
     
  With a copy to:
Bradley Arant Boult Cummings LLP
   
1600 Division Street, Suite 700
   
Nashville, TN 37203
   
Telephone: 615-252-2388
   
Facsimile: 615-252-6388
   
Attention: Jeffrey S. Buschmann
     
  If to Shareholder:
To the address for notice set forth on the signature page hereof
 
 
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(d)            Headings .  All captions and section headings used in this Agreement are for convenience only and do not form a part of this Agreement.
 
(e)            Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
 
(f)             Entire Agreement; Amendment .  This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement may not be changed or modified, except by an agreement in writing specifically referencing this Agreement and executed by each of the parties hereto.
 
(g)            Severability .  In the event that any provision of this Agreement, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.
 
(h)            Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.
 
(i)            Rules of Construction .  The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
 
(j)            Remedies .  The parties acknowledge that Parent will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of Shareholder set forth herein.  Therefore, it is agreed that, in addition to any other remedies that may be available to Parent upon any such violation, Parent shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to Parent at law or in equity.
 
(k)             No Assignment .  Unless otherwise provided for herein, Shareholder may not assign this Agreement.  This Agreement shall inure to the benefit of Parent, Company and their respective successors and assigns.
 
[ Remainder of Page Intentionally Left Blank ]
 
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
 
         
QUEPASA CORPORATION   
   
SHAREHOLDER:
 
 
   
 
 
By:                                                                  
   
 
 
Name:                                                                  
                                                      
 
Title:                                                                                                                                
      Address  
         
         
         
         
INSIDER GUIDES, INC.        
      Shares:                               
By:                                                                          
Name:                                                                  Company Common Stock:                                                             
Title:                                                                    Company Preferred Stock:                                                             
      Company Options:                                                                          
      Company Warrants:                                                                        
 
 
[SIGNATURE PAGE TO COMPANY VOTING AND LOCKUP AGREEMENT]
 
 
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APPENDIX A
 
IRREVOCABLE PROXY

 
The undersigned shareholder (“ Shareholder ”) of Insider Guides, Inc., a Delaware corporation (the “ Company ”), hereby irrevocably (to the fullest extent permitted by law) appoints [   ] of Quepasa Corporation, a Nevada corporation (“ Parent ”), and each of them, as the sole and exclusive attorneys-in-fact and proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of the Company that now are or hereafter may be beneficially owned by the undersigned, and any and all other shares or securities of the Company issued or issuable in respect thereof on or after the date hereof (collectively, the “ Shares ”), in accordance with the terms of this Proxy until the Expiration Time (as defined in that certain Voting and Lockup Agreement, dated of even date herewith, by and among Parent, the Company and Shareholder (the “ Voting Agreement ”)), subject to the limitations herein and therein.  The Shares beneficially owned by the undersigned shareholder of the Company as of the date of this Proxy are listed on the final page of this Proxy.  Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Shares for the Specified Matters (as defined below) are hereby revoked and the undersigned hereby agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration Time (as defined in the Voting Agreement).
 
This Proxy is irrevocable (to the fullest extent permitted by applicable law), is coupled with an interest and is granted pursuant to the Voting Agreement, and is granted in consideration of Parent entering into that certain Agreement and Plan of Merger, dated as of July 19, 2011, by and among Parent, the Company and certain other parties (the “ Merger Agreement ”).  The Merger Agreement provides for the merger of a wholly owned subsidiary of Parent with and into the Company in accordance with its terms (the “ Merger ”), and Shareholder is receiving a portion of the proceeds of the Merger.
 
The attorneys-in-fact and proxies named above are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Time (as defined in the Voting Agreement), to act as the undersigned’s attorney-in-fact and proxy to vote the Shares, and to exercise all voting, consent and similar rights of the undersigned with respect to the Shares (including, without limitation, the power to execute and deliver written consents), at every annual, special, adjourned or postponed meeting of shareholders of the Company and in every written consent in lieu of such meeting with respect to the following matters (the “Specified Matters”):
 
(i)             in favor of approval and adoption of the Merger Agreement and in favor of each of the other actions contemplated by the Merger Agreement and this Proxy and any action required in furtherance thereof;
 
 
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(ii)            against approval of any proposal made in opposition to, or in competition with, consummation of the Merger and the transactions contemplated by the Merger Agreement;
 
(iii)           against any action which the Company is prohibited from taking under Section 5.1 or 5.3 of the Merger Agreement; and
 
(iv)           in favor of waiving any notice that may have been or may be required relating to any reorganization of the Company or any subsidiary of the Company, any reclassification or recapitalization of the capital stock of the Company or any subsidiary of the Company, any sale of assets, change of control or acquisition of the Company or any subsidiary of the Company by any other person, or any consolidation or merger of the Company or any subsidiary of the Company with or into any other person.
 
The attorneys-in-fact and proxies named above may not exercise this Proxy on any other matter except for the Specified Matters as described in clauses (i), (ii), (iii) or (iv) above, and Shareholder may vote the Shares on all other matters.
 
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned.
 
This Proxy shall terminate, and be of no further force and effect, automatically as of the Expiration Time.
 
[ Remainder of Page Intentionally Left Blank ]
 
*****
 
 
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This Proxy shall terminate, and be of no further force and effect, automatically upon the Expiration Time (as defined in the Voting Agreement).
 
Dated: July ___, 2011
 
 
   
                                                       
 
Address
                                                      
                                                      
 

 
Shares:
 
Company Common Stock:                                                             
Company Preferred Stock:                                                             
Company  Options:                                                                
Company Preferred Stock:                                                             
 
 
 
[SIGNATURE PAGE TO PROXY]
Exhibit 10.2

PARENT VOTING AGREEMENT
 
THIS PARENT VOTING AGREEMENT (this “ Agreement ”) is made and entered into as of July __, 2011, by and among Quepasa Corporation., a Nevada corporation (“ Parent ”), the undersigned shareholder (“ Shareholder ”) of Parent, and Insider Guides, Inc., a Delaware corporation (the “ Company ”).
 
RECITALS
 
A.           Concurrently with the execution of this Agreement, Parent, Parent’s subsidiary, IG Acquisition Company (“ Merger Sub ”), and the Company have entered into an Agreement and Plan of Merger (the “ Merger Agreement ”), which provides for the merger of the Company with and into Merger Sub (the “ Merger ”).
 
B.           Pursuant to the Merger, all of the issued and outstanding shares of capital stock of the Company will be canceled and converted into the right to receive the consideration set forth in the Merger Agreement, all upon the terms and subject to the conditions set forth in the Merger Agreement.
 
C.           As of the date hereof, Shareholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of the number of shares of outstanding capital stock of Parent and other securities convertible into, or exercisable or exchangeable for, shares of capital stock of Parent (the “ Shares ”) set forth on the signature page of this Agreement.
 
D.           As a material inducement to the Company to enter into and to consummate the transactions contemplated by the Merger Agreement, Company has required that Shareholder agree, and Shareholder is willing to agree, to restrict the transfer or disposition of any of the Shares, or any other shares of capital stock of the Parent acquired by Shareholder hereafter and prior to the Expiration Time (as defined in Section 1(a) hereof), and to vote the Shares and any other such shares of capital stock of Parent as set forth in this Agreement.
 
NOW, THEREFORE, the parties hereto hereby agree as follows:
 
1.            Agreement to Retain Shares .
 
(a)            Transfer .  Shareholder agrees that, at all times during the period beginning on the date hereof and ending at the Expiration Time, Shareholder shall not Transfer (as defined below) any of the Shares or any New Shares (as defined in Section 1(b) hereof), or make any agreement regarding any Transfer, in each case without the prior written consent of Company.  Shareholder agrees that any Transfer in violation of this Agreement shall be void and of no force or effect.
 
 
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As used herein, the term “ Expiration Time ” shall mean the earliest to occur of (i) the Effective Time (as defined in the Merger Agreement), (ii) the termination of the Merger Agreement in accordance with the terms thereof, or (iii) the occurrence of a Material Adverse Amendment.  As used herein (A) the term “Material Adverse Amendment” shall mean an amendment, modification or waiver to the Merger Agreement that (i) (1) directly or indirectly increases the Merger Consideration (as defined in the Merger Agreement) payable in connection with the Merger, (2) waives, amends or modifies any condition to the obligation of Parent to consummate the Merger, (3) waives any breach of representation, warranty, covenant or agreement of Company contained in the Merger Agreement, (4) waives, amends or modifies any representation, warranty, covenant or agreement of Company so as to reduce the scope thereof, or the obligation thereunder, or (5) materially and adversely affects the Shareholder and (ii) is approved by the Parent’s Board of Directors regardless of whether in such vote the Shareholder’s nominee (if any) on the Parent’s Board of Directors (or the Shareholder in his capacity as a director) voted against such amendment.  As used herein, the term “ Transfer ” shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, pledge, hypothecation, or the gift, placement in trust, or the Constructive Sale (as defined below) or other disposition of such security (excluding transfers by testamentary or intestate succession or otherwise by operation of law) or any right, title or interest therein (including, but not limited to, any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer, Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing, excluding any of the foregoing effected (A) pursuant to a court order, (B) pursuant to the Merger, (C) pursuant to a Rule 10b5-1 trading plan, (D) to any transferee if such transferee, prior to the Transfer, executes a binding agreement with Parent and the Company substantially in the form of this Agreement.  As used herein, the term “ Constructive Sale ” shall mean, with respect to any security, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership.
 
(b)            New Shares .  Shareholder agrees that any shares of capital stock of the Parent that Shareholder purchases or with respect to which Shareholder otherwise acquires beneficial ownership after the date of this Agreement and prior to the Expiration Time, including, without limitation, shares issued or issuable upon the conversion, exercise or exchange, as the case may be, of all securities held by Shareholder which are convertible into, or exercisable or exchangeable for, shares of capital stock of the Parent (“ New Shares ”), shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Shares as of the date hereof.
 
2.            Agreement to Vote Shares .  Until the Expiration Time, at every meeting of shareholders of the Parent called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of shareholders of the Parent with respect to any of the following, Shareholder shall vote, to the extent not voted by the person(s) appointed under the Proxy (as defined in Section 3 ), the outstanding Shares and any outstanding New Shares (to the extent any such New Shares may be voted):
 
 
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(i)            in favor of approval of the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement, and in favor of the Financing Transaction (as defined in the Merger Agreement);
 
(ii)            against approval of any proposal made in opposition to, or in competition with, the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement;
 
(iii)           against any action which the Company is prohibited from taking under Section 5.2 of the Merger Agreement; and
 
(iv)           in favor of waiving any notice that may have been or may be required relating to any reorganization of the Parent or any subsidiary of the Parent, any issuance, reclassification or recapitalization of the capital stock of the Parent or any subsidiary of the Parent, any sale or purchase of assets, change of control of or acquisition by the Parent or any subsidiary of the Parent or any other person, or any consolidation or merger to which the Parent or any subsidiary of the Parent is the surviving entity.
 
Prior to the Expiration Time, Shareholder shall not enter into any agreement or understanding with any person to vote or give instructions in any manner inconsistent with this Section 2 .
 
3.            Irrevocable Proxy .  Concurrently with the execution of this Agreement, Shareholder agrees to deliver to Company an irrevocable proxy in the form attached hereto as Appendix A (the “ Proxy ”), which shall be irrevocable to the fullest extent permitted by applicable law, covering the total number of Shares and New Shares.
 
4.            Representations, Warranties and Covenants of Shareholder .  Shareholder represents, warrants and covenants to Company as follows:
 
(i)           Shareholder is the beneficial owner of the Shares, with full power to vote or direct the voting of the Shares for and on behalf of any and all beneficial owners of the Shares.
 
(ii)           As of the date hereof, the Shares are, and at all times up until the Expiration Time the Shares will be, free and clear of any rights of first refusal, co-sale rights, security interests, liens, pledges, claims, options, charges or other encumbrances of any kind or nature, in each case that would impair Shareholder’s ability to fulfill its obligations under Section 2 .  The execution and delivery of this Agreement by Shareholder do not, and Shareholder’s performance of its obligations under this Agreement will not conflict with or violate any order, decree, judgment or agreement known by the Shareholder to be applicable to such Shareholder or by which Shareholder or any of Shareholder’s properties or Shares is bound.
 
(iii)           Shareholder does not beneficially own any shares of capital stock of the Parent, or any securities convertible into, or exchangeable or exercisable for, shares of capital stock of the Parent, other than as set forth on the signature page hereto.
 
 
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(iv)           Shareholder has full power and authority to make, enter into and carry out the terms of this Agreement, the Proxy and any other related agreements to which Shareholder is a party.
 
5.            Additional Documents .  Shareholder hereby covenants and agrees to execute and deliver any additional documents reasonably necessary or desirable to carry out the purpose and intent of this Agreement.
 
6.            Termination .  This Agreement and the Proxy delivered in connection herewith shall terminate automatically and shall have no further force or effect as of the Expiration Time.
 
7.            Parent Covenants .  The Parent agrees to make a notation on its records and give instructions to its transfer agent(s) not to permit, prior to the Expiration Time, the transfer of any Shares or New Shares, except as permitted pursuant to Section 1(a) .
 
8.            Miscellaneous .
 
(a)            Directors and Officers .  Notwithstanding any provision of this Agreement to the contrary, Shareholder has entered into this Agreement in its, his or her capacity as a Shareholder of the Parent, and nothing in this Agreement shall limit or restrict Shareholder or any representative of Shareholder from acting, if applicable, in the Shareholder’s or such representative’s capacity as a director or officer of the Parent (it being understood that this Agreement shall apply to Shareholder solely in Shareholder’s capacity as a shareholder of the Parent) or voting in Shareholder’s sole discretion on any matter other than those matters referred to in Section 2 .  Company covenants that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) alleges that any action taken (or not taken) by Shareholder or Shareholder’s representative solely in Shareholder’s or such representative’s capacity as a director or officer of the Parent breaches or violates or would breach or violate any provision of this Agreement or the Proxy or (ii) challenges the right of Shareholder to vote or challenges the validity of or seeks to enjoin any vote by Shareholder (or the grant of a proxy with respect thereto) on any matter other than those matters set forth in Section 2 .
 
(b)            Waiver .  No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by the other party hereto.  The waiver of any breach of any term or provision of this Agreement shall not operate as or be con­strued to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement.  No delay or omission by Company in exercising any right under this Agreement shall operate as a waiver of that right or any other right under this Agreement.
 
(c)            Notices .  All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if sent via facsimile (receipt confirmed), or (iii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service.  All notices hereunder shall be delivered to the parties at the following addresses or facsimile numbers (or pursuant to such other instructions as may be designated in writing by the party to receive such notice):
 
 
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If to Company:
Insider Guides, Inc.
   
280 Union Square Drive
   
New Hope, PA 18938
   
Telephone:                              
   
Facsimile:                                
   
Attention: Mr. Geoff Cook
     
 
With a copy to:
SNR Denton US LLP
   
Two World Financial Center
   
225 Liberty Street
   
New York, NY 10281-2699
   
Telephone: 212-768-6700
   
Facsimile: 212-768-6800
   
Attention: Lisa A. Weiss
     
 
If to Parent:
Quepasa Corp.
   
324 Datura Street, Suite 114
   
West Palm Beach, FL 33401
   
Telephone: 561-366-1249
   
Facsimile:                               
   
Attention:                               
     
 
With a copy to:
Bradley Arant Boult Cummings LLP
   
1600 Division Street, Suite 700
   
Nashville, TN 37203
   
Telephone: 615-252-2388
   
Facsimile: 615-252-6388
   
Attention: Jeffrey S. Buschmann
     
 
If to Shareholder:
To the address for notice set forth on the signature page hereof
 
(d)            Headings .  All captions and section headings used in this Agreement are for convenience only and do not form a part of this Agreement.
 
(e)            Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
 
 
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(f)            Entire Agreement; Amendment .  This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement may not be changed or modified, except by an agreement in writing specifically referencing this Agreement and executed by each of the parties hereto.
 
(g)            Severability .  In the event that any provision of this Agreement, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.
 
(h)            Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.  The venue and consent to jurisdiction provisions of Section 9.7 of the Merger Agreement shall apply to this Agreement as set forth herein.
 
(i)            Rules of Construction .  The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
 
(j)            Remedies .  The parties acknowledge that Company will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of Shareholder set forth herein.  Therefore, it is agreed that, in addition to any other remedies that may be available to Company upon any such violation, Company shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to Company at law or in equity.
 
(k)            No Assignment .  Unless otherwise provided for herein, Shareholder may not assign this Agreement.  This Agreement shall inure to the benefit of Parent, Company and their respective successors and assigns.
 

 

 
[ Remainder of Page Intentionally Left Blank ]
 
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
 
         
QUEPASA CORPORATION   
   
SHAREHOLDER:
 
 
   
 
 
By:                                                                  
   
                                                      
 
Name:                                                                       Signature  
Title:                                                                                                                                
      Print Name  
         
                                                              
                                                              
      Address  
INSIDER GUIDES, INC.        
      Shares:                               
By:                                                                          
Name:                                                                  Parent Common Stock:                                                             
Title:                                                                    Parent Preferred Stock:                                                             
      Parent Options:                                                                          
      Parent Warrants:                                                                        

 
                                                 
[SIGNATURE PAGE TO PARENT VOTING AGREEMENT]
 
 
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APPENDIX A
 
IRREVOCABLE PROXY

 
The undersigned shareholder (“ Shareholder ”) of Quepasa Corporation, a Nevada corporation (the “ Parent ”), hereby irrevocably (to the fullest extent permitted by law) appoints [   ] of Insider Guides, Inc., a Delaware corporation (“ Company ”), and each of them, as the sole and exclusive attorneys-in-fact and proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of the Parent that now are or hereafter may be beneficially owned by the undersigned, and any and all other shares or securities of the Parent issued or issuable in respect thereof on or after the date hereof (collectively, the “ Shares ”), in accordance with the terms of this Proxy until the Expiration Time (as defined in that certain Parent Voting Agreement, dated of even date herewith, by and among Parent, the Company and Shareholder (the “ Voting Agreement ”)), subject to limitations herein and therein.  The Shares beneficially owned by the undersigned shareholder of the Parent as of the date of this Proxy are listed on the final page of this Proxy.  Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Shares for the Specified Matters (as defined below) are hereby revoked and the undersigned hereby agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration Time (as defined in the Voting Agreement).
 
This Proxy is irrevocable (to the fullest extent permitted by applicable law), is coupled with an interest and is granted pursuant to the Voting Agreement, and is granted in consideration of Company entering into that certain Agreement and Plan of Merger, dated as of July [__], 2011, by and among Parent, the Company and certain other parties (the “ Merger Agreement ”).  The Merger Agreement provides for the merger of the Company with and into a wholly owned subsidiary of Parent in accordance with its terms (the “ Merger ”).
 
The attorneys-in-fact and proxies named above are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Time (as defined in the Voting Agreement), to act as the undersigned’s attorney-in-fact and proxy to vote the Shares, and to exercise all voting, consent and similar rights of the undersigned with respect to the Shares (including, without limitation, the power to execute and deliver written consents), at every annual, special, adjourned or postponed meeting of shareholders of the Parent and in every written consent in lieu of such meeting with respect to the following matters (the “Specified Matters”):
 
(i)           in favor of approval of the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement, and in favor of the Financing Transaction (as defined in the Merger Agreement);
 
 
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(ii)            against approval of any proposal made in opposition to, or in competition with, the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement;
 
(iii)           against any action which the Company is prohibited from taking under Section 5.2 of the Merger Agreement; and
 
(iv)           in favor of waiving any notice that may have been or may be required relating to any reorganization of the Parent or any subsidiary of the Parent, any issuance, reclassification or recapitalization of the capital stock of the Parent or any subsidiary of the Parent, any sale or purchase of assets, change of control of or acquisition by the Parent or any subsidiary of the Parent or any other person, or any consolidation or merger to which the Parent or any subsidiary of the Parent is the surviving entity.
 
The attorneys-in-fact and proxies named above may not exercise this Proxy on any other matter except for the Specified Matters as described in clauses (i), (ii), (iii) or (iv) above, and Shareholder may vote the Shares on all other matters.
 
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned.
 
This Proxy shall terminate, and be of no further force and effect, automatically as of the Expiration Time.
 
[ Remainder of Page Intentionally Left Blank ]
 
*****
 
9
 

 
This Proxy shall terminate, and be of no further force and effect, automatically upon the Expiration Time (as defined in the Voting Agreement).
 
Dated: July [  ], 2011
 
 
 
   
                                                      
Signature
 

                                                      
Print Name
 

                                                      
                                                      
Address

 
Shares:
 
Parent Common Stock:                                                             
Parent Preferred Stock:                                                             
Parent Options:                                                                 
Parent Preferred Stock:                                                             
 


 
 
[SIGNATURE PAGE TO PROXY]
 

 

Exhibit 10.3

PARENT VOTING AGREEMENT
 
THIS PARENT VOTING AGREEMENT (this “ Agreement ”) is made and entered into as of July __, 2011, by and among Quepasa Corporation., a Nevada corporation (“ Parent ”), the undersigned shareholder (“ Shareholder ”) of Parent, and Insider Guides, Inc., a Delaware corporation (the “ Company ”).
 
RECITALS
 
A.           Concurrently with the execution of this Agreement, Parent, Parent’s subsidiary, IG Acquisition Company (“ Merger Sub ”), and the Company have entered into an Agreement and Plan of Merger (the “ Merger Agreement ”), which provides for the merger of the Company with and into Merger Sub (the “ Merger ”).
 
B.           Pursuant to the Merger, all of the issued and outstanding shares of capital stock of the Company will be canceled and converted into the right to receive the consideration set forth in the Merger Agreement, all upon the terms and subject to the conditions set forth in the Merger Agreement.
 
C.           As of the date hereof, Shareholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of the number of shares of outstanding capital stock of Parent and other securities convertible into, or exercisable or exchangeable for, shares of capital stock of Parent (the “ Shares ”) set forth on the signature page of this Agreement.
 
D.           As a material inducement to the Company to enter into and to consummate the transactions contemplated by the Merger Agreement, Company has required that Shareholder agree, and Shareholder is willing to agree, to restrict the transfer or disposition of any of the Shares, or any other shares of capital stock of the Parent acquired by Shareholder hereafter and prior to the Expiration Time (as defined in Section 1(a) hereof), and to vote the Shares and any other such shares of capital stock of Parent as set forth in this Agreement.
 
NOW, THEREFORE, the parties hereto hereby agree as follows:
 
1.            Agreement to Retain Shares .
 
(a)            Transfer .  Shareholder agrees that, at all times during the period beginning on the date hereof and ending at the Expiration Time, Shareholder shall not Transfer (as defined below) any of the Shares or any New Shares (as defined in Section 1(b) hereof), or make any agreement regarding any Transfer, in each case without the prior written consent of Company.  Shareholder agrees that any Transfer in violation of this Agreement shall be void and of no force or effect.
 
 
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As used herein, the term “ Expiration Time ” shall mean the earliest to occur of (i) the Effective Time (as defined in the Merger Agreement), (ii) the termination of the Merger Agreement in accordance with the terms thereof, or (iii) the occurrence of a Material Adverse Amendment.  As used herein (A) the term “Material Adverse Amendment” shall mean an amendment, modification or waiver to the Merger Agreement that (1) directly or indirectly increases the Merger Consideration (as defined in the Merger Agreement) payable in connection with the Merger, (2) waives, amends or modifies any condition to the obligation of Parent to consummate the Merger, (3) waives any breach of representation, warranty, covenant or agreement of Company contained in the Merger Agreement, (4) waives, amends or modifies any representation, warranty, covenant or agreement of Company so as to reduce the scope thereof, or the obligation thereunder, or (5) materially and adversely affects the Shareholder.  As used herein, the term “ Transfer ” shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, pledge, hypothecation, or the gift, placement in trust, or the Constructive Sale (as defined below) or other disposition of such security (excluding transfers by testamentary or intestate succession or otherwise by operation of law) or any right, title or interest therein (including, but not limited to, any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer, Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing, excluding any of the foregoing effected (A) pursuant to a court order, (B) pursuant to the Merger, (C) pursuant to a Rule 10b5-1 trading plan, (D) to any transferee if such transferee, prior to the Transfer, executes a binding agreement in favor of  Parent and the Company agreeing to be bound by the terms of this Agreement with respect to the Shares or New Shares being transferred.  As used herein, the term “ Constructive Sale ” shall mean, with respect to any security, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership.
 
(b)            New Shares .  Shareholder agrees that any shares of capital stock of the Parent that Shareholder purchases or with respect to which Shareholder otherwise acquires beneficial ownership after the date of this Agreement and prior to the Expiration Time, including, without limitation, shares issued or issuable upon the conversion, exercise or exchange, as the case may be, of all securities held by Shareholder which are convertible into, or exercisable or exchangeable for, shares of capital stock of the Parent (“ New Shares ”), shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Shares as of the date hereof.
 
2.            Agreement to Vote Shares .  Until the Expiration Time, at every meeting of shareholders of the Parent called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of shareholders of the Parent with respect to any of the following, Shareholder shall vote, to the extent not voted by the person(s) appointed under the Proxy (as defined in Section 3 ), the outstanding Shares and any outstanding New Shares (to the extent any such New Shares may be voted):
 
(i)            in favor of approval of the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement, and in favor of the Financing Transaction (as defined in the Merger Agreement);
 
 
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(ii)            against approval of any proposal made in opposition to, or in competition with, the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement; and
 
(iii)           against any action which Parent  is prohibited from taking under Section 5.2 of the Merger Agreement.
 
Prior to the Expiration Time, Shareholder shall not enter into any agreement or understanding with any person to vote or give instructions in any manner inconsistent with this Section 2 .
 
3.            Irrevocable Proxy .  Concurrently with the execution of this Agreement, Shareholder agrees to deliver to Company an irrevocable proxy in the form attached hereto as Appendix A (the “ Proxy ”), which shall be irrevocable to the fullest extent permitted by applicable law, covering the total number of Shares and New Shares.
 
4.            Representations, Warranties and Covenants of Shareholder .  Shareholder represents, warrants and covenants to Company as follows:
 
(i)           Shareholder is the beneficial owner of the Shares, with full power to vote or direct the voting of the Shares for and on behalf of any and all beneficial owners of the Shares.
 
(ii)           As of the date hereof, the Shares are, and at all times up until the Expiration Time the Shares will be, free and clear of any rights of first refusal, co-sale rights, security interests, liens, pledges, claims, options, charges or other encumbrances of any kind or nature, in each case that would impair Shareholder’s ability to fulfill its obligations under Section 2 .  The execution and delivery of this Agreement by Shareholder do not, and Shareholder’s performance of its obligations under this Agreement will not conflict with or violate any order, decree, judgment or agreement known by the Shareholder to be applicable to such Shareholder or by which Shareholder or any of Shareholder’s properties or Shares is bound.
 
(iii)           Shareholder does not beneficially own any shares of capital stock of the Parent, or any securities convertible into, or exchangeable or exercisable for, shares of capital stock of the Parent, other than as set forth on the signature page hereto.
 
(iv)           Shareholder has full power and authority to make, enter into and carry out the terms of this Agreement, the Proxy and any other related agreements to which Shareholder is a party.
 
5.            Additional Documents .  Shareholder hereby covenants and agrees to execute and deliver any additional documents reasonably necessary or desirable to carry out the purpose and intent of this Agreement.
 
6.            Termination .  This Agreement and the Proxy delivered in connection herewith shall terminate automatically and shall have no further force or effect as of the Expiration Time.
 
 
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7.            Parent Covenants .  The Parent agrees to make a notation on its records and give instructions to its transfer agent(s) not to permit, prior to the Expiration Time, the transfer of any Shares or New Shares, except as permitted pursuant to Section 1(a) .
 
8.            Miscellaneous .
 
(a)            Directors and Officers .  Notwithstanding any provision of this Agreement to the contrary, Shareholder has entered into this Agreement in its, his or her capacity as a Shareholder of the Parent, and nothing in this Agreement shall limit or restrict Shareholder or any representative of Shareholder from acting, if applicable, in the Shareholder’s or such representative’s capacity as a director or officer of the Parent (it being understood that this Agreement shall apply to Shareholder solely in Shareholder’s capacity as a shareholder of the Parent) or voting in Shareholder’s sole discretion on any matter other than those matters referred to in Section 2 .  Company covenants that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) alleges that any action taken (or not taken) by Shareholder or Shareholder’s representative solely in Shareholder’s or such representative’s capacity as a director or officer of the Parent breaches or violates or would breach or violate any provision of this Agreement or the Proxy or (ii) challenges the right of Shareholder to vote or challenges the validity of or seeks to enjoin any vote by Shareholder (or the grant of a proxy with respect thereto) on any matter other than those matters set forth in Section 2 .
 
(b)            Waiver .  No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by the other party hereto.  The waiver of any breach of any term or provision of this Agreement shall not operate as or be con­strued to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement.  No delay or omission by Company in exercising any right under this Agreement shall operate as a waiver of that right or any other right under this Agreement.
 
(c)            Notices .  All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if sent via facsimile (receipt confirmed), or (iii) on the date of confirmation of receipt (or the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service.  All notices hereunder shall be delivered to the parties at the following addresses or facsimile numbers (or pursuant to such other instructions as may be designated in writing by the party to receive such notice):
 
 
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If to Company:
Insider Guides, Inc.
   
280 Union Square Drive
   
New Hope, PA 18938
   
Telephone:                                  
   
Facsimile:                                
   
Attention: Mr. Geoff Cook
     
 
With a copy to:
SNR Denton US LLP
   
Two World Financial Center
   
225 Liberty Street
   
New York, NY 10281-2699
   
Telephone: 212-768-6700
   
Facsimile: 212-768-6800
   
Attention: Lisa A. Weiss
     
 
If to Parent:
Quepasa Corp.
   
324 Datura Street, Suite 114
   
West Palm Beach, FL 33401
   
Telephone: 561-366-1249
   
Facsimile:                                
   
Attention:                                
     
 
With a copy to:
Bradley Arant Boult Cummings LLP
   
1600 Division Street, Suite 700
   
Nashville, TN 37203
   
Telephone: 615-252-2388
   
Facsimile: 615-252-6388
   
Attention: Jeffrey S. Buschmann
     
 
If to Shareholder:
To the address for notice set forth on the signature page hereof
 
(d)            Headings .  All captions and section headings used in this Agreement are for convenience only and do not form a part of this Agreement.
 
(e)             Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
 
(f)             Entire Agreement; Amendment .  This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement may not be changed or modified, except by an agreement in writing specifically referencing this Agreement and executed by each of the parties hereto.
 
(g)            Severability .  In the event that any provision of this Agreement, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.
 
(h)            Governing Law; Venue .  This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.  The venue and consent to jurisdiction provisions of Section 9.7 of the Merger Agreement shall apply to this Agreement as if set forth herein.
 
 
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(i)             Rules of Construction .  The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
 
(j)             Remedies .  The parties acknowledge that Company will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of Shareholder set forth herein.  Therefore, it is agreed that, in addition to any other remedies that may be available to Company upon any such violation, Company shall have the right to enforce such covenants and agreements by specific performance, injunctive relief or by any other means available to Company at law or in equity.
 
(k)            No Assignment .  Unless otherwise provided for herein, Shareholder may not assign this Agreement.  This Agreement shall inure to the benefit of Parent, Company and their respective successors and assigns.
 

 

 
[ Remainder of Page Intentionally Left Blank ]
 
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
 
         
QUEPASA CORPORATION   
   
SHAREHOLDER:
 
 
   
 
 
By:                                                                  
   
                                                      
 
Name:                                                                       Signature  
Title:                                                                                                                                
      Print Name  
         
                                                              
                                                              
      Address  
INSIDER GUIDES, INC.        
      Shares:                               
By:                                                                          
Name:                                                                  Parent Common Stock:                                                             
Title:                                                                    Parent Preferred Stock:                                                             
      Parent Options:                                                                          
      Parent Warrants:                                                                        


           

 
[SIGNATURE PAGE TO PARENT VOTING AGREEMENT]
 
 
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APPENDIX A
 
IRREVOCABLE PROXY

 
The undersigned shareholder (“ Shareholder ”) of Quepasa Corporation, a Nevada corporation (the “ Parent ”), hereby irrevocably (to the fullest extent permitted by law) appoints [   ] of Insider Guides, Inc., a Delaware corporation (“ Company ”), and each of them, as the sole and exclusive attorneys-in-fact and proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of the Parent that now are or hereafter may be beneficially owned by the undersigned, and any and all other shares or securities of the Parent issued or issuable in respect thereof on or after the date hereof (collectively, the “ Shares ”), in accordance with the terms of this Proxy until the Expiration Time (as defined in that certain Parent Voting Agreement, dated of even date herewith, by and among Parent, the Company and Shareholder (the “ Voting Agreement ”)), subject to limitations herein and therein.  The Shares beneficially owned by the undersigned shareholder of the Parent as of the date of this Proxy are listed on the final page of this Proxy.  Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Shares for the Specified Matters (as defined below) are hereby revoked and the undersigned hereby agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration Time (as defined in the Voting Agreement).
 
This Proxy is irrevocable (to the fullest extent permitted by applicable law), is coupled with an interest and is granted pursuant to the Voting Agreement, and is granted in consideration of Company entering into that certain Agreement and Plan of Merger, dated as of July [__], 2011, by and among Parent, the Company and certain other parties (the “ Merger Agreement ”).  The Merger Agreement provides for the merger of the Company with and into a wholly owned subsidiary of Parent in accordance with its terms (the “ Merger ”).
 
The attorneys-in-fact and proxies named above are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Time (as defined in the Voting Agreement), to act as the undersigned’s attorney-in-fact and proxy to vote the Shares, and to exercise all voting, consent and similar rights of the undersigned with respect to the Shares (including, without limitation, the power to execute and deliver written consents), at every annual, special, adjourned or postponed meeting of shareholders of the Parent and in every written consent in lieu of such meeting with respect to the following matters (the “Specified Matters”):
 
(i)           in favor of approval of the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement, and in favor of the Financing Transaction (as defined in the Merger Agreement);
 
 
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(ii)            against approval of any proposal made in opposition to, or in competition with, the issuance of shares of the common stock of the Parent as consideration for the Merger as set forth in the Merger Agreement; and
 
(iii)           against any action which the Company is prohibited from taking under Section 5.2 of the Merger Agreement.
 
The attorneys-in-fact and proxies named above may not exercise this Proxy on any other matter except for the Specified Matters as described in clauses (i), (ii), or (iii) above, and Shareholder may vote the Shares on all other matters.
 
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned.
 
This Proxy shall terminate, and be of no further force and effect, automatically as of the Expiration Time.
 
[ Remainder of Page Intentionally Left Blank ]
 
*****
 
 
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This Proxy shall terminate, and be of no further force and effect, automatically upon the Expiration Time (as defined in the Voting Agreement).
 
Dated: July [  ], 2011
 
 
   
                                                      
Signature
 

                                                      
Print Name
 

                                                      
                                                      
Address

 
Shares:
 
Parent Common Stock:                                                             
Parent Preferred Stock:                                                             
Parent Options:                                                                 
Parent Preferred Stock:                                                             
 



[SIGNATURE PAGE TO PROXY]
 
 

 

Exhibit 10.4
SALE RIGHTS AGREEMENT
 
This SALE RIGHTS AGREEMENT (this “ Agreement ”) dated as of July 19, 2011, is entered into by and between Quepasa Corporation, a Nevada corporation (the “ Parent ”), each of the persons listed on Schedule I hereto who is a signatory hereto and Insider Guides, Inc., a Delaware corporation (the “ Company ”), for the benefit of each of the persons listed on Schedule I hereto who is not a signatory hereto.
 
A.           The Parent, IG Acquisition Company, a Delaware corporation and wholly-owned subsidiary of the Parent (“ Merger Sub ”), and the Company are parties to that certain Agreement and Plan of Merger dated as of even date herewith (the “ Merger Agreement ”) pursuant to which the Company has agreed to merge with and into the Merger Sub (the “ Merger ”) and the Affiliates of the Company listed on Schedule I hereto will have the right to receive shares of Parent’s common stock (the “ Common Stock ”) in accordance with the terms and conditions set forth therein;
 
B.           The Parent’s, the Company’s and the Merger Sub’s respective obligations under the Merger Agreement are conditioned upon the execution and delivery of this Agreement;
 
C.           In connection with the Merger, the Parent intends to file a registration statement on Form S-4 (the “ Form S-4 ”) to register the shares of Common Stock to be issued in connection with the Merger; and

D.           In connection with the merger of the Company with and into the Merger Sub, the Parent desires to grant to certain former holders of Company securities certain sale rights with respect to the stock of the Parent held by them.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows.
 
ARTICLE I.
DEFINITIONS
 
Section 1.1.             Definitions .  For purposes of this Agreement:
 
(a)           “ Affiliate ” means (i) with respect to any specified Person that is not a natural Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person, and (ii) with respect to any natural Person, any family member of such natural Person. The term “ Control ” shall mean, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, either through the ownership of voting securities or by contract.
 
 
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(b)           “ Closing Date ” means the date of the closing under the Merger Agreement.

 
(c)           “ Exchange Act ” means the Securities and Exchange Act of 1934, as amended.
 
(d)           “ Holder ” means a Person that (i) held at least 0.75% of the Company’s common stock (including common stock equivalents) on a fully-diluted basis immediately prior to the closing under the Merger Agreement, (ii) is a party to this Agreement or listed on Schedule I hereto (or a permitted transferee under Section 2.5 hereof) and (iii) owns Registrable Securities
 
(e)           “ Participating Holders ” means Holders participating, or electing to participate, in an offering of Registrable Securities.
 
(f)           “ Person ” means any individual, firm, corporation, company, partnership, trust, incorporated or unincorporated association, limited liability company, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of any such entity.

(g)           “ Registrable Securities ” shall mean (i) shares of Common Stock issued pursuant to the Merger Agreement, (ii) any Common Stock issued pursuant to options granted in connection with the transactions contemplated by the Merger Agreement, and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) or (ii) above.

(h)            “Registration Expenses” shall mean all expenses incurred by the Parent in complying its registration obligations hereunder, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Parent, reasonable fees and disbursements (not to exceed twenty-five thousand dollars ($25,000) per registration)   of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration.
 
(i)           “ Registration Statement ” shall mean any Registration Statement of the Parent filed with the SEC on an appropriate form pursuant to the Securities Act which covers any of the shares of Common Stock and any other Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein.

(j)           “ SEC ” or “ Commission ” means the United States Securities and Exchange Commission.
 
(k)           “ Securities Act ” means the Securities Act of 1933, as amended.
 
 
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(l)            “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale.
 
(m)           “ Underwritten Offering ” means an underwritten public offering of Common Stock.
 
ARTICLE II.
SALE RIGHTS.
 
 
Section 2.1.             Participation .
 
(a)           At any time or from time-to-time (prior to the time with respect to any Holder as the rights of such Holder under this Agreement may be terminated pursuant to Section 2.4 ), if Parent at any time proposes to (i) file a Registration Statement (including a secondary registration) with respect to any offering and sale of its Common Stock for its own account or for the account of any shareholder who holds its securities (other than (A) a registration on Form S-4 or S-8 or any successor form to such forms, (B) a registration of securities solely relating to an offering and sale to employees, directors or consultants of Parent pursuant to any employee stock plan or other employee benefit plan arrangement, (C) a registration of debt securities, or (D) solely for security holders who have registration rights as of the date of this Agreement (and solely to the extent they have such rights); provided that, this exception shall not apply to an Underwritten Offering, or (ii) engage in or arrange a private offering and sale of its Common Stock, for its own account and for the account of any shareholder who holds its securities (each, a “ Parent Sale ”); then, as expeditiously as reasonably practicable (but in no event less than twenty (20) days prior to the proposed date of filing such Registration Statement or proposed closing of the private offering and sale (as applicable), Parent shall give written notice (the “ Sale Rights Notice ”) of such proposed filing or sale to all Holders of Registrable Securities, and such notice shall offer the Holders of such Registrable Securities the opportunity to participate in such sale by selling such number of Registrable Securities as each such Holder may request in writing (a “ Sale Right ”); provided , however , that, the Registrable Securities included in each Parent Sale, in the aggregate, shall not exceed thirty percent (30%) of all the securities proposed to be sold in the applicable Parent Sale and if Participating Holders have requested the inclusion of Registrable Securities in the Parent Sale that would exceed such thirty percent (30%) limitation, then the number of Registrable Securities to be included in the Parent Sale shall be reduced, pro rata based on the number of securities requested to be included by each Participating Holder.  Subject to Section 2.1(d) below, Parent shall include in Parent Sale all such Registrable Securities which are properly requested to be included therein within fifteen (15) days after the Sale Rights Notice is given to such Holders.  Solely with respect to this Article II , if at any time after giving a Sale Rights Notice and prior to (i) the effective date of the Registration Statement filed in connection with such Parent Sale or (ii) the closing of a private Parent Sale, Parent shall determine for any reason not to complete or to delay the Parent Sale, Parent may, at its election, give written notice of such determination to each Holder of Registrable Securities and,
 
 
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(i)      in the case of a determination not to conduct a Parent Sale, shall be relieved of its obligation to include any Registrable Securities in connection with such Parent Sale, and
 
(ii)      in the case of a determination to delay a Parent Sale, shall be permitted to delay including any Registrable Securities in connection with such Parent Sale for the same period as the delay in selling such other securities; provided , however , that any such delay shall not alter, modify or amend any of the terms, conditions, restrictions and limitations set forth in this Article II .
 
(b)            Underwritten Offering .  In the event the Parent Sale for which Parent gives a Sale Rights Notice is for an Underwritten Offering, each Holder making a request for its Registrable Securities to be included in such Parent Sale must, and Parent shall make such arrangements with the underwriters so that each such Holder may, participate in such Underwritten Offering on the same terms as Parent and other Persons selling Common Stock in such Underwritten Offering; provided, however, that no Holder shall be required to make any representation or warranty to Parent, other than with respect to authority to enter into the agreements in connection with such Underwritten Offering, its title to the Registrable Securities and with respect to any written information provided by the Holder to Parent expressly for inclusion in the registration statement. In the case of any Underwritten Offering, Parent and/or all Holders distributing their securities through such an underwriting shall enter into an underwriting agreement in customary form with the representative(s) of the underwriter(s) selected for such an underwriting.
 
(c)           Withdrawal .  Each Holder making a request to exercise a Sale Right pursuant to this Article II shall be permitted to withdraw all or part of such Holder’s Registrable Securities from such exercise of a Sale Right at any time prior to effectiveness of the applicable Registration Statement.
 
(d)           Priority of Registration . If the managing underwriter or underwriters of any proposed Underwritten Offering of securities included in a registration informs the Holders of Registrable Securities sought to be included in such registration in writing (an “ Incidental Cutback Notice ”) that, in its or their opinion, the total amount or kind of securities which such Holders and any other Persons intend to include in such offering exceeds the number which can be sold in such offering without being likely to adversely affect the price, timing or distribution of the class of the securities offered or the market for the class of securities offered or for the Common Stock, then Parent shall include in such registration only the number of Registrable Securities which, in the good faith opinion of such underwriter can be included without having such an adverse effect, selected in the following order:
 
(i)      subject to the proviso to clause (ii) below, first, the securities, if any, being sold by Parent;
 
(ii)      second, the Registrable Securities, if any, requested to be included by the Holders pursuant to this Article II and securities being sold by any other Person(s), allocated pro rata based on the number of securities requested to be included by each Holder or Person prior to its receipt of the Incidental Cutback Notice; provided that, the Registrable Securities being sold by the Holders shall not, in the aggregate, be reduced to less than thirty percent (30%) of the total number of securities to be sold in such offering.
 
 
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Section 2.2.             Additional Information .  Parent  may require each selling Holder of Registrable Securities to furnish to Parent such information regarding the distribution of such Registrable Securities and such other customary information relating to such Holder and its ownership of the applicable Registrable Securities as Parent may from time to time reasonably request and as shall be reasonably required in connection with any Parent Sale. Each Holder of Registrable Securities agrees to furnish such information to Parent and to reasonably cooperate with Parent as necessary to enable Parent to comply with the provisions of this Agreement. Parent shall have the right to exclude from the applicable Parent Sale any Holder that does not comply with the preceding sentence.

Section 2.3.             No Inconsistent Agreements .   Parent will not enter into, and is not currently a party to, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities by this Agreement.  Parent shall not grant to any current or future shareholder any rights to register shares of Common Stock under the Securities Act or any applicable state securities laws which are superior to the rights granted to the Holders under this Agreement without the prior written consent of the Holders holding a majority of the outstanding Registrable Securities.

Section 2.4.             Termination of Sale Rights .   The right of any Holder to request inclusion in any Parent Sale shall terminate on the earlier of (i) the date on which all Registrable Securities held by such Holder have been sold or (ii) the two-year anniversary of the Closing Date.  This Agreement shall terminate in the event of a Change of Control of Parent after which Parent is no longer subject to the requirements of the Exchange Act.  For purposes of this Agreement, “Change of Control” shall mean the acquisition of 50% of more of Parent by means of a merger, stock purchase transaction or otherwise.

Section 2.5.             Transfer of Sale Rights .   The rights of a Holder hereunder may be transferred or assigned in connection with a transfer of Registrable Securities to (i) any Affiliate of a Holder, (ii) any subsidiary, parent, partner, retired partner, limited partner, stockholder or member of a Holder or (iii) any family member of a Holder or trust for the benefit of any Holder or any family member of a Holder.  Notwithstanding the foregoing, such rights may only be transferred or assigned provided that all of the following additional conditions are satisfied:  (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) the Parent is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.

           Section 2.6                   Obligations of the Parent.   Whenever required to effect the registration of any Registrable Securities, the Parent shall, as expeditiously as reasonably possible:
 
(a)            prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective until the Holders have completed the distribution related thereto.
 
 
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(b)            Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above.
 
(c)            Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
 
(d)            Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Parent shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.
 
(e)            In the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.
 
(f)            Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Parent will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.
 
(g)            Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through in an Underwritten Offering, (i) an opinion, dated as of such date, of the counsel representing the Parent for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Parent, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.
 
           Section 2.7                   Indemnification.   In the event any Registrable Securities are included in a registration statement pursuant to this Agreement:
 
 
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(a)            To the extent permitted by law, the Parent will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “ Violation ”) by the Parent: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Parent of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Parent will reimburse each such Holder, partner, member, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however , that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Parent, which consent shall not be unreasonably withheld, nor shall the Parent be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder.
 
(b)            To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Parent, each of its directors, its officers and each person, if any, who controls the Parent within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Parent or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Parent of the Securities Act  (collectively, a “ Holder Violation ”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Parent or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further , that in no event shall any indemnity under this Section 2.7(b), when taken together with any contribution under Section 2.7(d), exceed the net proceeds from the offering received by such Holder.
 
 
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(c)            Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.7 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7.
 
(d)            If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided , that in no event shall any contribution by a Holder hereunder, taken together with amounts paid in indemnity pursuant to Section 2.7(b) above, exceed the net proceeds from the offering received by such Holder.
 
 
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(e)            The obligations of the Parent and Holders under this Section 2.7 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.7 would apply that is covered by a registration filed before termination of this Agreement, such termination.  No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
 
Section 2.8              Expenses of Registration.   All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement herein shall be borne by the Parent.  All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered.
 
Section 2.9              Rule 144 Reporting.  With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Parent agrees to use its best efforts to:
 
(a)            Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act;
 
(b)            File with the SEC, in a timely manner, all reports and other documents required of the Parent under the Exchange Act; and
 
(c)            So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request:  a written statement by the Parent as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Parent filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.
 
ARTICLE III.
GENERAL PROVISIONS
 
Section 3.1.             Entire Agreement .  This Agreement, together with the schedules hereto and any certificates, documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and understanding of the parties in respect of the subject matter hereof and supersedes all prior understandings, agreements or representations by or among the parties, written or oral, to the extent they relate in any way to the subject matter hereof.
 
Section 3.2.            Assignment; Binding Effect .  No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other parties.  All of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors and permitted assigns, whether so expressed or not.  Without limiting the generality of the foregoing, all representations, covenants and agreements of Parent hereunder shall inure to the benefit of, and may be enforced by, any and all Holders.  Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement except for the Holders  as provided above.
 
 
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Section 3.3.             Notices .  All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below or at such other address for a party as shall be specified by like notice.  Any such notice shall be effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile.  Notices, including oral notices, shall be delivered as follows):
 
 
If to Company or any Person
Insider Guides, Inc.
 
Listed on Schedule I hereto:
280 Union Square Drive
   
New Hope, PA 18938
   
Telephone: (215) 862-1162
   
Facsimile: (215) 862-1655
   
Attention: Mr. Geoff Cook
     
 
With a copy to:
SNR Denton US LLP
   
Two World Financial Center
   
225 Liberty Street
   
New York, NY 10281-2699
   
Telephone: 212-768-6700
   
Facsimile: 212-768-6800
   
Attention: Lisa A. Weiss
     
     
 
If to Parent, or Merger Sub, to:
Quepasa Corporation
   
324 Datura Street, Suite 114
   
West Palm Beach, FL 33401
   
Telephone: 561-366-1249
   
Facsimile: 561-651-9984
   
Attention: John Abbott
     
 
With a copy to:
Bradley Arant Boult Cummings LLP
   
1600 Division Street, Suite 700
   
Nashville, TN 37203
   
Telephone: 615-252-2388
   
Facsimile: 615-252-6388
   
Attention: Jeffrey S. Buschmann
 
Section 3.4.             Specific Performance; Remedies .  Each party acknowledges and agrees that the other parties would be damaged irreparably if any provision of this Agreement were not performed in accordance with its specific terms or were otherwise breached.  Accordingly, the parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and its provisions in any action or proceeding instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.  Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and in addition to any other rights, obligations or remedies otherwise available at law or in equity. Except as expressly provided herein, nothing herein will be considered an election of remedies.
 
 
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Section 3.5.             Submission to Jurisdiction .  Any action, suit or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall only be brought in any federal court located in the State of Delaware or any Delaware state court, and each party consents to the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such, action, suit or proceeding in any such court or that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, service of process on such party as provided in Section 3.3 shall be deemed effective service of process on such party.
 
Section 3.6.             Governing Law .  This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law principles.
 
Section 3.7.             Headings .  The article and section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.
 
Section 3.8.             Amendments .  This Agreement may not be amended or modified without the written consent of the Parent and prior to the Effective Time (as defined in the Merger Agreement), the Company or following the Effective Time, Holders of at least a majority of the Registrable Securities.
 
Section 3.9.             Extensions; Waivers .   Any party may, for itself only, (a) extend the time for the performance of any of the obligations of any other party under this Agreement, (b) waive any inaccuracies in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit of such party contained herein.  Any such extension or waiver will be valid only if set forth in a writing signed by the party to be bound thereby.  No waiver by any party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.  Neither the failure nor any delay on the part of any party to exercise any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise of the same or of any other right or remedy.
 
 
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Section 3.10.           Severability .   The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is judicially determined not to be enforceable in accordance with its terms, the parties agree that the court judicially making such determination may modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its modified form, such provision will then be enforceable and will be enforced.
 
Section 3.11.           Counterparts; Effectiveness .  This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.  This Agreement will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.  For purposes of determining whether a party has signed this Agreement or any document contemplated hereby or any amendment or waiver hereof, only a handwritten original signature on a paper document or a facsimile copy of such a handwritten original signature shall constitute a signature, notwithstanding any law relating to or enabling the creation, execution or delivery of any contract or signature by electronic means.
 
Section 3.12.           Construction .  This Agreement has been freely and fairly negotiated among the parties.  If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement.  Any reference to any law will be deemed also to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise.  The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties intend that each representation, warranty, and covenant contained herein will have independent significance. If any party has breached any covenant contained herein in any respect, the fact that there exists another covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached will not detract from or mitigate the fact that the party is in breach of the first covenant.
 
[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Sale Rights Agreement as of the date first above written.
 
QUEPASA CORPORATION
 
By:
/s/ John Abbott
Name:
John Abbott
Title:
Chief Executive Officer
 
IG ACQUISITION COMPANY
 
By:
/s/ John Abbott
Name:
John Abbott
Title:
Chief Executive Officer
 
INSIDER GUIDES, INC.
 
By:
/s/ Geoff Cook
Name:
Geoff Cook
Title:
Chief Executive Officer
 
Signature Page to Sale Rights Agreement
 
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/s/ Geoff Cook
 
Geoff Cook
   

Signature Page to Sale Rights Agreement
 
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/s/ Terry O. Herndon
 
Terry O. Herndon
   

Signature Page to Sale Rights Agreement
 
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/s/ Eva S. Herndon
 
Eva S. Herndon
   

Signature Page to Sale Rights Agreement
 
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  NORWEST VENTURE PARTNERS
   
By:
/s/ Kurt Betcher
Name:
Name: Kurt Betcher
Title:
Title: Administrative Partner / CFO
 
Signature Page to Sale Rights Agreement
 
17
 
 
U.S. VENTURE PARTNERS IX, L.P.
 
By: Presidio Management Group IX, L.L.C.
its: General Partner
 
By  
/s/   Paul Matteucci
Name:
Paul Matteucci
Title:
Managing Member
   
 
Signature Page to Sale Rights Agreement
 
18
 
 
FIRST ROUND CAPITAL 2006 LP
 
By: First Round Management 2006 LLC,
its General Partner
 
By  
/s/   Joshua Kopelman
Name:
Joshua Kopelman
Title:
Managing Member
   
 
Signature Page to Sale Rights Agreement
 
19
 

 
FIRST ROUND CAPITAL 2006 ANNEX FUND LP
 
By: First Round Management 2006 LLC,
its General Partner
 
By  
/s/   Joshua Kopelman
Name:
Joshua Kopelman
Title:
Managing Member
   
 
Signature Page to Sale Rights Agreement
 
20
 
 
  /s/ Spencer Rhodes
 
Spencer Rhodes
   

Signature Page to Sale Rights Agreement

Exhibit 10.5


EMPLOYMENT AGREEMENT
 
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as of July 19, 2011 by and between Quepasa Corporation, a Nevada corporation (the “Company”), and Geoff Cook (“Employee”).
 
WHEREAS , the Company, through its Board of Directors (the “Board”), desires to retain the services of Employee, and Employee desires to be retained by the Company, on the terms and conditions set forth in this Agreement;
 
NOW, THEREFORE , in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
 
1.             EMPLOYMENT .  The Company hereby employs Employee, and Employee hereby accepts employment, as Chief Operating Officer of the Company and President, Consumer Internet Division upon the terms of and subject to this Agreement.  Employee shall also serve as a member of the Board of Directors of the Company and its subsidiary, Insider Guides, Inc. and a member of the Executive Committee of the Company.  During the Term (as defined below), upon the death, disability or resignation of a member of the Board who has been appointed by Insider Guides, Inc. pursuant Section 5.19 of the Merger Agreement among the Company, IG Acquisition Company and Insider Guides, Inc. (the “ Merger Agreement ”), Employee shall have the right to designate, on behalf of Insider Guides, Inc., a replacement for such director.
 
2.              TERM.   The term (the “Term”) of this Agreement shall commence on the effective date of the merger between Insider Guides, Inc., a Delaware corporation, and a subsidiary of the Company (the “Effective Date”), and shall continue until otherwise terminated in accordance with the terms of this Agreement.
 
3.              DUTIES.   As of the Effective Date and during the Term, Employee will serve as Chief Operating Officer of the Company and President, Consumer Internet Division and in such other capacities consistent with foregoing as decided from time to time by Chief Executive Officer of the Company.  Consumer Internet Division of the Company includes, but is not limited to, quepasa.com and myyearbook.com.  As President, Consumer Internet Division, Employee will have primary responsibility for hiring and terminating employment, and setting compensation of Consumer Internet Division personnel subject to approval of Chief Executive Officer of the Company, not to be unreasonably withheld.  Employee shall diligently perform his duties as Chief Operating Officer of the Company and President, Consumer Internet Division and shall devote the substantial portion of his business time and effort to his employment with the Company and such additional duties, consistent with the foregoing, hereunder. During the Term, Employee shall not, directly or indirectly, alone or as a member of a partnership, or as an officer, director, employee or agent of any other person, firm or business organization engage in any other business activities or pursuits requiring his personal service that materially conflict with his duties hereunder or the diligent performance of such duties.
 
 
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4.             COMPENSATION.
 
a.             BASE SALARY. During the Term, Employee shall be paid a salary of $250,000 per year, payable in equal installments no less frequently than monthly (“Base Salary”). The Base Salary shall be reviewed at least annually by the Board of Directors or any Committee of the Board delegated the authority to review executive compensation.
 
b.            OPTION AND BONUS. In addition to Base Salary, Employee is awarded as of the Effective Date an option to purchase 450,000 shares, with a per-share exercise price equal to the per-share closing price of the Company’s common stock as quoted on the NYSE Amex Stock Exchange under the symbol “QPSA” as of the Effective Date, and subject to the conditions contained in a separate stock option agreement to be entered into between Employee and the Company no later than thirty (30) days after the Effective Date, and the Company’s 2006 Stock Incentive Plan (the “Stock Incentive Plan”). This option shall vest as provided in Schedule A hereto.  In addition, Employee shall participate in the management bonus program established by the Company (the “Management Bonus Program”) with an annual targeted bonus equal to no less than 85% of the average of the Company’s Chief Executive Officer and Chief Financial Officer of the Company's respective bonuses under the Management Bonus Program for the applicable year, to be paid in the equivalent value of fully-vested options to purchase shares of the Company’s common stock and/or shares of the Company’s common stock , provided that if and to the extent that the Chief Executive Officer's or Chief Financial Officer's bonuses are paid in cash, Employee's bonus shall also be paid in cash.
 
c.             INSURANCE. During the Term, Employee shall be entitled to participate in all health, life, disability and other insurance programs, if any, that the Company and its subsidiaries may offer to other key executive employees of the Company and its subsidiaries.
 
d.             PAID TIME OFF. Employee shall be entitled to six (6) weeks’ paid time off (in addition to holidays) in each calendar year during the Term; provided, that Employee may take only two (2) weeks’ paid time off within any calendar month. Except with respect to paid time off unused as the result of a request by the Company to postpone scheduled paid time off, any unused paid time off from one calendar year shall not carryover to any subsequent calendar year.
 
e.             EXPENSE REIMBURSEMENT. Employee shall, upon submission of appropriate supporting documentation, be entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of his duties hereunder in accordance with policies established by the Company. Such expenses shall include, without limitation, reasonable entertainment expenses, gasoline and toll expenses and cellular phone use charges, if such charges are directly related to the business of the Company.
 
5.              GROUNDS FOR TERMINATION .  The Board of Directors of the Company may terminate this Agreement for Cause. As used herein, “Cause” shall mean any of the following: (i) an act of willful misconduct or gross negligence by Employee in the performance of his material duties or obligations to the Company; provided, that if such act is capable of cure, Employee shall be given written notice and such act shall not be deemed a basis for Cause if cured within sixty (60) days after written notice is received by Employee specifying the alleged failure in reasonable detail (and during such sixty (60) day period, Employee shall continue to be employed by the Company at full pay); (ii) conviction of Employee of a felony involving moral turpitude; or (iii) a material act of dishonesty or breach of trust on the part of Employee resulting or intended to result directly or indirectly in personal gain or enrichment at the expense of the Company.
 
 
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6.               TERMINATION BY EMPLOYEE.   Employee may terminate this Agreement for Good Reason. As used herein, “Good Reason” means:
 
a.             The Company materially breaches the provisions of this Agreement (except those set forth in Paragraph 4(a) of this Agreement) and Employee provides at least fifteen (15) days’ prior written notice to the Company of the existence of such breach and his intention to terminate this Agreement (no such termination shall be effective if such breach is cured during such period); or
 
b.             The Company fails to comply with the provisions of Paragraph 4(a) herein or to pay any amounts due under the Management Bonus Program pursuant to Paragraph 4(b) herein for an uninterrupted ten (10) day period;
 
c.             The Company requires Employee to work in a non-supervisory or non-management position;
 
d.             The Company decreases Employee’s compensation (Base Salary or percentage of bonus opportunity);
 
e.             The Company materially reduces Employee’s welfare benefits, including, without limitation, paid vacation, paid sick time, paid legal and float holidays, medical, dental and cancer insurance, hospital indemnity, Flexible Spending, Short- and Long-term Disability insurance, Basic Group Term Life/ AD&D insurance, Supplemental Life/AD&D insurance, Spouse Life/Spouse AD&D insurance, Dependent Life insurance, Vision Plan, 401(k) plan, Employee Assistance Program, or education reimbursement program (collectively, the “Benefits”); provided, however, that any change in the Benefits that is made by the Company and that applies to its employees generally shall not be considered “Good Reason”; or
 
f.              The Employee is required, without his prior written consent, to relocate his office more than seventy-five (75) miles from the office where Employee currently reports.
 
7.             PAYMENTS AND OTHER PROVISIONS UPON TERMINATION.
 
a.            TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. In the event Employee’s employment with the Company (including its subsidiaries) is terminated by the Company for Cause or by Employee without Good Reason, then, on or before Employee’s last day of employment with the Company, the provisions of this Paragraph 7(a) shall apply.
 
(i)             Accrued Obligations. The Company shall pay in a lump sum to Employee at the time of Employee’s termination the amount of compensation payable to Employee for services rendered to the Company, as well as compensation for unused vacation time and earned bonus that is accrued but unpaid. Any and all other rights granted to Employee under this Agreement shall terminate as of the date of such termination.
 
(ii)             Non-competition; Non-solicitation. The provisions of Paragraphs 13 and 14 shall, at the option of the Company in its sole discretion, continue to apply with respect to Employee for a period of up to six (6) months following the date of such termination, so long as the Company: (A) provides a written notice to Employee within five (5) business days after Employee’s termination that the Company wishes to exercise its right to require the Employee to comply with Paragraphs 13 and 14 hereof; and (B) the Company thereafter pays to Employee in periodic installments, without interest, in accordance with the regular salary payment practices of the Company an amount equal to (1) the amount of Employee’s Base Salary and target bonus as in effect immediately prior to Employee’s date of termination, multiplied by (2) the number of months that the Company is requiring the non-competition and non-solicitation covenants to remain in place, divided by (3) 12. The first such installment of Base Salary and target bonus shall be paid on or before the delivery of the notice described in the prior sentence of this Paragraph 7(a)(ii). Paragraphs 13 and 14 of this Agreement shall no longer apply to Employee if the Company fails to pay the amounts required under this Paragraph 7(a)(ii) for an uninterrupted ten (10) day period and such failure is not cured within five (5) days after written notice of such failure is delivered to the Company.
 
 
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b.            TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event Employee’s employment with the Company (including its subsidiaries) is terminated by the Company for any reason other than for Cause, other than as a consequence of Employee’s death, Disability (as defined below) or normal retirement under the Company’s retirement plans and practices, or by Employee for Good Reason, the provisions of this Paragraph 7(b) shall apply. In addition to the amounts stated below, Employee shall be paid any other amounts by the Company which are due and payable to him but which remain unpaid as of the date of such termination.
 
(i)             Salary, Performance Award, and Bonus Payments. On or before Employee’s last day of employment with the Company, the Company shall pay in a lump sum to Employee, as compensation for services rendered to the Company, a cash amount equal to two (2) times the amount of Employee’s Base Salary and two times his target bonus amount under the Management Bonus Program as in effect immediately prior to his date of termination.  Notwithstanding the foregoing, if Employee is a “Specified Employee” of the Company for purposes of Code Section 409A at the time of a payment event set forth in Paragraph 7(b) and the Company determines in good faith no applicable exception to the requirements of Code Section 409A exists for the payment, then no payments pursuant to this Paragraph 7(b)(i) shall be made to Employee by the Company until the amount of time has passed that is necessary to avoid incurring excise taxes under Code Section 409A.  Should this provision result in a delay of payments to Employee, on the first day any such payments may be made without incurring a penalty pursuant to Code Section 409A (the “409A Payment Date”), the Company shall begin to make such payments as described in this Paragraph 7(b)(i), provided that any amounts that would have been payable earlier but for the application of this Paragraph 7(b)(i) shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the prime rate of interest set forth in the Western Edition of the Wall Street Journal from the date that payments to Employee should have been made under this Agreement.  The balance of such severance payments shall be payable in accordance with regular payroll timing and the COBRA premiums shall be reimbursed monthly.  For purposes of this provision, the term Specified Employee shall have the meaning set forth in Code Section 409A(2)(B(i) or any successor provision and the treasury regulations and rulings issued thereunder.
 
(ii)             Vesting of Options and Rights. Notwithstanding the vesting period set forth in this Agreement, the Stock Incentive Plan and any related stock option agreements between the Company and Employee for stock options granted Employee by the Company, all stock options shall be vested and immediately exercisable upon termination of Employee’s employment by the Company without Cause, by Employee for Good Reason, or by reason of death or Disability. In addition, Employee will have the right to exercise all such options for a period of two (2) years following such termination.
 
 
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(iii)            Benefit Plan Coverage. The Company shall maintain in full force and effect for Employee and his dependents, for twelve (12) months after the date of termination, all life, health, accident, and disability benefit plans and other similar employee benefit plans, programs and arrangements in which Employee or his dependents were entitled to participate immediately prior to the date of termination, in such amounts as were in effect immediately prior to the date of termination, provided that such continued participation is possible under the general terms and provisions of such benefit plans, programs and arrangements. In the event that participation in any benefit plan, program or arrangement described above is barred, or any such benefit plan, program or arrangement is discontinued or the benefits there under materially reduced, the Company shall arrange to provide Employee and his dependents, for six (6) months after the date of termination, with benefits substantially similar to those that they were entitled to receive under such benefit plans, programs and arrangements immediately prior to the date of termination. Notwithstanding any time period for continued benefits stated in this Paragraph 7(b)(iii), all benefits in this Paragraph 7(b)(iii) will terminate on the date that Employee becomes an employee of another employer and eligible to participate in the employee benefit plans of such other employer. To the extent that Employee was required to contribute amounts for the benefits described in this Paragraph 7(b)(iii) prior to his termination, he shall continue to contribute such amounts for such time as these benefits continue in effect after termination.
 
(iv)           Other Compensation. Any awards previously made to Employee under any of the Company’s compensation plans or programs and not previously paid shall immediately vest on the date of his termination and shall be paid on that date and included as compensation in the year paid.
 
(v)            Savings and Other Plans. Except as otherwise provided herein or under the terms of the applicable plans relating to termination of employment, Employee’s active participation in any savings, retirement, profit sharing or supplemental employee retirement plans or any deferred compensation or similar plan of the Company or any of its subsidiaries shall continue only through the last day of his employment. All other provisions, including any distribution and/or vested rights under such plans, shall be governed by the terms of those plans.
 
(vi)            Non-competition; Non-solicitation. The provisions of Paragraphs 13 and 14 shall apply to Employee for six (6) months following the date of termination. Paragraphs 13 and 14 of this Agreement shall no longer apply to Employee if the Company fails to pay the amounts required under the provisions of Paragraph 7(b)(i) for an uninterrupted ten (10) day period and such failure is not cured within five (5) days after written notice of such failure is delivered to the Company.
 
c.            The provisions of this Paragraph 7 shall apply if Employee’s employment is terminated prior to or more than one (1) year after the occurrence of a Change of Control (as defined below). Upon the occurrence of any Change of Control, until the first anniversary of such Change of Control, the provisions of Paragraph 8 shall apply in place of this Paragraph 7; provided, however, that in the event that Employee’s employment is terminated by Employee after a Change of Control without Good Reason, then the provisions of Paragraph 8 shall not apply and the provisions of Paragraph 7(a) shall instead apply.
 
 
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8.             PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
 
a.             SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: Following the occurrence of a Change of Control (other than as a consequence of his death or Disability (as defined below), Employee shall be entitled to receive from the Company, the following:
 
(i)             Base Salary. An amount equal to two (2) times Employee’s Base Salary as in effect at the date of termination shall be paid in a lump sum on the date of termination;
 
(ii)             Target Bonus .  An amount equal to two (2) times Employee’s target bonus amount under the Management Bonus Program for the fiscal year in which the date of termination occurs, to be paid in a lump sum on the date of termination; and
 
(iii)            Other Benefits. All benefits under Paragraphs 7(b)(ii), 7(b)(iii), 7(b)(iv), and 7(b)(v) shall be extended to Employee as described in such Paragraphs; provided, however, that all stock options held by Employee as of the date of a Change in Control shall fully vest and immediately become exercisable in full.  In the event that Employee is terminated following a Change in Control, all stock options held by Employee shall remain exercisable for a period of two (2) years following such termination.
 
(iv)            Section 409A Compliance .  Notwithstanding the foregoing, if Employee is a “Specified Employee” of the Company for purposes of Code Section 409A at the time of a payment event set forth in Paragraph 8(a) and the Company determines in good faith that no applicable exception to the requirements of Code Section 409A exists for the payment, then no payments pursuant to Paragraphs 8(a)(i) and (ii) shall be made to Employee by the Company until the amount of time has passed that is necessary to avoid incurring excise taxes under Code Section 409A.  Should this provision result in a delay of payments to Employee, on the first day any such payments may be made without incurring a penalty pursuant to Code Section 409A (the “409A Payment Date”), the Company shall begin to make such payments as described in Paragraphs 8(a)(i) and (ii), provided that any amounts that would have been payable but for the application of this Paragraph 8(a)(iv), shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the prime rate of interest set forth in the Western Edition of the Wall Street Journal from the date that payments to Employee should have been made under this Agreement.  The balance of such severance payments shall be payable in accordance with regular payroll timing and the COBRA premiums shall be reimbursed monthly.  For purposes of this provision, the term Specified Employee shall have the meaning set forth in Code Section 409A(2)(B)(i) or any successor provision and the treasury regulations and rulings issued thereunder.
 
b.             NON-COMPETITION/NON-SOLICITATION PERIOD. In the event of a termination under the circumstances described in Paragraph 8(a), the provisions of Paragraphs 13 and 14 shall be without force and effect and shall not apply to Employee.
 
c.             GROSS-UP PAYMENT. In the event that any amount payable to Employee pursuant to this Agreement (collectively, the “Payments”) is determined to constitute a “parachute payment” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), and that any Payments result in the imposition on Employee of an excise tax under Section 4999 of the Code or any successor statute or regulation (an “Excise Tax”), the Company shall pay to Employee an additional amount (a “Gross-Up Payment”) such that the net amount retained by Employee with respect to the Payments, after deduction of any Excise Tax on the Payments and any Federal, state and local income tax and Excise Tax on the Gross-Up Payment (and any interest and penalties thereon), but before deduction for any Federal, state or local income or employment tax withholding on such Payments, shall be equal to the amount of the Payments. The Gross-Up Payment shall be paid to Employee within five (5) days of a determination that such Excise Tax is due, but in no event later than the end of Employee’s taxable year following Employee’s taxable year in which such Excise Tax owed by Employee that is subject to Gross-Up Payment is remitted to the applicable taxing authority.
 
 
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d.             CHANGE OF CONTROL.  For purposes of this Agreement, the term “Change of Control” means and includes each of the following:
 
(i)            A sale, transfer, or other disposition by the Company through a single transaction or a series of transactions of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities to any “Unrelated Person” or “Unrelated Persons” acting in concert with one another and a replacement of the majority of the members of the Board under this Paragraph 8(d)(iv). For purposes of this definition, the term “Person” shall mean and include any individual, partnership, joint venture, association, trust, corporation, or other entity (including a “group” as referred to in Section 13(d)(3) of the Exchange Act). For purposes of this definition, the term “Unrelated Person” shall mean and include any Person other than the Company, or an employee benefit plan of the Company;
 
(ii)           A sale, transfer, or other disposition through a single transaction or a series of related transactions of all or substantially all of the assets of the Company to an Unrelated Person or Unrelated Persons acting in concert with one another;
 
(iii)          Any consolidation or merger of the Company with or into an Unrelated Person, unless immediately after the consolidation or merger the holders of the common stock of the Company immediately prior to the consolidation or merger are the beneficial owners of securities of the surviving corporation representing at least 50% of the combined voting power of the surviving corporation’s then outstanding securities; or
 
(iv)          A replacement of the majority of the members of the Board during any 12-month period by individuals whose appointment or election to the Board is not approved by a majority of the Board prior to the date of the appointment or election. 
 
9.              TERMINATION BY REASON OF DEATH .  If Employee shall die while employed by the Company, both prior to termination of employment and during the Term of this Agreement, except as otherwise provided herein, all of Employee’s rights under this Agreement shall terminate following the payment of such amounts of Base Salary that have accrued but remain unpaid, the payment of a pro rata portion of his target bonus amount under the Management Bonus Program through the month in which his death occurs, plus three (3) additional months of such salary and bonus payments. All benefits under Paragraphs 7(b)(ii), 7(b)(iv) and 7(b)(v) herein shall be extended to Employee’s estate as described in such Paragraphs. In addition, Employee’s eligible dependents shall receive continued benefit plan coverage under Paragraph 7(b)(iii) for three (3) months from the date of Employee’s death.
 
10.             TERMINATION BY DISABILITY .  Employee’s employment hereunder may be terminated by the Company for Disability. In such event, except as otherwise provided herein, all of Employee’s rights under this Agreement shall terminate with the payment of such amounts of Base Salary that have accrued but remain unpaid as of thirtieth (30th) day after such notice is given. All benefits under Paragraphs 7(b)(ii), 7(b)(iii), 7(b)(iv) and 7(b)(v) shall be extended to Employee as described in such Paragraphs. In addition, Paragraphs 13 and 14 shall continue to apply to Employee for a period of one(1) year from the date of such termination.
 
 
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For purposes of this Agreement, “Disability” means, as a result of Employee’s incapacity due to physical or mental illness:
 
a.              Employee shall have been absent from his duties as an officer of the Company on a substantially full-time basis for six (6) consecutive months; and
 
b.             Within thirty (30) days after the Company notifies Employee in writing that it intends to replace him, Employee shall not have returned to the performance of his duties as an officer of the Company on a full-time basis.
 
11.             RETIREMENT.   If during the Term or any extension thereof, the Company adopts a retirement plan with respect to executive officers of the Company, Employee shall have the right to participate in such policy and the provisions of such policy shall supersede the provisions of the preceding sentence.
 
12.             INDEMNIFICATION .  If litigation shall be brought, in the event of breach or to enforce or interpret any provision contained herein, the non-prevailing party shall indemnify the prevailing party for reasonable attorney’s fees (including those for negotiations, trial and appeals) and disbursements incurred by the prevailing party in such litigation, and hereby agrees to pay prejudgment interest on any money judgment obtained by the prevailing party calculated at the generally prevailing NationsBank of Florida, N.A. base rate of interest charged to its commercial customers in effect from time to time from the date that payment(s) to him should have been made under this Agreement.
 
13.           NON-COMPETITION.
 
a.             At all times during the Term, and for such additional periods as may otherwise be set forth in this Agreement in reference to this Paragraph 13, Employee shall not, directly or indirectly, engage in any business, enterprise or employment, whether as owner, operator, shareholder, director, partner, creditor, consultant, agent or any capacity whatsoever that manufactures products designed to compete directly with products of the Company or markets such products anywhere in the world where the Company (i) is engaged in business or (ii) has evidenced an intention of engaging in business. Employee acknowledges that he has read the foregoing and agrees that the nature of the geographical restrictions is reasonable given the international nature of the Company’s business. In the event that these geographical or temporal restrictions are judicially determined to be unreasonable, the parties agree that these restrictions shall be judicially reformed to the maximum restrictions which are reasonable.
 
 
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b.             Notwithstanding the provisions of the preceding Paragraph 13(a), Employee may accept employment with a company that would be deemed to be a competitor of the Company as described in the previous sentence (a “Competitor”), so long as (i) the Competitor has had annual revenues of at least $1 billion in each of the prior two (2) fiscal years, (ii) the Competitor’s revenues for products and maintenance in direct competition with the Company do not exceed 50% of its total revenues, and (iii) Employee’s responsibilities are solely for divisions or subsidiaries of the Competitor that do not compete with the Company.
 
14.             NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS.   At all times during the Term, or for such additional periods as may otherwise be set forth in this Agreement in reference to this Paragraph 14, Employee shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, (i) attempt to employ, employ or enter into any contractual arrangement with any employee or former employee of the Company, its affiliates, subsidiaries or predecessors in interest, unless such employee or former employee has not been employed by the Company, its affiliates, subsidiaries or predecessors in interest during the twelve (12) months prior to Employee’s attempt to employ him, or (ii) call on or solicit any of the actual or targeted prospective customers of the Company or its affiliates, subsidiaries or predecessors in interest with respect to any matters related to or competitive with the business of the Company.
 
15.           CONFIDENTIALITY.
 
a.             NONDISCLOSURE. Employee acknowledges and agrees that the Confidential Information (as defined below) is a valuable, special and unique asset of the Company’s business. Accordingly, except in connection with the performance of his duties hereunder, Employee shall not at any time during or subsequent to the term of his employment hereunder disclose, directly or indirectly, to any person, firm, corporation, partnership, association or other entity any proprietary or confidential information relating to the Company or any information concerning the Company’s financial condition or prospects, the Company’s customers, the design, development, manufacture, marketing or sale of the Company’s products or the Company’s methods of operating its business (collectively, the “Confidential Information”). The Confidential Information shall not include information which, at the time of disclosure, is known or available to the general public by publication or otherwise through no act or failure to act on the part of Employee.
 
b.             RETURN OF CONFIDENTIAL INFORMATION. Upon termination of Employee’s employment for any reason, or at any time at the request of the Company, Employee shall promptly return all Confidential Information in the possession or under the control of Employee to the Company and shall not retain any copies or other reproductions or extracts thereof. Employee shall at any time at the request of the Company destroy or have destroyed all memoranda, notes, reports, and documents, whether in “hard copy” form or as stored on magnetic or other media, and all copies and other reproductions and extracts thereof, prepared by Employee and shall provide the Company with a certificate that the foregoing materials have in fact been returned or destroyed.
 
c.             BOOKS AND RECORDS. All books, records and accounts whether prepared by Employee or otherwise coming into Employee’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon termination of Employee’s employment hereunder or upon the Company’s request at any time.
 
16.             INJUNCTION/SPECIFIC PERFORMANCE SETOFF .  Employee acknowledges that a breach of any of the provisions of Paragraphs 13, 14 or 15 hereof would result in immediate and irreparable injury to the Company which cannot be adequately or reasonably compensated at law. Therefore, Employee agrees that the Company shall be entitled, if any such breach shall occur or be threatened or attempted, to a decree of specific performance and to a temporary and permanent injunction, without the posting of a bond, enjoining and restraining such breach by Employee or his agents, either directly or indirectly, and that such right to injunction shall be cumulative to whatever other remedies for actual damages to which the Company is entitled. Employee further agrees that the Company may set off against or recoup from any amounts due under this Agreement to the extent of any losses incurred by the Company as a result of any breach by Employee of the provisions of Paragraphs 13, 14 or 15 hereof.
 
 
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17.             ENFORCEABILITY.    Any provision in this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
 
18.             SUCCESSORS.   This Agreement shall be binding upon Employee and inure to his and his estate’s benefit, and shall be binding upon and inure to the benefit of the Company and any permitted successor of the Company. Neither this Agreement nor any rights arising hereunder may be assigned or pledged by Employee or anyone claiming through Employee, or by the Company, except to any corporation which is the successor in interest to the Company by reason of a merger, consolidation or sale of substantially all of the assets of the Company. The foregoing sentence shall not be deemed to have any effect upon the rights of Employee upon a Change of Control.
 
19.             CONTROLLING LAW .  This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of Florida.  Venue for any dispute will be Palm Beach County.
 
20.             NOTICES .  Any notice required or permitted to be given hereunder shall be written and sent by registered or certified mail, telecommunicated or hand delivered at the address set forth herein or to any other address of which notice is given:
 
 
To the Company:
Quepasa Corporation
 
324 Datura Street Suite 114
 
West Palm Beach, FL 33401
 
Attention:  Michael Matte
 
                                           To Employee:
Geoff Cook6
Harbourton Ridge Drive
 
Pennington, NJ 08534
 
21.             ENTIRE AGREEMENT .  This Agreement constitutes the entire agreement between the parties hereto on the subject matter hereof and may not be modified without the written agreement of both parties hereto.
 
22.             WAIVER.   A waiver by any party of any of the terms and conditions hereof shall not be construed as a general waiver by such party.
 
23.             COUNTERPARTS .  This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute a single agreement.
 
24.             INTERPRETATION .  In the event of a conflict between the provisions of this Agreement and any other agreement or document defining rights and duties of Employee or the Company upon Employee’s termination, the rights and duties set forth in this Agreement shall control.
 
 
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25.             CERTAIN LIMITATIONS ON REMEDIES .  Paragraph 7(b) provides that certain payments and other benefits shall be received by Employee upon the termination of Employee by the Company other than for Cause and states that these same provisions shall apply if Employee terminates his employment for Good Reason. It is the intention of this Agreement that if the Company terminates Employee other than for Cause (and other than as a consequence of Employee’s death, Disability or normal retirement) or if Employee terminates his employment with Good Reason, then the payments and other benefits set forth in Paragraph 7(b) shall constitute the sole and exclusive remedies of Employee.
 
26.             SURVIVAL .  This Agreement shall terminate upon termination prior to the Effective Date of the Merger Agreement.  Notwithstanding the provisions of Paragraph 2, the provisions of Paragraphs 13, 14, and 15 shall survive the expiration or early termination of this Agreement at any time after the Effective Date.
 
27.             CERTAIN FEES .  The Company shall promptly reimburse Employee for reasonable legal fees and other expenses incurred by him in connection with the preparation and execution of this Agreement. In the event of any dispute under this Agreement as to which Employee is the prevailing party, the Company shall promptly reimburse Employee for reasonable legal fees and other expenses incurred by him in connection with such dispute.
 
 
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IN WITNESS WHEREOF , this Employment Agreement has been executed by the parties as of the date first above written.
 
COMPANY :

Quepasa CORPORATION



By: /s/ John Abbott
Title: Chief Executive Officer

 
EMPLOYEE :
 
/s/ Geoff Cook
Geoff Cook

 

Signature Page
 
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Exhibit 99.1

 
Quepasa and myYearbook Announce Merger Agreement

Accretive combination creates leading global platform for social discovery with 70+ million registered users, 2.2 million mobile app installs, 11.5 million mobile game installs, and 2.1 million social game installs


WEST PALM BEACH, FL – July 20, 2011 – Today Quepasa Corporation (NYSE Amex: QPSA) , owner of popular Latino social network Quepasa.com and cross-platform social game development studio Quepasa Games , announced that it has executed a definitive agreement to merge with Insider Guides, Inc. , DBA myYearbook , the best place to meet new people on the web or mobile device, for $100 million, comprised of approximately $82 million in Quepasa common stock and approximately $18 million in cash.  For further information on the merger consideration, see the Form 8-K filed by Quepasa with the Securities and Exchange Commission today.

“With this merger, we intend to create nothing less than the public market leader in social discovery,” noted Quepasa CEO, John Abbott.  “Combination with myYearbook nearly doubles the size of Quepasa’s existing user base while positioning the new company for significantly higher growth in mobile and social games, advertising, and virtual currency. The myYearbook team is product-oriented and hungry to continue building innovative products at the convergence of social and mobile. We expect the scale of this combination to enable a new class of investor in Quepasa. We believe myYearbook’s proven track record in monetization and engagement will fuel significant future growth.”

Over the past 12 months, myYearbook has experienced rapid growth in users and in mobile traffic. With over 1 billion page views on mobile platforms and 1.2 billion page views on the web each month, myYearbook is one of the largest media properties in the US. It is also the #1 web site in the comScore Teens category with more visits, minutes, and pageviews than any other site in the category. By emphasizing social discovery, focusing on the people users want to know rather than the people they already know, the service has built a large and growing user base, especially in the teen and young adult demographic. In 2010, myYearbook generated $23.7 million in revenue, up 53% year-over-year, and EBITDA of $4.9 million, up 315% year-over-year.

“We are thrilled to bring our vision of social discovery to a global audience through combination with Quepasa,” noted Geoff Cook, CEO of myYearbook. “Meeting new people is now -- and has always been -- one of the Internet’s core activities. This combination creates the scale needed to build the #1 player in social discovery. What excites me most about this opportunity is applying myYearbook’s platform for monetization and engagement to Quepasa’s fast-growing markets while also doubling the size of our development team to execute against an aggressive product pipeline focused on social, mobile, and virtual currency.”

Key highlights of the combined business include:

 
1.
Consolidated TTM Revenues and EBITDA of $33.6 million and $5.9 million, respectively, as of the twelve months ended March 31, 2011;
 
 
 
 
 
 
2.
4 billion monthly advertising impressions with 1 billion on mobile and 3 billion on the web as of June, 2011;
 
 
3.
Total registered web users of 70.9 million, 2.2 million mobile installs (1.4 million on Android and 800 thousand on iPhone), 11.5 million mobile game installs, 2.1 million social game installs and monthly page views of 2.4 billion in June, 2011;
 
 
4.
Dramatic mobile growth from 2% of daily myYearbook users logging in on a mobile device in January, 2010 to 40% of daily users logging in on a mobile device in June, 2011;
 
 
5.
Successful mobile platform to be leveraged across Latin America, the United States, and other geographies;
 
 
6.
Experienced social media team of 200+ people with 100+ engineers/product and 23 in Sales group;
 
 
7.
Quepasa Games’ social game IP creates vertically integrated, high-margin social gaming revenue stream for myYearbook;
 
 
8.
Vibrant virtual currency which accounts for one-quarter of myYearbook revenue;
 
 
9.
Highly complementary mix of cross-platform advertising products, including Quepasa Social Contests and myYearbook Social Theater
 
Following the completion of the merger, which is expected in the fourth quarter of 2011, subject to certain closing considerations described in the Merger Agreement, Geoff Cook will serve as Chief Operating Officer of Quepasa Corporation and President of its Consumer Internet Division while joining the company’s Board of Directors. Current myYearbook Board members, Rick Lewis, a Partner at myYearbook investor U.S. Venture Partners, and Terry Herndon, angel investor, will also join the Quepasa Board. Together with Geoff Cook, the myYearbook designees to the Quepasa Board represent the three largest shareholders in myYearbook.

Merger Conference Call
Quepasa will hold a conference call today at 9:00 am ET to discuss the merger.  Listeners may access the conference call live through the following numbers: TOLL-FREE at 1-888-846-5003 or TOLL/ INTERNATIONAL at 1-480-629-9856, or via webcast at http://www.talkpoint.com/viewer/starthere.asp?Pres=136212 .  A slide presentation will accompany the call and can also be viewed at http://www.talkpoint.com/viewer/starthere.asp?Pres=136212 .

A replay will be available at TOLL-FREE 1-877-870-5176 or TOLL/INTERNATIONAL at 1-858-384-5517 from:  07/20/2011 @ 12:00 pm Eastern Time To: 08/20/2011 @ 11:59 pm Eastern Time, Replay Pin Number:  4458363 .

About Insider Guides and myYearbook.com
myYearbook makes meeting new people fun and easy online and on your mobile phone. myYearbook combines innovative social games, virtual goods, social applications, and a robust virtual currency called "Lunch Money" to facilitate introductions and break the ice. myYearbook started in a single high school in 2005 and has grown to over 32.7 million members worldwide. For more information please visit www.myYearbook.com or install the myYearbook app on iPhone or Android.

About Quepasa Corporation
Quepasa Corporation (NYSE Amex: QPSA) is a social media technology company which owns Quepasa.com, the leading online social network and game platform for the Latino community, Quepasa Games, a cross platform social game development studio, and Quepasa DSM, a cross platform social advertising and contest platform.  Quepasa.com provides fun, interactive, and easy to use social tools, and rich multimedia content in English, Spanish and Portuguese to embrace Latinos everywhere, and empower them to connect online, compete in contests and games and share their interests, ideas, and activities. Quepasa is headquartered in West Palm Beach, Florida with offices in Miami, Los Angeles, Scottsdale, Hermosillo, Mexico, and Curitiba, Brazil.  For more information about the company, go to www.quepasacorp.com, or join for free at www.Quepasa.com .

 
 
 
 
Cautionary Note Regarding Forward Looking Statements
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical facts contained herein, including statements regarding the proposed merger with myYearbook, the benefits of the merger, creating the public market leader in social discovery, Quepasa’s future growth, our having the scale to build the #1 player in social discovery and the closing of the merger, our future financial performance, our liquidity, our business strategy and the plans and objectives of management for future operations, are forward-looking statements.  The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

Important factors that could cause actual results to differ from those in the forward-looking statements include: the possibility that the anticipated benefits from the merger will not be realized, or will not be realized within the expected time period; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions including the failure of Quepasa shareholders to approve the issuance of the shares pursuant to the merger and the failure of the shareholders of Insider Guides to approve the merger; the risk that the Quepasa and myYearbook businesses will not be integrated successfully; and disruption from the merger making it more difficult to maintain business and operational relationships. Further information on our risk factors is contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2010.  Any forward-looking statement made by us herein speaks only as of the date on which it is made.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
 
Additional Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy Quepasa’s securities or the solicitation of any shareholder vote or approval.  This communication is being made in respect of the proposed transaction involving Quepasa and Insider Guides.  In connection with the proposed transaction, Quepasa will be filing documents with the SEC, including a registration statement on Form S-4 that will include a proxy statement and prospectus of Quepasa.  Before making any voting or investment decision, investors and stockholders are urged to read carefully the proxy statement and prospectus regarding the proposed transaction and any other relevant documents filed by Quepasa with the SEC when they become available because they will contain important information about the proposed transaction.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website (www.sec.gov), by accessing Quepasa’s website at www.quepasacorp.com under the heading “Investors” and then under the link “SEC Filings” and from Quepasa by directing a request to Quepasa at Quepasa Corporation, 324 Datura Street, Suite 114, West Palm Beach, FL 33401, Attention: Investor Relations.

 
 
 
 
Quepasa and its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction.  You can find information about Quepasa’s directors and executive officers in its definitive proxy statement filed with the SEC on April 14, 2011. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and prospectus and other relevant materials to be filed with the SEC when they become available. You can obtain free copies of these documents from Quepasa using the contact information above.


Company Contacts:
Atomic PR for myYearbook
Tammy Chan, 212-699-3646
tammy@atomicpr.com

E. Brian Harvey, Vice President of Capital Markets and Investor Relations
Quepasa Corporation
Tel (310) 801-1719
brian.harvey@quepasacorp.com