Securities and Exchange Commission
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
PACIFIC WEBWORKS, INC.
(Exact name of registrant as specified in its charter) NEVADA 87-0627910 (State of incorporation) (I. R. S. Employer Identification No.) 180 South 300 West, Suite 400 Salt Lake City, Utah 84101 (801) 578-9020 (Address and telephone number of registrant's principal executive offices and principal place of business)
Securities to be registered pursuant to Section 12(b) of the Act:
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
The following description of Pacific WebWorks' business should be read in conjunction with the information included elsewhere in this registration statement. This section contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results discussed in the forward-looking statements as a result of certain of the risk factors set forth below and elsewhere in this registration statement.
Our Business. We are primarily an engineering and management company which develops and sells business software technology for the Internet. We provide software tools for e-commerce, including shopping carts, point of sale, lead generation, lead distribution, security methods (including encryption), and search engine technologies. Our products allow businesses to build, manage, and maintain their own websites, sell products, generate leads, distribute information, and gain intelligence about their website visitors. Our products provide business owners with access to such services for a fraction of the costs typically incurred by large companies for similar services.
Our Market. We market our products to small and medium-sized businesses which want total, one-stop solutions to Internet advertising, marketing, and sales concerns. Our typical "target" customers are businesses which would prefer to invest in technologies which allow them to develop functional, interactive Internet websites, rather than hiring information systems employees to develop such websites. The Internet is an interactive worldwide network of computers and data systems which allows users to retrieve data, purchase products, send and receive communications, and purchase or provide services. The Internet's use has grown substantially since it was first commercially introduced in the early 1990's. International Data Corporation estimates that the number of Internet users in the United States will grow from approximately 35 million in 1996 to approximately 160 million by 2000. The increase in the number of users has resulted in a rapid increase in the numbers of advertisers, products, and services on the Internet.
The Internet software market is relatively large and continuing to expand. Currently, the vast majority of businesses with successful web strategies are those which have the financial resources to frequently update and re-design their websites. Such businesses either hire and retain "information systems" employees to develop, support, and maintain their websites, or alternatively purchase Internet services from multiple parties, integrate such services, and gather or purchase information on their markets to facilitate website updates. Our market, by contrast, consists of small to medium-sized businesses which desire the capability to quickly re-design their websites without incurring substantial costs or relying upon additional employees or multiple vendors. Our products provide small and medium-sized businesses with such flexibility, allowing businesses complete control of their websites.
Our Product. We have developed software technology which we market under the name Visual WebTools(TM). Visual WebTools(TM) allows businesses to create and maintain websites. It is powerful, yet easy and intuitive to use. Visual WebTools(TM) allows a small business to quickly and easily create a website on the Internet, list itself with the major search engines, set up e-mail, and register a domain name. VisualWeb Tools(TM) provides all the tools needed to edit and maintain a website from any Internet-capable computer. It allows a user to create an online store front, generate sales leads, process credit cards, communicate with site visitors, and collect statistical information about who visits the website and what they do while they are there. It allows a business to create, manage, and maintain every aspect of its website at all times of the day or night. This functionality, combined with an easy to use visual interface, provides a point-and-click total Internet business solution for approximately three thousand dollars per year.
Visual WebTools(TM) incorporates the following features:
WebWizard. WebWizard allows businesses to quickly and easily create, update, modify, or enhance their websites. Changes can be made 24 hours a day, 7 days a week from anyplace in the world with an Internet terminal. WebWizard includes an easy to use but powerful preview interface which is referred to in the industry as "WYSIWYG" (What You See Is What You Get) which uses familiar "drag and drop" functions and which allows businesses to make website changes instantaneously. Changes are updated automatically and placed online within minutes. WebWizard gives businesses the ability to manipulate their websites' layout, colors, and content, and to move, resize, and cut and paste text, graphics, and tables. WebWizard also gives businesses a library of hundreds of graphics to use throughout the website, and the ability to upload graphics or files from a local hard drive directly into the website.
WebShopper. WebShopper allows businesses to add "electronic storefronts" to their websites. We assist businesses in setting up merchant accounts and in facilitating secure credit card transactions through a collaboration with joint venture partners. WebShopper also provides a customizable product database. A business's products and all of its variables, such as price, color and size, can be entered into a password-protected product database, which can be updated or edited at any time. Customizable price and shipping modifiers, receipt options, sale flagging, product option variables and tax calculations are also available.
WebChannels. WebChannels allows businesses to send e-mail to multiple clients simultaneously, creating marketing channels directly to customers. Businesses can send announcements, sales information, product updates, promotions, newsletters, jokes, or any other correspondence to clients at any time. WebChannels also allows subscribers to add or remove themselves from the automated e-mail database.
WebProfiler. WebProfiler allows businesses to gather demographics on site visitors by creating custom questionnaires which provide direct feedback from site visitors. With WebProfiler, businesses can obtain information from target audiences, including, for example, levels of customer satisfaction or dissatisfaction and customer preferences with regard to new products or services. WebProfiler assists businesses in obtaining the information necessary to improve customer relations, improve products, run surveys and product specials, and gather additional information.
WebStats. WebStats allows businesses to monitor website visits. It creates detailed reports about visits to their websites, which assist businesses to determine the effectiveness of changes to their websites and which pages on their sites draw the most interest. WebStats keeps a detailed two-year history of visits to and activity within our subscribers' websites, and can generate detailed reports of site activity. For example, it can generate reports which show year-long sales trends, identify product purchasers, or track the effectiveness of sales and promotions during specific time periods or from specific locations. WebStats retains this information in database format. We intend that future versions of WebStats will allow our customers to download and manipulate such information.
WebWizard and WebShopper are our basic products and come in three progressive versions: "Retail," "Express," and "Pro." The "Express" and "Pro" versions provide additional product features and support options to the business. WebStats, WebProfiler, and WebChannels are available to our customers for an additional license fee.
Sales and Marketing. We believe that our competitors are not effectively targeting our market niche: a total Internet based, end-to-end business solution for small- and medium-sized businesses. Our products allow businesses to generate leads, sell products, run sales promotions, capture demographic information about website visitors, communicate with website visitors, and obtain intelligent information about who is visiting their websites and what they are doing while they are there. Our products allow our customers to stay in complete control of their websites and provide tools which can facilitate a successful internet experience for them.
We market and sell our products through re-seller channels, our internal sales force, outside sales agents, and strategic partners. We sell our products to resellers at wholesale, who then mark the products up and sell them at retail. As of July 15, 1999, we have entered into WebTools Reseller Agreements with six companies. Each end user must sign a purchase agreement with the reseller which the reseller must in turn provide to us. We then provide software to the resellers' own end users which allows such users to create Internet projects. We provide the initial reseller with training in the use of the software, but the reseller must provide all product support for the reseller's end users. The reseller is an independent contractor and is obligated to pay the amounts due under the agreement even if it does not receive payments from its end user.
We have released and sold WebWizard Pro since late November, 1998, and WebWizard Express and WebWizard Retail since the first quarter of 1999. Sales have been conducted primarily by two of our resellers and have accounted for approximately $24,000 in gross sales revenue during 1998. During 1997 we had 41 clients, none of which accounted for more than 5% of our gross revenue. During 1998 we had a total client base of 85. Four clients each accounted for more than 5% of our gross revenues for that year. As of the second quarter of 1999, we have continued to increase our client base to several hundred. None of our clients have provided more than 5% of our gross revenues in 1999.
We believe we may be able to develop a substantial presence in our target market through a combination of marketing strategy, unique proprietary technology, technical expertise, and early entry into our target market. We have structured a unique reseller program. We have also developed a trial version of Visual WebTools(TM), which can be provided to a business for evaluation purposes free of charge. Our products will allow a business to create, operate, and maintain a website for an initial one-year term, after which our customer may maintain its license by paying a monthly license fee of approximately 6% of the initial purchase price. We are also pursuing a national advertising campaign which will include television, radio, and print media.
In the past, businesses which have attempted to maintain interactive websites and conduct business on the Internet have either developed technical expertise themselves, paid employees to create and maintain their websites, or retained contract "web professionals" to do so. We hope that Visual WebTools(TM) will allow small businesses, at a relatively small cost, to participate in Internet commerce by creating and managing their own Internet storefronts.
Product Development. We acquired a large amount of source code, the underlying technology from which we program, from Innovative Research and Animated Design, Inc. (the "IRAD") in June of 1997. We believe that this code base provides us with a significant market advantage with advancements in the areas of Internet business technologies, including 3D animation and search engine technologies. We intend to incorporate these technologies into future versions of Visual WebTools(TM).
We announced the release of WebWizard 2.0 in February 1999. WebWizard 2.0 enhances WebWizard, which is Visual WebTools'(TM) base product. WebWizard 2.0 simplifies the tasks of creating and maintaining websites. It incorporates Microsoft's ActiveX components directly into the interface, making WebWizard as easy to use as a word processor. The new WebWizard 2.0 supports online "drag and drop" functions for editing images, tables, and text. WebWizard 2.0 also supports online text editing, as well as infinite-level "undo" and "redo" functions. An extensive table editor has been added which allows simple resizing and quick editing of tables. The new import feature will allow current and older websites to be converted into the Visual WebTools(TM) environment quickly and easily. WebWizard 2.0 also includes an updated graphics and animation library, enhanced navigation support, and increased security.
In February 1999, we also released WebShopper Pro, which includes support for merchant account functionality, real-time Internet credit card and personal check settlement, and fraud prevention features. WebShopper Pro supports and accepts all major credit cards and optional electronic checks on a real-time basis. We intend to expand the features of the Visual WebTools(TM) family during the remainder of 1999 by adding 3D animation, new site layout support, background images, additional graphic libraries, and private office features such as document sharing, and a shopping mall.
Through June, 1999, we spent $506,132 in cash, of which approximately 60% was devoted to engineering costs, including research and development expenses. During 1998 and 1997, we spent approximately $235,000 and $105,000 in cash, respectively, of which approximately 60% was devoted to engineering costs, including research and development expenses. Such costs are passed on to purchasers in the cost of the product.
Material Contracts. We are a party to the following material contracts:
In January, 1998, we entered into an agreement with Electric Lightwave, Inc. for telecommunications, facilities, and Internet access. We currently pay $1,725.00 per month for such service. The contract is scheduled to expire December 31, 2001. We believe that we will be able to extend this contract on terms which are acceptable to us, but have no assurances that we can do so. However, we believe that we will be able to enter a new contract with a different service provider if the contract is not extended.
In April of 1998 we entered into a Development, License, and Service Agreement with American Home Business Association (the "American Home") for development of a website for American Home. We agreed to create a website, customize our software, prepare a first version of the website, and put a company database on the Internet. We granted an exclusive license to American Home to use our search engine, "IQuest," for use only within the Internet Home Business Directory Industry. American Home pays us a $10,000 royalty fee per year. We provide maintenance for IQuest for a monthly fee of $250. We allow Home Business to use 4% of our current internet access capacity. We also provide enhancements to the software which we own. The agreement has a term of two years and will expire March 31, 2000.
In February of 1999, we entered into an agreement with U.S. Merchant Systems, Inc. and IntelliPay, Inc., both located in Newark, California. U.S. Merchant Systems, Inc. provides merchant accounts to our clients. IntelliPay provides software which enables merchant accounts to communicate with Internet e-commerce applications. We integrated a merchant account and transaction processing which allows purchasers of Visual WebTools(TM) to accept all major credit cards and personal checks at point of sale from their website. We are also leveraging a relationship with a provider of Internet factoring, which will allow customers to make monthly payments on negotiated terms.
Corporate Development. Our predecessor-in-interest was incorporated in the state of Nevada on May 18, 1987, as Asphalt Associates, Inc. (the "Asphalt Associates"). Asphalt Associates never established commercial business operations. On January 11, 1999 Asphalt Associates merged with Utah WebWorks, Inc., a Utah corporation (the "Utah WebWorks") and changed its name to Pacific WebWorks, Inc. Utah WebWorks owned a significant portion of the software technology which we currently use. The merger became effective January 11, 1999.
Trademark, Licenses and Intellectual Property. On October 9, 1998 we filed a trademark application for Visual WebTools(TM). In December of 1998 the United States Patent and Trademark Office assigned Serial No. 567,136 to such mark. The trademark is currently pending. On July 9, 1999, we filed a Trademark application for Mainstreetsquare.com(TM), Cyberhaggle(TM), and Pricehunter(TM), all features of the online mall currently in development. Our success will depend, in part, on our ability to obtain and protect our trademark and trade secrets and operate without infringing upon the proprietary rights of others in the United States and other countries. If we were to become involved in a dispute regarding our intellectual property, it could become necessary for us to participate in interference proceedings before the United States Patent and Trademark Office to determine whether we have a valid claim to the rights involved. We could also be forced to seek a judicial determination concerning the rights in question. Such proceedings could be costly and time consuming, even if we were to eventually prevail. Should we not prevail, we could be forced to pay significant damages, obtain a license to the technology in question, or stop marketing one or more of its products.
We also rely upon trade secrets, proprietary know-how, and confidentiality provisions in agreements with employees, consultants, and resellers to protect our intellectual property rights. There are risks that these other parties may not comply with the terms of their agreements with us, and that we may not be able to adequately enforce our rights against such parties.
We have adopted a policy of requiring its employees and resellers to execute confidentiality agreements when they commence employment with us or resell our products. These agreements generally provide that all confidential information developed or made known to the employees or resellers during the course of their relationships with us is to be kept confidential and not disclosed to third parties, except under certain specific circumstances. In the case of employees, the agreements also provide that all inventions conceived by the employees in the course of their employment will be our exclusive property.
Employees. We currently employ 21 people, 20 of which are full-time employees and one of which is part-time. Our employees are not presently covered by any collective bargaining agreement. We believe that our relations with our employees is good, and we have not experienced any work stoppages.
Reports to Security Holders. Following the effective date of this registration statement, we will be required to comply with the reporting requirements of the Securities Exchange Act of 1934 ( the "Exchange Act") and will file annual, quarterly, and other reports with the Securities and Exchange Commission (the "SEC"). We also will be subject to the proxy solicitation requirements of the Exchange Act and, accordingly, will furnish an annual report with audited financial statements to our stockholders. We currently use an investor relations firm, Columbia Financial Group, and interested persons may call at (888) 301-6271. Also, interested persons may visit our website at www.pWebWorks.com.
Available Information. Copies of this registration statement may be inspected, without charge, at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Denver Regional offices of the SEC located at 1801 California Street, Suite 4800, Denver, Colorado 80202. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. Copies of this material also should be available through the Internet by using the SEC's EDGAR Archive, the address of which is http://www.sec.gov.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
An investment in our common stock is very risky. Potential investors should carefully consider the factors discussed above, in addition to the information contained in the remainder of this registration statement, before purchasing our common stock. This registration statement contains forward-looking statements that involve risks and uncertainties. Many factors, including those described below, may cause actual results to differ materially from anticipated results.
We have a limited operating history and we cannot be certain of future progress or profitability. We were incorporated in 1987, but did not operate as a business until 1997. We only recently started marketing our software products through resellers. We may encounter financial, managerial, technological or other difficulties as a result of our lack of operating history. Although we anticipate that our operating revenue will increase in the future, we cannot guarantee that our revenues will exceed our operating expenses.
Our quarterly results could fluctuate and we cannot be certain that future results will be similar to past results. We have consistently incurred losses since our formation. Our operating results in the future may vary significantly, depending on factors such as revenue from product sales and license fees, announcements and launches of new products and services, market acceptance of new and enhanced versions of Visual WebTools(TM) and related products, changes in our operating expenses, changes in our business strategy, and general economic factors. Our revenues will also be difficult to forecast because the markets for our products and services are evolving and our revenues in any period could be significantly affected by new product announcements or launches by our competitors, as well as by such competitors' development of alternative technologies. We do not believe that period-to-period comparisons of our results of operations will necessarily provide investors with meaningful data for the foreseeable future because of our lack of active operations in such earlier periods.
Our industry is subject to rapid technological change with which we may not be able to keep up. Internet industries change rapidly. Accordingly, our operating results will depend upon our ability to successfully compete. Our ability to successfully compete, in turn, will depend upon a number of factors, including our ability to successfully maintain and sell existing products, our ability to conceive, develop, improve, and market new products, our ability to identify and take advantage of emerging technological trends within its target markets, and our ability to respond effectively to technological changes or new product announcements by competitors. We believe that we will need to make continuing significant expenditures for research and development in the future. Risks exist that we may not be able to successfully develop new products or, if we do, that such products may not be accepted by the market.
We are subject to intense competition and we may not be able to compete successfully in the market. Our markets are new, competitive, and subject to rapid technological change. We face competition in the overall Internet software market, as well as in the website building market. We expect competition to persist, increase, and intensify in the future as the markets for our products and services continue to develop and as additional competitors enter our market.
Currently, in our estimation, few major competitors offer products comparable the Visual WebTools(TM) product family. "Yahoo! Store" is our most significant competitor, with its brand name recognition and significantly greater financial, technical, marketing, and managerial resources. Our success in our target market will depend upon our ability to build name brand recognition and to provide cost-effective products and services to our customers. We may be unable to compete effectively with current and future competitors.
We depend on our management, which may leave us at any time. We depend upon the efforts and abilities of our officers, directors, and certain key employees. Should we lose the services of one or more of these persons, such loss could have a material adverse effect on our operations.
We depend upon our proprietary rights, none of which can be completely safeguarded against infringement. Our ability to compete effectively will depend, in part, upon our ability to protect our proprietary source code and Visual WebTools(TM) through a combination of licenses and trade secrets. Competition in our market is intense and our competitors may independently develop or obtain patents on technologies that are substantially equivalent or superior to those incorporated into Visual WebTools(TM).
Intellectual property rights, by their nature, are uncertain and involve complex legal and factual questions. We may unknowingly infringe upon the proprietary rights of others, thereby exposing us to significant liability and/or damages. We are not aware of any third party intellectual property rights which would prevent us from marketing and developing Visual WebTools(TM), although such rights may exist. If we were to infringe upon the intellectual property of another party, we could be forced to seek a license to such intellectual property rights or alter the products or processes so they no longer infringe upon such rights. If we were required to attempt to obtain a license to another party's proprietary rights, such efforts would be expensive, and might be unsuccessful.
We also rely upon trade secrets and other unpatented proprietary information in our product development activities. To the extent we rely upon confidential information to maintain our competitive position, other parties may independently develop the same or similar information. We seek to protect trade secrets and proprietary knowledge in part through confidentiality agreements with our employees, resellers, and collaborators. Such agreements may not effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information. If employees or collaborators develop products independently that may be applicable to our products under development, disputes may arise about ownership of proprietary rights to those products or services. Protracted and costly litigation could be necessary to enforce and determine the scope of our proprietary rights. It would be impossible to predict whether such litigation might be successful. Our failure to obtain patent and trade secret protection, for any reason, could have a material adverse effect on our business, financial position and results of operations.
We may need additional capital and be unable to raise it. We believe, based on our current expenditure rate, that we will need additional financing by the fall of 1999. Therefore, our success will depend upon our ability to access equity capital markets and borrow on terms that are financially advantageous to us. We rely upon revenues from resellers, license agreements, and product sales. We may not be able to obtain additional funds on acceptable terms. If we fail to obtain funds on acceptable terms, we might be forced to delay or abandon some or all of our business plans, which could have a material adverse effect on us. If we are unable to obtain additional capital, we may not have sufficient working capital to develop products, finance acquisitions, pursue business opportunities, or meet reporting requirements. If we borrow funds, we could be forced to use a large portion of our cash reserves to repay principal and interest on such funds. If we issue our securities for capital, the interests of investors and shareholders could be diluted.
Our products are complex and may be subject to error complaints from our customers. Visual WebTools(TM) is complex and may contain errors, defects, and "bugs". We have detected such errors, defects, and bugs in the past and have corrected them as quickly as possible. Correcting any defects or bugs we may discover in the future may require us to make significant expenditures of capital and other resources. Despite our continuing tests, users may find errors or defects in Visual WebTools(TM) which could cause additional development costs or result in the loss of (or delays in) the market acceptance of Visual WebTools(TM). As of this date, we have no knowledge of any errors, defects, or bugs in our software.
Our stock price is volatile and is not in our control. In recent years the stock market in general, and the market for shares of high technology Internet companies in particular, have each experienced extreme price fluctuations. In many cases these fluctuations have been unrelated to the operating performance of the affected companies. The trading price of our common stock may be subject to extreme fluctuations in response to both business related issues (such as quarterly variations in operating results, announcements of new products developed by us, or announcements from our competitors) and stock market-related influences (including, but not limited to, changes in analysts' estimates, the presence or absence of short selling of our common stock, and events affecting other companies which the market believes might affect us).
We may have problems as a result of the year 2000 problem. We rely upon computer systems, applications, and devices in operating and monitoring all of the major aspects of our business, including financial systems (such as general ledger, accounts payable, and payroll modules), customer service, networks, telecommunications equipment, and developing and manufacturing end products. In addition, we provide our services and products over the Internet, which is a computer-based medium. Our internal systems may be materially affected by the year 2000 problem. Even if our internal systems are not materially affected by the year 2000 problem, we could be affected by such problems with the operations of our suppliers, contractors, customers, or other persons or entities with which we interact. Despite our efforts to minimize the potential impact of the year 2000 problem on its internal systems and operations, we may suffer a material disruption of our business as a result of this problem. This could have a material adverse effect on us.
The future sale of common stock could pose investment risks, including substantial dilution to our shareholders. The market price of our common stock could drop as a result of sales of the common stock in the market after the effective date of this registration statement, or the perception that such sales could occur. These factors could also make it more difficult for us to raise funds through future offerings of our common stock. There will be a total of 10,000,000 shares of common stock outstanding immediately after the Effective Date. The common stock will be freely transferable without restriction or further registration under the Securities Act of 1933 (the "Securities Act"), except for any common stock held by our "affiliates," as defined in Rule 144 under the Securities Act. We also have 3,960,000 shares of common stock outstanding that are freely transferrable without restriction under the Securities Act. The remaining 6,040,000 shares of common stock outstanding will be "restricted securities," as defined in Rule 144. The common stock may be sold in the future without further registration under the Securities Act to the extent such sales are permitted by Rule 144 or any other exemption under the federal securities laws.
We have a short market history which does not provide our investors with extensive information. There has not been a large public market for our equity securities, and our common stock has traded on the over-the-counter market only since January of 1999. We do not know the extent to which investor interest in our stock will lead to the development of an active trading market for such stock, or how liquid that market might be. Investors may be unable to resell their common stock at or above the price they pay for the common stock.
We have not paid dividends. We have never paid a dividend on our common stock. We intend to retain future earnings to finance our growth and development and do not plan to pay cash dividends in the foreseeable future.
We have a new product in a developing market which may not work properly. Visual WebTools(TM) is based on software technology which has been used for approximately two years. We have refined Visual WebTools(TM) by adding additional functions, including but not limited to e-commerce capabilities. Our success will depend largely on its ability to further refine and continue to develop Visual WebTools(TM) and other products. If Visual WebTools(TM) does not achieve significant market acceptance and usage, we could suffer material adverse effects in our business.
The primary markets for Visual WebTools(TM) have only recently begun to develop and are rapidly evolving. As is typical of new and rapidly evolving industries, demand for (and market acceptance of) products and services that have been released recently or that are planned for future release are subject to a high level of uncertainty. If Visual WebTools(TM) does not achieve market acceptance, we could suffer material adverse effects.
Our markets are highly dependent on the use of the Internet. A number of critical issues concerning the commercial use of the Internet, including security, reliability, capacity, taxation, costs, ease of use, access, quality of service, and acceptance of advertising, remain unresolved and may retard the growth of the Internet for commercial applications.
We will need to manage our growth, even if we grow quickly. We hope to achieve rapid growth, both with respect to our sales and operations and with respect to the number and complexity of our products. Several members of our key management team only recently joined us. See "Directors and Executive Officers." Our growth, coupled with the rapid evolution of our markets, has placed, and is likely to continue to place, significant strains on our administrative, operational, technical, and financial resources and increased demands on our internal management systems, procedures, and controls. If we are unable to manage our growth effectively, our business and our financial condition could suffer material adverse effects.
We will be dependent upon license renewal which cannot be assured to occur. We intend to provide small to medium-sized businesses with a relatively inexpensive, easy-to-use product which will allow them to create and maintain websites. We expect to derive revenues from user licenses and license renewals and to increase the brand recognition of Visual WebTools(TM) among users through such relationships. Our success in establishing Visual WebTools(TM) as a recognized brand name and achieving its acceptance in the market will depend in part on our ability to continually engineer and deliver new product technologies and superior customer service, so that customers renew their licenses year after year.
We may be subject to increased regulations and may be exposed to liability for information retrieved from the Internet. Other than the laws and regulations applicable to businesses generally, we are aware of few laws and regulations which expressly apply to access and commerce on the Internet. Due to the increased popularity and use of the Internet, however, it is possible that new laws and regulations may be adopted with respect to the Internet relating to issues such as user privacy, pricing and characteristics, and content and quality of products and services. For example, we may be subject to the provisions of the Communications Decency Act, which if found to be constitutional, could expose us to substantial liability. The adoption of any such laws or regulations could retard the growth or the use of the Internet, which could adversely affect the demand for our products and services. Such laws or regulations could also result in significant additional costs and technological challenges for us in complying with any mandatory requirements. Further, several states have attempted to tax online retailers and service providers, even when such parties have no physical presence in the state. The federal government has imposed a three-year moratorium on taxation of Internet commerce. We cannot predict what effect the lapse of this three-year period will have on our business operations. In addition, plaintiffs have brought claims, and sometimes obtained judgments, against online service providers for defamation, negligence, copyright or trademark infringement, or under other theories with respect to materials disseminated through those the Internet. We may be subject to similar claims.
We may be subject to risks associated with global operations, including fluctuating currency exchange rates and political instability. Visual WebTools(TM) is designed for national and international markets and we plan to include translation and localization support. As a result, we may derive substantial portions of its future revenues from customers outside the United States. Our ability to expand products and services internationally will be limited by the general acceptance of the Internet in other countries. In addition, international operations are subject to a number of risks, including costs of localizing products and services for international markets, dependence on independent resellers, multiple and conflicting regulations regarding communications, restrictions on use of data and internet access, longer payment cycles, unexpected changes in regulatory environments, import and export restrictions and tariffs, difficulties in staffing and managing international operations, greater difficulty or delay in accounts receivable collection, potentially adverse recessionary environments and economies outside the United States, and political and economic instability. Furthermore, we expect that our export sales will be denominated predominately in United States dollars. Therefore, an increase in the value of the United States dollar relative to other currencies could make our products and services more expensive and potentially less competitive in international markets.
None of our shareholders is subject to a lock-up, and some of our shareholders may immediately sell their shares and depress our stock price. Our current stockholders have not entered into any agreements which restrict their ability, by contract, to sell or otherwise dispose of their common stock. As a result, our stockholders will be able to sell any and all of their shares of common stock, subject to applicable federal securities laws. Sales and distributions of substantial amounts of our common stock in the public market, whether by reason of this registration statement or by existing shareholders, could adversely affect the prevailing market price for our securities.
Our registration statement contains forward-looking statements which may in the future prove to be inaccurate. We have included forward-looking statements in this registration statement. The information contained in this registration statement includes information based on trends or other forward-looking statements that involve a number of assumptions, risks, and uncertainties. The actual results of our operations could differ materially from our historical results of operations and those discussed in the forward-looking statements. The forward-looking statements are based on our management's beliefs, as well as assumptions management has made based on currently available information. Words such as "anticipate," "believe," "estimate," "plan," "expect," "intend," and words or phrases of similar import, as they relate to us or our management, are intended to identify forward-looking statements. The forward-looking statements should be read in light of these factors and the factors identified elsewhere in this registration statement.
The financial information set forth below with respect to our statements of operations for each of the years in the two-year period ended December 31, 1998, and with respect to our balance sheets at December 31, 1997 and 1998, is derived from financial statements included elsewhere in this registration statement which have been audited by our independent certified public accountants, Crouch Bierwolf & Chisholm, and is qualified by reference to such financial statements and notes related thereto. The financial data for the three month periods ended March 31, 1998 and March 31, 1999 are derived from our unaudited financial statements included elsewhere in this registration statement and, in the opinion of our management, includes all adjustments (consisting only of normal, recurring adjustments) necessary to present fairly the information set forth. The results for the three months ended March 31, 1999 are not necessarily indicative of the results that we can expect for the full year. The following selected financial data should be read in conjunction with our financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Result of Operation".
Year Ended Three Months Ended December 31, March 31, ---------------------- ------------------------ 1997 1998 1998 1999 ---- ---- ---- ---- Revenues: Product Sales.................................... $94,014 $172,395 $69,173 $4,499 Total revenues..............................$94,014 $172,395 $69,173 $4,499 Operating costs and expenses: Selling, general and administrative...............$163,021 $312,099 $61,916 $184,159 Non-recurring charges.............................0 0 0 0 Total costs and expenses....................$163,021 $312,099 $61,916 $184,159 Income (loss) from operations........................($69,007) ($139,704) ($7,257) ($179,660) Interest expense.....................................($3,500) ($10,761) 0 0 Interest income and other, net.......................$3,755 0 0 0 Income (loss) from continuing operations before income taxes and minority interest.......... ($68,752) ($150,465) ($7,257) ($179,660) Income tax expense (benefit).........................0 0 0 0 Income (loss) from continuing operations............ ($69,007) ($139,704) ($7,257) ($179,660) Income (loss) from discontinued operations.......... 0 0 0 0 Net income (loss)....................................($69,007) ($139,704) ($7,257) ($179,660) Per Common Share Amounts: Income (loss) from continuing operations........... (68.75) (150.46) 9.17 (0.02) Income from discontinued operations................. 0 0 0 0 Net income (loss)....................................(68.75) 150.46) 9.17 (0.02) Shares used in computing per share amounts...... 1000 1000 1000 8,333,500 Balance Sheet Data: Cash and cash equivalents...........................$5,440 $9,306 $5,198 $549,679 Total Assets........................................$61,092 $55,970 $72,639 $623,676 Long-term obligations, including current portion.............................................0 0 0 0 Redeemable, convertible preferred shares........... 0 0 0 0 Accumulated deficit.................................($68,752) ($219,217) ($69,352) ($398,877) Shareholders' equity (deficit)......................($58,752) ($209,217) ($49,579) ($611,123) See Notes to Financial Statements for information concerning the computation of per share amounts.
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management Discussion and Analysis of Financial Condition and Plan of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those factors set forth under the section entitled "Risk Factors" and elsewhere in this registration statement.
Overview. Our products allow small to medium-sized businesses to build, manage, and maintain their own websites, sell products, generate leads, distribute information, and gain intelligence about their website visitors. Originally, we focused on providing professional services for the Internet on an hourly basis. After April, 1998, management shifted its focus to development and sale of software products. This decision was based on management's vision of our company, market conditions, and the type and amount of technology we had already acquired or developed. In March, 1998, we began development of new Internet software which was completed by November 1998. We market our software technology under the brand name "Visual WebTools(TM)", which incorporates proprietary intellectual property rights which we either own or license. We intend to target small to medium-size businesses and create a reseller network through licensing arrangements with other portal or website providers.
Our predecessor-in-interest was a development stage company which did not generate any revenues. As of April 1, 1999, after our merger with Utah WebWorks, we had an accumulated loss of approximately $179,660. We expect our operating losses to continue until we develop a sufficient reseller network and enter into sufficient licensing agreements to cover our operating expenses.
Reverse merger treatment. Our predecessor-in-interest was incorporated in the state of Nevada on May 18, 1987, as Asphalt Associates, Inc. Asphalt Associates never established commercial business operations. On January 11, 1999, Asphalt Associates completed a merger with Utah WebWorks, Inc., a Utah corporation. The Nevada corporation was the surviving entity in that transaction and, as part of the transaction, changed its name to "Pacific WebWorks, Inc." At the time of the merger, Utah WebWorks owned a significant portion of the intellectual property which we currently use. As a result of the merger, the former shareholders of Utah WebWorks obtained 50% of the voting power of the combined companies. Accordingly, in conformance with generally accepted accounting principles, the merger has been accounted for as a "reverse merger" and the accounting survivor is Utah WebWorks. The financial statements for the fiscal year ended December 31, 1998 are those of Asphalt Associates because the merger was effected on January 11, 1999. This discussion will rely on the proforma consolidated unaudited financials for the year ended December 31, 1998.
Stock Split and Change in Par Value. In December 1998, we authorized a 4-for-1 forward stock split. Unless otherwise noted in this registration statement all share amounts reflect the forward stock split.
Results of Operations. The following table summarizes the results of our operations for the years ended December 31, 1997 and 1998 and for the interim period ended March 31, 1999.
Year ended Year ended Interim Period Ended December 31, 1997 December 31, 1998 March 31, 1999 ----------------- ----------------- -------------- Revenues $94,014 $172,395 $4,499 General & Administrative $163,021 $312,099 $184,159 Total Operating Expense.. $163,021 $312.099 $184,159 Operating Income/Loss. ($69,007) ($139,704) ($179,660) Interest Expense/ Driving Exp. (Prof.) ($3,500) ($10,761) Other Income $3,755 0 0 Net Profit (loss) ($68,752) ($150,465) ($179,660)
Our expenses have exceeded our revenues for each fiscal period since our inception. We have generated $4,499 in revenues from product sales and licensing fees for our software technology during the first quarter of 1999. We hope that our revenues will increase as a result of our efforts to build a larger reseller network to market Visual WebTools(TM). We expect that, as we implement our business plan, our revenues will grow, along with the burdens generally associated with larger revenues, including increased burdens on our managerial, accounting, and technical personnel.
Quarterly Trends. We do not anticipate significant "seasonal" changes in our operations. We hope that revenues will grow consistently over the next five years, but we believe that increases (or decreases) in our revenues should be reasonably steady from quarter to quarter. We believe our revenues will come from product sales and licensing agreements with resellers.
Liquidity and Capital Resources. Since our inception, we have funded our cash requirements through issuances of our common stock. We have used the funds from those transactions to fund our investments in and development of our technology, to provide working capital, and for general corporate purposes. In December, 1998, we sold 840,000 common shares to two accredited investors for $1,000,000. As of the year ended December 31, 1998, we posted current assets of $1,000,000, with no liabilities, resulting in a positive net worth of $1,000,000. Our operating losses were $150,465 in 1998 and were funded primarily by equity transactions.
Pursuant to the Merger Agreement, Asphalt Associates loaned $250,000 to Utah WebWorks as a 30 day interest free loan which was converted into equity in the merged entity on January 11th, 1999. The $250,000 was used to pay off an outstanding note payable which decreased our total liabilities and the remaining $750,000 is held in escrow to be disbursed over the next nine months. Also, the management of Asphalt Associates resigned and the management and board of Utah WebWorks filled the vacancies. As a result of these transactions, our financials show total assets of $623,676 for the period ended March 31, 1999, which includes cash or cash equivalents of $549,679. With total liabilities of $12,553, we posted a positive net worth of $614,721. We experienced operating losses of $179,660 for the three months ending March 31, 1999.
A summary of our audited balance sheets for the years ended December 31, 1997 and December 31, 1998 and our interim statements for March 31, 1999 are as follows:
Year ended Year ended Interim Period Ended December 31, 1997 December 31, 1998 March 31, 1999 ----------------- ----------------- -------------------- Cash/Cash Equivalents $5,440 $9,306 $549,679 Current Assets $34,551 $20,534 $567,473 Total Assets $61,092 $55,970 $623,676 Current Liabilities $119,844 $265,187 $12,553 Total Liabilities $119,844 $265,187 $12,553 Total Stockholder Equity ($58,752) ($209,217) $611,123 Total Liabilities & Stockholder Equity $61,092 $55,970 $623,676
With the infusion of cash from the Merger Agreement, we believe we have sufficient resources to continue our product development efforts and to continue our sales, marketing, and promotional activities for Visual WebTools(TM). However, we operate in a very competitive industry in which large amounts of capital are required in order to develop and promote products. Many of our competitors have significantly greater capital resources than we do. We believe we will need to continue to raise additional capital, both internally and externally, in order to successfully compete.
We currently estimate that we will require between $1,500,000 and $2,500,000 to fully develop our products and services. The current products have been marketed and sold since March of 1999. Actual development costs will depend on a number of factors, including
- our ability to negotiate favorable licensing agreements with resellers; - the number of our resellers;
- the software and services for which they subscribe;
- the nature and success of our products and services;
- regulatory changes; and changes in technology.
In addition, our actual expenses and revenues could vary materially from the amounts we anticipate or budget, and such variations may affect the additional financing needed for our operations. Accordingly, there can be no assurance that we will be able to obtain the capital that we will require.
To the extent that we acquire the amounts necessary to fund our business plan through the issuance of equity securities, our then-current shareholders may experience dilution in the value per share of their equity securities. The acquisition of funding through the issuance of debt could result in a substantial portion of our cash flows from operations being dedicated to the payment of principal and interest on that indebtedness, and could render us vulnerable to competition or economic downturns.
OTC Bulletin Board Eligibility Rule. In January of 1999, the SEC granted approval to the NASD OTC Bulletin Board Eligibility Rule 6530 which requires a company listed on the OTC Bulletin Board to be a reporting company and current in its reports filed with the SEC. As a result of this rule change we have filed this registration statement in order to become a fully reporting company and list our common stock on the OTC Bulletin Board. The SEC reporting requirements will add additional expenses to our operations, including the expense of filing this registration statement and preparing annual and quarterly reports. If the SEC does not reach a position of no comment with regards to this registration statement prior to our deadline date of August 1999, we may lose our listing on the OTC Bulletin Board, which would adversely effect the market for our common stock.
Year 2000 Compliance. We have completed a review of our computer systems and operations to determine the extent to which our business could be vulnerable to potential errors and failures as a result of the "year 2000" problem. The year 2000 problem results from the use of computer programs which were written using only two digits (rather than four digits) to define applicable years. On January 1, 2000, any clock or date recording mechanism, including date-sensitive software which uses only two digits to represent the year, could interpret a date of "00" as the year "1900," rather than the year "2000." This could result in system failures or miscalculations, causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, provide services or engage in similar activities. These failures, miscalculations and disruptions could have a material adverse effect on our business, operations, and financial condition.
We believe, based on our review of our operations and computer systems, that our significant computer programs and operations will not be materially affected by the Year 2000 problem, and that we can modify or replace the programs that will be affected by the end of 1999 at a cost which will not be significant. Under a reasonably likely worst case scenario, however, our computer systems and/or operations could be materially affected by the Year 2000 problem.
In addition to our own properties and computer systems, we rely on operations and computer systems of third party customers, financial institutions, vendors and other parties with or through which we conduct business (such as utilities, Internet service providers, and the owners of communications backbones).
We have prioritized our year 2000 efforts in an effort to protect, to the extent possible, our business and operations. Our first priority will be to protect our critical operations, such as those systems and applications that we use to provide various resellers and customers with access to Visual WebTools(TM), from incurring material service interruptions that could occur as a result of the year 2000 transition. To this end, we have attempted to identify any element within our business operation (including elements relating to third party relationships) that could be materially impacted by the year 2000 date change, and has attempted to determine the risks to our continuing business operations as a result of an adverse effect resulting from that date change.
We generally require our resellers and suppliers to warrant that they are year 2000 ready. We have purchased most of our mission-critical systems from such third-party vendors. We have attempted to identify the resellers and third parties with which we have contractual relationships which may not be year 2000 compliant by the end of 1999, and we have adopted contingency plans which we believe will mitigate any adverse impact to our business operations resulting from those vendors' or third parties' inability to perform their contractual obligations. Our contingency plans include preparing and using backup copies of our financial records, determining the availability and reliability of alternate network and backbone communication systems, and scheduling additional phone center, repair, support, and administrative personnel to be on hand on the transition date.
We currently lease 8,500 square feet of commercial office space in the Westgate Business Center in Salt Lake City, Utah 84101. The building has a total of 200,000 square feet of office and common space and serves as our main office and production facility. We pay $8,610 each month for our lease and an additional $720 for parking stalls, which we believe is typical for similar premises in the area currently available for lease. The current lease is for a three year term and will expire on December 31, 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 15, 1999, the beneficial ownership of our outstanding common stock of: (i) each person or group known by us to own beneficially more than 5% of our outstanding common stock, (ii) each of our executive officers, (iii) each of our directors, and (iv) all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The inclusion of any shares as beneficially owned does not constitute an admission of beneficial ownership of those shares. The percentage of beneficial ownership is based on 10,000,000 shares of common stock outstanding as of July 15, 1999.
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned ------------------------------- Name and Address of Number of Shares of Beneficial Owners Common Stock Percentage of Class ------------------------------- ------------------- ------------------- Net Strategic Investments, LLC(1) 1,107,500 11.08% 1986 E. Falcon Hill Circle Sandy, Utah 84092
Common Stock Beneficially Owned ------------------------------- Name and Address of Number of Shares of Beneficial Owners Common Stock Percentage of Class ------------------- ------------------- Lamar P. Taylor 1,665,000(2) 16.7% 180 South 300 West, Suite 400 Salt Lake City, Utah 84101 Allan E. Oepping 725,000 7.3% 180 South 300 West, Suite 400 Salt Lake City, Utah 84101 Eric K. Schmitter 500,000 5.0% 180 South 300 West, Suite 400 Salt Lake City, Utah 84101 Benjamin A. Black 500,000 5.0% 180 South 300 West, Suite 400 Salt Lake City, Utah 84101 All executive officers and directors as a group 3,364,500 33.65%
(1) Christian Larsen's father owns all of the outstanding stock of Net Strategic Funding, Inc., the corporation which owns all of the interest of Net Strategic Investments, LLC. Mr. Christian Larsen has disclaimed beneficial ownership of such shares.
(2) Mr. Taylor is one of two members of LVT Associates, LLC and shares voting and investing power with such LLC.
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and key employees, as of the date hereof, and their respective ages and positions with us are set forth below. Biographical information for each of those persons is also presented below. Our executive officers are chosen by our Board of Directors and serve at their discretion. Christian Larsen and Bryan Larsen are brothers.
Directors and Officers Name Age Position Held ---- --- ------------- Christian R. Larsen 25 Director, President, Acting Chief Executive Officer Mark S. Jensen 42 Chief Operating Officer Bryan R. Larsen 22 Secretary, Treasurer Lamar P. Taylor 37 Director Allan E. Oepping 24 Director Eric K. Schmitter 24 Director Benjamin A. Black 27 Director
Christian R. Larsen: Mr. Larsen serves as President and Acting Chief Executive Officer of Pacific WebWorks and has done so since April 1999. He will serve as President until April of 2000. In July, 1993 he started Innovative Research and Animated Design, Inc. (the "IRAD") which developed custom and commercial software for animation and special effects. IRAD grew to a Company employing 28 individuals. He has seven years' experience providing computer consulting and business management services. Mr. Larsen filed a Chapter 7 voluntary bankruptcy petition in May of 1997 in the District of Utah Central Division of the United States Bankruptcy Court, which was discharged in September of 1997.
Mark S. Jensen: Mr. Jensen serves as Chief Operating Officer of our company. He joined us in June, 1999, after spending eighteen years in sales, operations, and services in the software industry. He graduated with a B.A. in Business Administration and Marketing from Weber State University in 1981.
Bryan R. Larsen: Mr. Larsen serves as Secretary and as a Treasurer. He started with Utah WebWorks in January of 1998 as an administrative assistant and was elected Secretary of that company in September of 1998. He has been employed as a woodworker and a delivery driver. He attended Salt Lake Community College in Salt Lake City, Utah during 1994.
Lamar P. Taylor: Mr. Taylor was the founder of Utah WebWorks, Inc. He currently serves as a Director of the Company. He served as President for Utah WebWorks from April of 1997. He specialized in 3D computer animation between 1991 and 1993. He worked as a senior animator for IRAD, producing two dimensional and three dimensional computer animation for television commercials, promotional videos and medical simulations during 1994 to 1997. He received his B.A. with Honors, from California State University, Los Angeles in 1991.
Allan E. Oepping: Mr. Oepping serves as a Director. As of January of 1999 he is Pacific WebWorks' Vice President of Engineering. He has fourteen years' experience working with computer hardware and software. He started with Utah WebWorks in November of 1997 as an independent consultant, then became the Technical Director in August of 1998. He was the head programmer for IRAD for five years. He attended Salt Lake Community College in Salt Lake City, Utah during 1994. Mr. Oepping filed a Chapter 7 voluntary bankruptcy petition on March 2, 1998, in the District of Utah, Central Division of the United States Bankruptcy Court. The petition was discharged on June 12, 1998.
Eric K. Schmitter: Mr. Schmitter serves as a Director. He started with Utah WebWorks as the Creative Director in April of 1997. He has two years experience in animation and two years experience in software sales. He attended the University of North Texas during 1993 and the University of Utah in 1994. In 1988, Mr. Schmitter filed a Chapter 13 voluntary bankruptcy petition, which later converted to a Chapter 7, in the District of Utah, Central Division, of the United States Bankruptcy Court. The petition was subsequently discharged later that year.
Benjamin A. Black: Mr. Black serves as a Director. He has three years experience in software development programming. He has worked as Senior Programmer for Utah WebWorks since April of 1997. He was an important programmer at IRAD during 1994 through 1997. In 1995 he received his Associate of Science degree in electronics technology from Salt Lake Community College in Salt Lake City, Utah.
Board of Directors: Our Articles of Incorporation provide for a Board of Directors consisting of at least 3, but no more than 9 persons. Our directors serve for terms of one year.
During the past two fiscal years, no executive officer has been paid compensation which exceeds $100,000. During 1997 no executive officer received cash compensation, bonuses, stock appreciation rights, long term compensation, stock awards or long-term incentive rights. In December of 1998, Mr. James R. Glavas, our former President, received 120,000 common shares, valued at $12,000 ($0.10 per share) for services rendered during 1998. None of the current officers and directors received compensation from us during our last fiscal year because the merger was not effective until January 11, 1999.
Compensation of Directors. We do not have any standard compensation arrangements for our directors.
Employment Contracts. We have adopted a policy to enter into employment agreements with our senior management, and entered into employment agreement with each of our managers in April of 1999. Each agreement is effective for one year and will be automatically renewed annually unless terminated. Mr. Larsen, our Chief Executive Officer, will receive an annual base salary of $60,000 and bonuses not to exceed an additional $65,000. Mr. Jensen, our highest paid officer, will receive a base salary of $75,000 and bonuses not to exceed another $75,000. Each of our senior managers receives medical insurance. Each may be terminated for cause if he or she acts improperly or negligently in his position, engages in dishonest or illegal conduct, and/or breaches our policies and procedures. Each may be terminated for disability if he fails to perform duties for 90 consecutive days for mental or physical health reasons. Each promises to not compete with us for a period of one year after his or her employment expires or terminates, unless he assures us in writing that confidential and proprietary information will not be jeopardized. All inventions and improvements in our products or methods of conducting business shall remain our property. Each agrees not to solicit employees, customers or others for a period of two years after the termination of his employment. After termination or resignation, each agrees not to disclose or use confidential or proprietary information. The agreements provide compensation if we have a change in control or if the person resigns, or the employment is terminated.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions we have either engaged in during the past two years or proposes to engage in involving our executive officers, directors, 5% stockholders or immediate family members of such persons:
In December of 1998, we issued an aggregate of 200,000 common shares valued at $20,000 for services rendered to Asphalt Associates, Inc., our predecessor in interest. Of these shares, 120,000 common shares were issued to James R. Glavas, the President of Asphalt Associates prior to the merger, and 80,000 shares were issued to Tony Glavas, his son.
Pursuant to the Merger Agreement, $1,000,000 was placed in an escrow account by Asphalt Associates, our predecessor in interest, to be disbursed to the merged entity. We loaned $250,000 of such funds to Utah WebWorks as a 30 day interest free loan. The note payable was converted to equity in the merged entity. These funds were distributed to us between January and June of 1999.
We are not aware that we are a party to any existing or threatened legal or administrative proceedings as of the date of this filing.
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Since January of 1999 our common stock has traded over-the-counter and been quoted on the OTC Electronic Bulletin Board under the symbols "PWEB" and "PWEBE". There was no trading activity in our common stock during 1997 and 1998. Fidelity Transfer Company, located in Salt Lake City, Utah, currently acts as our transfer agent and registrar for the common stock. The following table presents the range of the high and low bid prices of our stock as reported by the NASDAQ Trading and Market Services. Such quotations represent prices between dealers and may not include retail markups, markdowns, or commissions and may not necessarily represent actual transactions.
Year Quarter High Low 1999 First 20.0 6.875 1999 Second 9.875 5.625
On December 31, 1998, the Board authorized a four-for-one forward stock split. We currently have 3,960,000 shares of common stock that are freely tradeable (except for such of those shares as may be acquired by our affiliates). The remaining common stock held by existing shareholders are "restricted securities" as that term is defined by Rule 144. Restricted securities may be sold in the public market only if they are registered or if they qualify for exemption from registration under Rules 144 or 701 under the Securities Act or otherwise.
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who has beneficially owned shares for at least one year is entitled to sell, within any three month period, a number of shares that does not exceed the greater of (i) one percent of the shares outstanding, or (ii) the average weekly volume of trading in such shares for the four calendar weeks preceding such sale, subject to the filing of a Form 144 with respect to such sale and certain other limitations and restrictions. In addition, a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, would be entitled to sell such shares under Rule 144(k) without regard to the volume, manner of sale and other limitations described above.
An employee or consultant of ours who purchased his or her shares pursuant to a written compensatory plan or contract is entitled to rely on the resale provisions of Rule 701, which permit non-affiliates to sell their Rule 701 shares without having to comply with the public information, holding-period, volume-limitation, or notice provisions of Rule 144 and permit affiliates to sell their Rule 701 shares without having to comply with the Rule 144 holding period restrictions, in each case commencing 90 days after the date of this registration statement.
Dividends. We have not paid dividends on our common stock and do not intend to do so in the future.
RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities sold by Pacific WebWorks within the past three years without registration:
On December 24, 1998, we issued an aggregate of 200,000 common shares valued at $20,000 for services rendered to us. Of these shares, 120,000 common shares were issued to James R. Glavas and 80,000 shares were issued to Tony Glavas, his son, for their services to Asphalt Associates, Inc.
On December 28, 1998, we issued an aggregate of 840,000 common shares to two accredited investors for $1,000,000, with 440,000 common shares issued to Capital Communications, Inc. and 400,000 common shares to Mutual Ventures Corporation. On January 1, 1999 we issued an aggregate of 5,000,000 common shares to the stockholders of Utah WebWorks, Inc., pursuant to the Merger Agreement under which that company merged with Asphalt Associates and changed its name to Pacific WebWorks, Inc.
In February, 1999, we issued a warrant to Columbia Financial Group to purchase 400,000 shares of our common stock at an aggregate exercise price of $1,475,000 in exchange for their services to us.
In connection with each of these isolated issuances of our securities, we believe that each purchaser
- was aware that the securities had not been registered under federal
- acquired the securities for his/its own account for investment purposes and not with a view to or for resale in connection with any distribution for purposes of the federal securities laws;
- understood that the securities would need to be indefinitely held unless registered or an exemption from registration applied to a proposed disposition; and
- was aware that the certificate representing the securities would bear a legend restricting their transfer.
We believe that, in light of the foregoing, the sale of our securities to the respective acquirers did not constitute the sale of an unregistered security in violation of the federal securities laws and regulations by reason of the exemptions provided under Sections 3(b) and 4(2) of the Securities Act of 1933, and the rules and regulations promulgated thereunder.
DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Common Stock. The Board authorized a four-for-one forward common stock split on December 31, 1998 and changed the authorized capital from 20,000,000 to 50,000,000 common shares, par value $.001. We have not authorized or issued any preferred stock. Holders of the common stock are entitled to receive, pro rata, such dividends as may be declared by our Board of Directors out of funds legally available for such purposes. In the event of our liquidation, dissolution or winding up, the holders of the common stock are entitled to participate in all assets remaining after the payment of liabilities. The holders of the common stock have no preemptive rights and no right to convert the common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock, and all outstanding common stock is fully paid and non-assessable. The holders of the common stock are entitled to one vote for each share they hold of record on all matters submitted to a vote of our stockholders. We have not paid, and do not intend to pay, cash dividends on the common stock for the foreseeable future.
Anti-Takeover Effective Nevada Law In Certain Provisions. Nevada law
provides that any agreement providing for the merger or consolidation for sale
of all or substantially all of the assets of a corporation be approved by the
owners of at least the majority of the outstanding shares of that corporation,
unless a different vote is provided for in our Articles of Incorporation. Our
Articles of Incorporation do not provide for a super-majority voting requirement
in order to approve any such transactions. Nevada law also gives appraisal
rights for certain types of mergers, plans of reorganization, or exchanges or
sales of all or substantially all of the assets of a corporation. Under Nevada
law, a stockholder does not have the right to dissent with respect to (a) a sale
of assets or reorganization, (b) any plan of merger or any plan of exchange, if
(i) the shares held by the stockholder are part of a class of shares which are listed on a national securities exchange or the NASDAQ National Market Systems, or are held of record by not less than 2,000 shareholders and (ii) the stockholder is not required to accept for his shares any consideration other than shares of a corporation that, immediately after the effective time of the merger or exchange, will be part of a class of shares which are listed on a national securities exchange or the NASDAQ National Market System, or are held of record by not less than 2,000 holders.
Control Share Acquisition Provision. Under Nevada law, when a person has acquired or offers to acquire one-fifth, one-third, or a majority of the stock of a corporation, a stockholders' meeting must be held after delivery of an "offeror's" statement, at the offeror's expense, so that the stockholders of the corporation can vote on whether the owner(s) of the shares proposed to be acquired (the "control shares") can exercise voting rights. Except as otherwise provided in a corporation's Articles of Incorporation, the approval of the owner(s) of a majority of the outstanding stock not held by the offerors is required so that the stock held by the offerors will have voting rights. The control share acquisition provisions are applicable to any acquisition of a controlling interest, unless the Articles of Incorporation or by-laws of a corporation in effect on the tenth day following the acquisition of a controlling interest by an acquiring person provide that the control share acquisition provisions do not apply. We have not elected out of the control share acquisition provisions of Nevada law.
Combination Moratorium Provision. Nevada law provides that a corporation may not engage in any "combinations," which is broadly defined to include mergers, sales and leases of assets, issuances of securities, and similar transactions with an "interested stockholder" (which is defined as the beneficial owner of 10% or more of the voting power of the corporation) and certain affiliates of their associates for three years after an interested stockholder's date of acquiring the shares, unless the combination or the purchase of the shares by the interested stockholder is approved by the Board of Directors by the date the interested stockholder acquires the shares. After the initial three-year period, any combination must still be approved by majority of the voting power not beneficially owned by the interested stockholder or the interested stockholders' affiliates or associates, unless the aggregate amount of cash and the market value of the consideration other than cash that could be received by stockholders as a result of the combination is at least equal to the highest of: (a) the highest bid per share of each class or series of shares, including the common shares, on the date of the announcement of the combination or on the date the interested stockholder acquired the shares; or (b) for holders of preferred stock, the highest liquidation value of the preferred stock.
Other Provisions. Under Nevada law, the selection of a period for achieving corporate goals is the responsibility of the directors. In addition, the officers, in exercising their respective powers with a view to the interests of the corporation, may consider (i) the interests of the corporation's employees, suppliers, creditors, and customers, (ii) the economy of the state and the nation, (iii) the interests of the economy and of society, and (iv) the long-term, as well as short-term, interests of the corporation and its stockholders, including the possibility that those interests may be best served by the continued independence of the corporation. The directors also may resist any change or potential change of control of the corporation if the directors, by majority vote of a quorum, determine that a change or potential change is opposed to or not in the best interests of the corporation "upon consideration of the interest of the corporation's stockholders," or for one of the other reasons described above. The directors may also take action to protect the interests of the corporations' stockholders by adopting or executing plans that deny rights, privileges, powers, or authority to a holder of a specific number of shares or percentage of share ownership or voting power.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither our Articles of Incorporation nor our bylaws provide for the indemnification of a present or former director or officer. However, pursuant to Nevada Revised Statutes Section 78.750 and 78.751 we must indemnify a director, officer, employee, or agent of the corporation who is successful on the merits or otherwise in defense of any action or suit. Such indemnification shall include expenses, including attorney's fees actually or reasonably incurred. Nevada law also provides for discretionary indemnification for each person who serves as or at the request of the corporation as our officer or director. We may indemnify such individuals against all costs, expenses, and liabilities incurred in a threatened, pending, or completed action, suit or proceeding brought because such individual is our director or officer. Such individual must have conducted himself in good faith and reasonably believed that his conduct was in, or not opposed to, our best interests. In a criminal action he must not have had a reasonable cause to believe his conduct was unlawful.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Pacific WebWorks, Inc.
We have audited the accompanying balance sheets of Pacific WebWorks, Inc. as of December 31, 1998 and 1997 and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pacific WebWorks, Inc. as of December 31, 1998 and 1997 and the results of its operations and cash flows for the years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had recurring operating losses and is dependent upon financing to continue operations. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in the Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Salt Lake City, Utah
January 26, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Pacific WebWorks, Inc. Balance Sheets Assets March 31, December 31, 1999 1998 1997 ------------ -------------- -------------- (unaudited) Current assets Cash $ 549,679 $ 9,306 $ 5,440 Accounts Receivable (net of allowance of $5,849, $6,600 and $2,545, respectively) 16,885 10,392 28,011 Employee Receivable 909 836 1,100 ------------- ------------ ------------ Total Current Assets 567,473 20,534 34,551 ------------- ------------ ------------ Property and Equipment (Note 3) 40,270 23,353 17,708 ------------- ------------ ------------ Other Assets Deposits 9,600 5,250 - Intangible Technology (Note 6) 6,333 6,833 8,833 ------------- ------------ ------------ Total Other Assets 15,933 12,083 8,833 ------------- ------------ ------------ Total Assets $ 623,676 $ 55,970 $ 61,092 ============= ============ ============ Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 8,607 $ 11,261 $ 9,022 Accrued Expenses 3,946 3,926 6,920 Notes Payable (Note 5) - 250,000 - Notes Payable - Related Party (Note 4) - - 103,902 ------------- ------------ ------------ Total Current Liabilities 12,553 265,187 119,844 ------------- ------------ ------------ Stockholders' Equity Common Stock, authorized 50,000,000 shares of $.001 par value, issued and outstanding 10,000,000, 1,000 and 1,000 shares, respectively 10,000 1 1 Additional Paid in Capital 1,000,000 9,999 9,999 Retained Deficit (398,877) (219,217) (68,752) ------------- ------------ ------------ Total Stockholders' Equity 611,123 (209,217) (58,752) ------------- ------------ ------------ Total Liabilities and Stockholders' Equity $ 623,676 $ 55,970 $ 61,092 ============= ============ ============
Pacific WebWorks, Inc. Statements of Operations For the Thre For the Months Ended Year Ended March 31, December 31, 1999 1998 1998 1997 ------------ ----------- ----------- ----------- Revenues: $ 4,499 $ 69,301 $ 172,395 $ 94,014 ------------ ----------- ----------- ----------- Expenses: General & Administrative 184,159 60,129 312,099 163,021 ------------ ----------- ----------- ----------- Total Expenses 184,159 60,129 312,099 163,021 ------------ ----------- ----------- ----------- Income (Loss) from Operations (179,660) 9,172 (139,704) (69,007) Other Income (Expenses) Interest Expense - - (10,761) (3,500) Other Income - - - 3,755 ------------ ----------- ----------- ----------- Net Income (Loss) $ (179,660) $ 9,172 $ (150,465) $ (68,752) ============ =========== =========== =========== Net Income (Loss) Per Share $ (.02) $ 9.17 $ (150.46) $ (68.75) ============ =========== =========== =========== Weighted average shares outstanding 8,333,500 1,000 1,000 1,000 ============ =========== =========== ===========
Pacific WebWorks, Inc. Statement of Stockholders' Equity Additional Common Stock Paid-in Retained Shares Amount Capital Deficit ----------- ------------ ------------ ------------ Balance at Inception on April 10, 1997 - $ - $ - $ - April 1997, shares issued for cash at $10 per share 1,000 1 9,999 - Net loss December 31, 1997 - - - (68,752) ----------- ------------ ------------ ------------ Balance, December 31, 1997 1,000 1 9,999 (68,752) Net loss December 31, 1998 - - - (150,465) ----------- ------------ ------------ ------------ Balance, December 31, 1998 1,000 1 9,999 (219,217) Reverse merger and Reorganization adjustment 9,999,000 9,999 990,001 - Net loss March 31, 1999 - - - (179,660) ----------- ------------ ------------ ------------ Balance, March 31, 1999 10,000,000 $ 10,000 $ 1,000,000 $ (398,877) ========== ============ ============ ============
Pacific WebWorks, Inc. Statement of Cash Flows For the Three For the Months Ended Year Ended March 31, December 31, 1999 1998 1998 1997 ----------- ------------ ------------ ------------ Cash Flows form Operating Activities: Net Income (loss) $ (179,660) $ 9,172 $ (150,465) $ (68,752) Adjustments to reconcile net (loss) to net cash provided by operations Depreciation & Amortization 4,942 - 13,151 5,473 Bad Debt - - 4,055 2,545 Change in assets and liabilities: Accounts receivable (7,591) (4,134) 13,828 (31,656) Accounts Payable and accrued expenses (2,634) (2,624) (755) 15,942 ----------- ------------ ------------ ------------ Net Cash Flows used in Operating Activities (184,943) 2,414 (120,186) (76,448) ----------- ------------ ------------ ------------ Cash Flows from Investing Activities: Cash paid for property and equipment (20,334) (3,055) (12,675) (22,014) Cash paid for deposits (4,350) (4,600) (5,250) - Cash paid for technology - - - (10,000) Cash acquired in acquisition 750,000 - - - ----------- ------------ ------------ ------------ Net Cash Paid for Investing Activities 725,316 (7,655) (17,925) (32,014) ----------- ------------ ------------ ------------ Cash Flows from Financing Activities: Cash from debt financing 210,000 5,000 381,300 108,802 Issuance of stock - - - 10,000 Principle payments on Debt financing (210,000) - (239,323) (4,900) ----------- ------------ ------------ ------------ Net Cash Flows from Financing Activities - 5,000 141,977 113,902 ----------- ------------ ------------ ------------ Net increase (decrease) in cash 540,373 (241) 3,866 5,440 Cash, beginning of period 9,306 5,440 5,440 - ----------- ------------ ------------ ------------ Cash, end of period $ 549,679 $ 5,198 $ 9,306 $ 5,440 =========== ============ ============ ============ Supplemental Cash Flow Information Cash Paid for: Interest $ 14,262 $ - Taxes $ - $ -
Pacific WebWorks, Inc. Notes to The Financial Statements March 31, 1999 (unaudited), December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies
Pacific WebWorks, Inc., (formerly Utah Webworks, Inc.)(the "Company") was organized in the State of Utah on April 10, 1997. The Company was organized to develop, service and sell computer and internet related software and hardware, and is currently engaged in such activities. The Company's headquarters are located in Salt Lake City, Utah. On January 11, 1999, the Company merged with Pacific Webworks, Inc. a Nevada corporation and changed the name of the Company to Pacific Webworks, Inc.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
e. Provision for Income Taxes
The Company has elected an S-Corp status for income tax purposes, which provides for all taxable income or loss to pass through to the shareholders to be taxed on an individual level. Therefore, there is no provision for income taxes at the corporate level and no deferred tax provision.
f. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. In these financial statements, assets involve extensive reliance on management's estimates. Actual results could differ from those estimates.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had recurring operating losses since inception and is dependent on financing to continue operations. Management has secured a financial commitment through a reverse merger subsequent to the audit date (see subsequent events Note 7). This commitment if fulfilled will provide the Company with sufficient funds to expend business operations in order to generate sufficient revenues to cover anticipated costs. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 3 - Property and Equipment
Property and Equipment consists of the following at December 31, 1998 and 1997:
December 31, 1998 1997 ------------- ------------- Computer Equipment $ 32,990 $ 20,315 Furniture and Fixtures 5,820 1,699 ------------- ------------- Total 38,810 22,014 Less Accumulated Depreciation (15,457) (4,306) ------------- ------------- 23,353 17,708 ============= =============
Depreciation expense for the period ended December 31, 1998 and 1997 was $11,151 and $4,306, respectively.
NOTE 4 - Related Party Transactions
Lamar Taylor an officer and shareholder of the Company, advanced funds to the Company for operating capital in the amounts of $131,300 and $108,800 during the periods ended December 31, 1998 and 1997, respectively. All advances were repaid during 1998 and the balance at December 31, 1997 totaled $103,902.
NOTE 5 - Notes Payable
The Company borrowed $250,000 from Pacific WebWorks, Inc. a public corporation, as a 30 day interest free loan pursuant to a merger agreement which became effective on January 11, 1999. At such time the note payable was converted to equity in the merged entity. (See Note 7).
NOTE 6 - Intangible Technology
On May 7, 1997, the Company entered into an agreement for assignment of a security interest and judgement from a bank for various software service codes and other technology they held. The Company paid $10,000 for the transfer of these software tools and is amortizing them over a five year life. Amortization expense is $1,167 and $2,000 for the years ended December 31, 1997 and 1998, respectively.
NOTE 7 - Subsequent Events
Effective January 11, 1999, the Company entered into an agreement and Plan of Reorganization with Pacific Webworks, Inc., formerly Asphalt Associates, Inc. (a public company). The agreement provides for the merger of the Company into Pacific to be treated as a reverse merger, thus leaving the Company as the accounting survivor. Pursuant to the agreement, Pacific issued 5,000,000 shares of common stock to the shareholders of the Company for all shares of the Company. The management of Pacific resigned and the management and board of the Company filled the vacancy. Pacific has cash in escrow of $750,000 and a note receivable from the Company of $250,000 as its only assets.
NOTE 8 - Unaudited Information
Pacific WebWorks, Inc. (the Company) has elected to omit substantially all footnotes to the financial statements for the three months ended March 31, 1999. The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments which are, in the opinion of management, necessary to properly reflect the results of the three months ended March 31, 1999. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year.
NOTE 9 - Consolidation Policy
The March 31, 1999 unaudited financial statements are consolidated, to include the books of Pacific Webworks, Inc. (Utah) and its parent Pacific Webworks, Inc. (Nevada). All intercompany accounts have been eliminated in the consolidation.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
We have had no change in, or disagreements with, our principal independent accountant during the last two fiscal years.
FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits Exhibit Number Description 2.1 Articles of Merger for Asphalt Associates, Inc., dated January 6, 1999 2.2 Agreement and Plan of Merger between Asphalt Associates, Inc., and Utah WebWorks, Inc., dated January 11, 1999 3.1 Articles of Incorporation of Asphalt Associates, Inc. 3.2 Amended and Restated Bylaws of Pacific WebWorks, Inc. 10.1 Master Service Agreement between Electric Lightware, Inc. and Utah WebWorks, Inc., dated February 2, 1998 10.2 Internet Access Agreement, Addendum to Master Service Agreement between Electric Lightwaew, Inc. and Utah WebWorks, Inc., dated February 2, 1998 10.3 Form of Employment Agreement 10.4 Development, License and Service Agreement between American Home Business Association and Utah WebWorks, Inc., dated April 15, 1999 10.5 Form of Reseller Agreement 10.6 Lease Agreement between Utah WebWorks and Westgate Business Center dated January 11, 1999 10.7 Letter Agreement between Utah WebWorks, Inc. and IntelliPay, Inc. 10.8 Consulting Agreement between Columbia Financial Group and Pacific WebWorks, Inc., dated January 26, 1999 11.1* Statement re computation of earnings per share 12.1* Statement re computation of ratios 27.1 Financial Data Schedule
* TO BE FILED BY AMENDMENT
ARTICLES OF MERGER FOR
ASPHALT ASSOCIATES, INC.
A NEVADA CORPORATION
Pursuant to the provisions of Section 92A.200 of the Nevada Revised Statutes, Asphalt Associates, a Nevada corporation (the "Corporation"), hereby adopts and files the following Articles of Merger as the surviving corporation to the merger of Utah WebWorks, Inc., a Utah corporation ("WebWorks"), with an into the Corporation:
FIRST: The name and place of incorporation of each corporation which is a party to this merger is as follows:
Name Place of Incorporation ---- ---------------------- Asphalt Associates, Inc. Nevada Utah WebWorks, Inc. Utah
SECOND: The Agreement and Plan of Merger (the "Plan") governing the merger between the Corporation and WebWorks has been adopted by the Board of Directors of the Corporation and WebWorks.
THIRD: The approval of the shareholders of the Corporation and WebWorks was required to effectuate the merger. The number of shares of stock outstanding in each of the corporations (and the number of votes entitled to be cast) as of the date of the adoption of the Plan was as follows:
Entity Type of Shares Number of Shares Outstanding ------ -------------- ---------------------------- Asphalt Associates, Inc. Common 1,250,000 Utah WebWorks, Inc. Common 100,000
The number of shares of stock of each corporation which voted for and against the Plan was as follows:
Entity Type of Shares For Against ------ -------------- ------- -------- Asphalt Associates, Inc. Common 650,000 0 Utah WebWorks, Inc. Common 100,000 0
FOURTH: The number of votes cast for the Plan by each voting group entitled to vote was sufficient for approval of the merger by each such voting group.
FIFTH: Following the merger Article I and Article II to the Articles of Incorporation of the surviving corporation shall be amended as follows:
A. Delete Article I in its entirety and substitute in its place the following.
The name of the Corporation is Pacific WebWorks, Inc.
B. Delete Article IV in its entirety and substitute in its place the following:
The amount of the total authorized capital stock of the Corporation is 50,000,000 shares of common stock, par value $.001 per share. Each share of common stock shall have one (1) vote. Such stock may be issued from time to time without any action by the stockholders for such consideration as may be fixed from time to time by the Board of Directors, and shares so issued, the full consideration for which has been paid or delivered, shall be deemed the full paid up stock, and the holder of such shares shall not be liable for any further payment thereof. Said stock shall not be subject to assessment to pay the debts of the Corporation, and no paid-up stock and no stock issued as fully paid shall ever be assessed or assessable by the Corporation.
The Corporation is authorized to issue 50,000,000 shares of common stock, par value $.001 per share.
SIXTH: The complete executed Plan is on file at the registered
office or other place of
business of the Corporation.
SEVENTH: A copy of the Plan will be furnished by the Corporation, on request and without cost, to any shareholder of either corporation which is a party to the merger.
EIGHTH: The merger will be effective upon the filing of the Articles of Merger.
DATED this 6th day of January, 1999.
ASPHALT ASSOCIATES, INC.
a Nevada corporation
By /S/ _____________________________________ James R. Glavas, President By /S/ _____________________________________ Martin L. Smart, Secretary/Treasurer STATE OF UTAH ) )ss. COUNTY OF SALT LAKE)
On the 6th day of January, 1999, personally appeared before me James R. Glavas and Martin L. Smart personally known to me or proved to me on the basis of satisfactory evidence, and who, being by me duly worn, did say that they are the president and Secretary/ Treasurer of Asphalt Associates, Inc., and that said document was signed by them on behalf of said corporation by authority of its bylaws, and said James R. Glavas and Martin L. Smart acknowledged to me that said corporation executed the same.
/S/ -------------------------------------- NOTARY PUBLIC
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Plan") is made this 1st day of January 1999, among Asphalt Associates, Inc., a Nevada corporation ("Asphalt"); Utah WebWorks, Inc., a Utah corporation, any and all of its subsidiaries and fictitious names (hereinafter collectively referred to as "WebWorks") and its shareholders (hereinafter "Shareholders").
Asphalt wishes to acquire one hundred percent (100%) of the issued and outstanding stock of WebWorks for and in exchange for stock of Asphalt, in a stock for stock transaction intending to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The parties intend for this Plan to represent the terms and conditions of such tax-free reorganization, which Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, IT IS AGREED:
Section 1 Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the holders of all the issued and outstanding stock of WebWorks agree to assign, transfer, and deliver to Asphalt, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature or description, all of their shares of WebWorks stock, and Asphalt agrees to acquire such shares on the date thereof, or as soon as practicable thereafter, by issuing and delivering in exchange therefore solely common shares of Asphalt's stock, par value $0.001, in the aggregate of 5,000,000 shares, of the then issued and outstanding shares of Asphalt subject to the provisions of this Plan. Such shares will represent at least fifty percent (50%) of the issued and outstanding shares of Asphalt. Subsequent to the date hereof, the Shareholders shall, upon the surrender of the WebWorks certificates representing their respective beneficial and record ownership one hundred percent (100%) of the issued and outstanding shares of WebWorks to Asphalt, as soon as practicable hereafter, the Shareholders shall be entitled to receive a certificate(s) evidencing shares of the exchanged Asphalt stock as provided for herein. Upon the consummation of the transaction contemplated herein, Asphalt shall merge with WebWorks and become the surviving corporation.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number of Asphalt shares to be issued and delivered pursuant to this Plan shall be appropriately adjusted to take into account any stock split, stock dividend, reverse stock split, recapitalization, or similar change in Asphalt common stock, which may occur between the date of the execution of this Plan and the date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to Asphalt at the closing provided for in Section 2 (the "Closing") the shares of common stock of WebWorks listed opposite their respective names on Exhibit A hereto (the "WebWorks shares") in exchange for shares of the common stock of Asphalt as outlined above in Section 1. 1 hereof (the "Asphalt Stock"). All of such shares of Asphalt stock shall be issued at the closing to the Shareholders, in the numbers shown opposite their respective names in Exhibit "A." The transfer of WebWorks, shares by the Shareholders shall be effected by the delivery to Asphalt at the Closing of certificates representing the transferred shares endorsed in blank or accompanied by stock powers executed in blank, with all signatures guaranteed by a national bank and with all necessary transfer taxes and other revenue stamps affixed and acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from time to time thereafter, the Shareholders shall execute such additional instruments and take such other action as Asphalt may request in order to more effectively sell, transfer and assign clear title and ownership in the WebWorks shares to Asphalt.
Section 2 Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at the law offices of Daniel W. Jackson, Esq. on or before January 29, 1999 or at such other time or place as may be mutually agreed upon in writing by the parties. The Closing may also be accomplished by wire, express mail or other courier service, conference telephone communications or as otherwise agreed by the respective parties or their duly authorized representatives. In any event, the closing of the transactions contemplated by this Plan shall be effected as soon as practicable after all of the conditions contained herein have been satisfied.
2.2 Closing Events. At the Closing, each of the respective parties hereto shall execute, acknowledge and deliver (or shall cause to be executed, acknowledged, and delivered) any agreements, resolutions, rulings, or other instruments required by this Plan to be so delivered at or prior to Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transaction contemplated hereby.
2.3 Mediation Arbitration. If a dispute arises out of or relates to this Plan, or the breach thereof, and if said dispute cannot be settled through direct discussions, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration. Thereafter, any unresolved controversy or claim arising out of or relating this Plan, or breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the Award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
Section 3 Representations, Warranties and Covenants of Asphalt
Asphalt represents and warrants to, and covenants with, the Shareholders and WebWorks as follows:
3.1 Corporate Status. Asphalt is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. Asphalt has full corporate power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business on all material respects as it is now being conducted, and there is no jurisdiction in which the character and location of the assets owned by it, or the nature of the business transacted by it, requires qualification. Included in the Asphalt schedules (defined below) are complete and correct copies of its Articles of Incorporation and Bylaws as in effect on the date hereof. The execution and delivery of this Plan does not, and the consummation of the transactions contemplated hereby will not, violate any provision of Asphalt's Articles of Incorporation or Bylaws. Asphalt has taken all action required by law, its Articles of Incorporation, its Bylaws, or otherwise, to authorize the execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of Asphalt as of the date hereof consists of 20,000,000 common shares, par value $0.001. The common shares of Asphalt issued and outstanding are fully paid, non-assessable shares. There are no outstanding options, warrants, obligations convertible into shares of stock, or calls or any understanding, agreements, commitments, contracts or promises with respect to the issuance of Asphalt's common stock or with regard to any options, warrants or other contractual rights to acquire any of Asphalt's authorized but unissued common shares. There are no issued and outstanding preferred shares. As of the Closing, Asphalt shall have not more than 10,000,000 shares issued and outstanding.
3.3 Financial Statements.
(a) Asphalt hereby warrants and covenants to WebWorks that the audited financial statements dated February 28, 1998 and December 31, 1997 and 1996, fairly and accurately represent the financial condition of Asphalt and that no material change has occurred in the financial condition of Asphalt.
(b) Asphalt hereby warrants and represents that the audited financial statements for the periods set forth in subparagraph (a), supra, fairly and accurately represent the financial condition of Asphalt as submitted heretofore to WebWorks for examination and review.
3.4 Conduct of Business. Asphalt will use its best efforts to maintain and preserve its business organization, employee relationships and goodwill intact, and will not, without the prior written consent of WebWorks, enter into any material commitments except in the ordinary course of business.
Asphalt will conduct itself in the following manner pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be made in the Articles of Incorporation or Bylaws of Asphalt. Except as contemplated in Sections 3.13, 3.14 and 3.15 of this Plan.
(b) Capitalization, etc. Asphalt will not make any change in its authorized or issued shares of my class, declare or pay any dividend or other distribution, or issue, encumber, purchase or otherwise acquire any of its shares of any class.
3.5 Options, Warrants and Rights. Asphalt has no options, warrants or stock appreciation rights related to the authorized but unissued Asphalt common stock. There are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued Asphalt common stock, except options, warrants, calls, or commitments, if any, to which Asphalt is not a party and by which it is not bound.
3.6 Title to Property. Asphalt has good and marketable title to all of its properties and assets, real and personal, proprietary or otherwise, as will be reflected in the balance sheets of Asphalt, and the properties and assets of Asphalt are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise disclosed in its financial statements.
3.7 Litigation. There are no material actions, suits, or proceedings, pending, or, to the best knowledge of Asphalt, threatened by or against or effecting Asphalt at law or in equity, or before any governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind; Asphalt does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, warrant, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable period subsequent thereto, Asphalt and its present management will (i) give to the Shareholders and WebWorks, or their duly authorized representatives, full access, during normal business hours, to all of its books, records, contracts and other corporate documents and properties so that the Shareholders and WebWorks, or their duly authorized representatives, may Inspect them; and (ii) furnish such information concerning the properties and affairs of Asphalt as the Shareholders and WebWorks, or their duly authorized representatives, may reasonably request. Any such request to inspect Asphalt's books shall be directed to Asphalt's counsel, Daniel W. Jackson, at the address set forth herein under Section 10.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no Closing), Asphalt and its representatives will keep confidential any information which they obtain from the Shareholders or from WebWorks concerning its properties, assets and the proposed business operations of WebWorks. If the terms and conditions of this Plan imposed on the parties hereto are not consummated on or before 5:00 p.m. MST on January 29, 1999 or otherwise waived or extended in writing to a date mutually agreeable to the parties hereto, Asphalt will return to WebWorks all written matter with regard to WebWorks obtained in connection with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by this Plan will not result in the breach of any term or provision of, or constitute a default under any indenture, mortgage, deed of trust, or other material agreements or instrument to which Asphalt was or is a party, or to which any of its assets or operations are subject, and will not conflict with any provision of the Articles of Incorporation or Bylaws of Asphalt.
3.11 Corporate Authority. Asphalt has full corporate power and authority to enter into this Plan and to carry out its obligations hereunder and will deliver to the Shareholders and WebWorks, or their respective representatives, at the Closing, a certified copy of resolutions of its Board of Directors authorizing execution of this Plan by its officers and performance thereunder.
3.12 Consent of Shareholders. Asphalt hereby warrants and represents that the Shareholders of Asphalt, being the owners of a majority of the issued and outstanding stock of the Corporation consented in writing to the authorization to execute this Agreement and Plan of Reorganization as between Asphalt and WebWorks pursuant to a stock-for-stock transaction in which Asphalt would acquire one hundred percent of the issued and outstanding shares of WebWorks in exchange for the issuance of a total of 5,000,000 common shares of Asphalt and thereby WebWorks shall merge with and into Asphalt.
3.13 Resignation of Directors. Upon the Closing, the current directors of Asphalt shall submit their resignations.
3.14 Name of the Corporation. At the Closing, the Board of Directors of Asphalt will adopt a resolution to change the name of Asphalt to Pacific WebWorks, Inc.
3.15 Authorized Capital. At the Closing, the Board of Directors of Asphalt will adopt a resolution to increase the authorized capital stock of the Asphalt from 20,000,000 common shares to 50,000,000.
3.16 Special Covenants and Representations Regarding the Exchanged Asphalt Stock. The consummation of this Plan and the transactions herein contemplated include the issuance of the exchanged Asphalt shares to the Shareholders, which constitutes an offer and sale of securities under the Securities Act of 1933, as amended, and applicable states' securities laws. Such transaction shall be consummated in reliance on exemptions from the registration and prospectus requirements of such statutes which depend interlace on the circumstances under which the Shareholders acquire such securities. In connection with the reliance upon exemptions from the registration and prospectus delivery requirements for such transactions, at the Closing, Shareholders shall cause to be delivered to Asphalt a Letter(s) of Investment Intent in the form attached hereto as Exhibit B and incorporated herein by reference.
3.17 Undisclosed or Contingent Liabilities. Asphalt hereby represents and warrants that it has no undisclosed or contingent liabilities which have not been disclosed to WebWorks in writing or in this Agreement or in any Exhibit attached hereto.
3.18 Information. The information concerning Asphalt set forth in this Plan, and the Asphalt schedules attached hereto, are complete and accurate in all material respects and do not contain, or will not contain, when delivered, any untrue statement or a material fact or omit to state a material fact the omission of which would be misleading to WebWorks in connection with this Plan.
3.19 Title and Related Matters. Asphalt has good and marketable title to all of its properties, interests in properties, and assets, real and personal, which are reflected, or will be reflected, in the Asphalt balance sheets, free and clear of any and all liens and encumbrances.
3.20 Contracts or Agreements. Asphalt is not bound by any material contracts, agreements or obligations which it has not already disclosed to WebWorks in writing or in this Agreement or in any Exhibit attached hereto.
3.21 Governmental Authorizations. Asphalt has all licenses, franchises, permits and other government authorizations that are legally required to enable it to conduct its business in all material respects as conducted on the date hereof.
3.22 Compliance with State and Federal Reporting Requirements. Asphalt is not nor has it ever been subject to the reporting requirements of section 12(g) of the Securities Exchange Act of 1934 or 15(d) of the Securities Act of 1933 (15 U.S.C. 78m or 78o (d)) and is not an investment company registered or required to be registered under the Investment Company Act of 1940 (15 U.S.C. 80a-l et seq). There is publicly available information concerning Asphalt as specified in paragraph (a)(5)(i) to (xiv), inclusive, and paragraph (a)(5)(xvi) of Rule I 5c2-1 I under the Securities Exchange Act of 1934.
3.23 Compliance with Laws and Regulations. Asphalt has complied with all applicable statutes and regulations of any federal, state, or other applicable jurisdiction or agency thereof, except to the extent that noncompliance would not materially and adversely effect the business, operations, properties, assets, or condition of Asphalt or except to the extent that noncompliance would not result in the occurrence of any material liability, not otherwise disclosed to WebWorks.
3.23 Approval of Plan. The Board of Directors of Asphalt has authorized the execution and delivery of this Plan by Asphalt and have approved the Plan and the transactions contemplated hereby. Asphalt has full power, authority, and legal right to enter into this Plan and to consummate the transactions contemplated hereby.
3.24 Investment Intent. Asphalt is acquiring the WebWorks shares to be transferred to it under this Plan for the purpose of merging with WebWorks and not with a view to the sale or distribution thereof, and Asphalt shall cancel the WebWorks shares upon the completion of the merger.
3.25 Unregistered Shares and Access to Information. Asphalt understands that the offer and sale of the WebWorks shares have not been registered with or reviewed by the Securities and Exchange Commission under the Securities Act of 1933, as amended, or with or by any state securities law administrator, and no federal, state securities law administrator has reviewed or approved any disclosure or other material concerning WebWorks or the WebWorks shares. Asphalt has been provided with and reviewed all information concerning WebWorks, the WebWorks shares as it has considered necessary or appropriate as a prudent and knowledgeable investor to enable it to make an informed investment decision concerning the WebWorks shares. Asphalt has made an investigation as to the merits and risks of its acquisition of the WebWorks Shares and has had the opportunity to ask questions of, and has received satisfactory answers from, the officers and directors of WebWorks concerning WebWorks, the WebWorks shares and related matters, and has had an opportunity to obtain additional information necessary to verify the accuracy of such information and to evaluate the merits and risks of the proposed acquisition of the WebWorks shares.
3.26 Obligations. Asphalt is not aware of any outstanding obligations to any of its employees or consultants as of the Closing.
3.27 Asphalt Schedules. Asphalt has delivered to WebWorks the following items listed below, hereafter referred to as the "Asphalt Schedules", which is hereby incorporated by reference and made a part hereof. A certification executed by a duly authorized officer of Asphalt on or about the date within the Plan is executed to certify that the Asphalt Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Financial statements;
(c) Shareholder list;
(d) Resolution of Directors approving Plan;
(e) Officers' Certificate as required under Section 6.2 of the Plan;
(f) Opinion of counsel as required under Section 6.4 of the Plan;
(g) Certificate of Good Standing;
(h) Consent of Shareholders approving Plan.
Section 4 Representations, Warranties and Covenants of WebWorks
WebWorks represents and warrants to, and covenants with, the Shareholders and Asphalt as follows:
4.1 Corporate Status. WebWorks is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah incorporated on April 10, 1997. WebWorks has full corporate power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business on all material respects as it is now being conducted, and there is no jurisdiction in which the character and location of the assets owned by it, or the nature of the business transacted by it, requires qualification. Included in the WebWorks schedules (defined below) are complete and correct copies of its Articles of Incorporation and Bylaws as in effect on the date hereof. The execution and delivery of this Plan does not, and the consummation of the transactions contemplated hereby will not, violate any provision of WebWorks's Articles of Incorporation or Bylaws. WebWorks has taken all action required by law, its Articles of Incorporation, its Bylaws, or otherwise, to authorize the execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of WebWorks as of the date hereof consists of 100,000 common shares. As of the date hereof all common shares of WebWorks issued and outstanding are fully paid, non-assessable shares. There are no outstanding options, warrants, obligations convertible into shares of stock, or calls or any understanding, agreements, commitments, contracts or promises with respect to the issuance of WebWorks's common stock or with regard to any options, warrants or other contractual rights to acquire any of WebWorks's authorized but unissued common shares.
4.3 Conduct of Business. WebWorks will use its best efforts to maintain and preserve its business organization, employee relationships and goodwill intact, and will not, without the prior written consent of Asphalt, enter into any material commitments except in the ordinary course of business.
WebWorks agrees that WebWorks will conduct itself in the following manner pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be made in the Certificate of Incorporation or Bylaws of WebWorks.
(b) Capitalization. etc. WebWorks will not make any change in its authorized or issued shares of any class, declare or pay any dividend or other distribution, or issue, encumber, purchase or otherwise acquire any of its shares of any class.
4.4 Title to Property. WebWorks has good and marketable title to all of its properties and assets, real and personal, proprietary or otherwise, as will be reflected in the balance sheets of WebWorks, and the properties and assets of WebWorks are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise disclosed in its financial statements.
4.5 Litigation. There are no material actions, suits, or proceedings, pending, or, to the best knowledge of WebWorks, threatened by or against or effecting WebWorks at law or in equity, or before any governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind; WebWorks does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, warrant, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.
4.6 Books and Records. From the date hereof, and for any reasonable period subsequent thereto, WebWorks and its present management will (i) give to Asphalt, or their duly authorized representatives, full access, during normal business hours, to all of its books, records, contracts and other corporate documents and properties so that Asphalt, or their duly authorized representatives, may inspect them; and (ii) furnish such information concerning the properties and affairs of WebWorks as the Shareholders and WebWorks, or their duly authorized representatives, may reasonably request. Any such request to inspect WebWorks's books shall be directed to WebWorks's representative, at the address set forth herein under Section 10.4 Notices.
4.7 Confidentiality. Until the Closing (and thereafter if there is no Closing), WebWorks and its representatives will keep confidential any information which they obtain from the Shareholders or from WebWorks concerning its properties, assets and the proposed business operations of WebWorks. If the terms and conditions of this Plan imposed on the parties hereto are not consummated on or before 5:00 p.m. MST on January 29, 1999 or otherwise waived or extended in writing to a date mutually agreeable to the parties hereto, WebWorks will return to Asphalt all written matter with regard to Asphalt obtained in connection with the negotiations or consummation of this Plan.
4.8 Investment Intent. The Shareholders represent and covenant that they are acquiring the unregistered and restricted common shares of Asphalt to be delivered to them under this Plan for investment purposes and not with a view to the subsequent sale or distribution thereof, and as agreed, supra, the Shareholders, their successors and assigns agree to execute and deliver to Asphalt on the date of Closing or no later than the date on which the restricted shares are issued and delivered to the Shareholders, their assigns, or designees, an Investment Letter similar in form to that attached hereto as Exhibit B.
4.9 Unregistered Shares and Access to Information. WebWorks and the Shareholders understand that the offer and sale of Asphalt shares to be exchanged for the WebWorks shares have not been registered with or reviewed by the securities and Exchange Commission under the Securities Act of 1933, as amended, or with or by any state securities law administrator, and no federal or state securities law administrator has reviewed or approved any disclosure or other material facts concerning Asphalt or Asphalt stock. WebWorks and the Shareholders have been provided with and reviewed all information concerning Asphalt and Asphalt shares, to be exchanged for the WebWorks shares as they have considered necessary or appropriate as prudent and knowledgeable investors to enable them to make informed investment decisions concerning the Asphalt shares, to be exchanged for the WebWorks shares. WebWorks and the Shareholders have made an investigation as to the merits and risks of their acquisition of the Asphalt shares, to be exchanged for the WebWorks shares and have had the opportunity to ask questions of, and have received satisfactory answers from, the officers and directors of Asphalt concerning Asphalt shares to be exchanged for the WebWorks shares and related matters, and have had an opportunity to obtain additional information necessary to verify the accuracy of such information and to evaluate the merits and risks of the proposed acquisition of the Asphalt shares to be exchanged for the WebWorks shares.
4.10 Title to Shares. The Shareholders are the beneficial and record owners, free and clear of any liens and encumbrances, of whatever kind or nature, of all of the shares of WebWorks of whatever class or series, which the Shareholders have contracted to exchange.
(a) Set forth in the WebWorks Schedules are copies or descriptions of all material contracts which written or oral, all agreements, franchises, licenses, or other commitments to which WebWorks is a party or by which WebWorks or its properties are bound.
(b) Except as may be set forth in the WebWorks Schedules, WebWorks is not a party to any contract, agreement, corporate restriction, or subject to any judgment, order, writ, injunction, decree, or award, which materially and adversely effect the business, operations, properties, assets, or conditions of WebWorks.
(c) Except as set forth in the WebWorks Schedules, WebWorks is not a party to any material oral or written (i) contract for employment of any officer which is not terminable on 30 days (or less) notice; (ii) profit sharing, bonus, deferred compensation, stock option, severance, or any other retirement plan of arrangement covered by Title IV of the Employee Retirement Income Security Act, as amended, or otherwise covered; (iii) agreement providing for the sale, assignment or transfer of any of its rights, assets or properties, whether tangible or intangible, except sales of its property in the ordinary course of business with a value of less than $2,000; or (iv) waiver of any right of any value which in the aggregate is extraordinary or material concerning the assets or properties scheduled by WebWorks, except for adequate value and pursuant to contract. WebWorks has not entered into any material transaction which is not listed in the WebWorks Schedules or reflected in the WebWorks financial statements.
4.12 Material Contract Defaults. WebWorks is not in default in any material respect under the terms of any contract, agreement, lease or other commitment which is material to the business, operations, properties or assets, or condition of WebWorks, and there is no event of default or event which, with notice of lapse of time or both, would constitute a default in any material respect under any such contract, agreement, lease, or other commitment in respect of which WebWorks has not taken adequate steps to prevent such default from occurring, or otherwise compromised, reached a satisfaction of, or provided for extensions of time in which to perform under any one or more contract obligations, among others.
4.13 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or other
material agreement or instrument to which WebWorks was or is a party, or to
which any of its assets or operations are subject, and will not conflict with
any provision of the Articles of Incorporation or Bylaws of WebWorks.
4.14 Governmental Authorizations. WebWorks is in good standing in the State of Utah. Except for compliance with federal and state securities laws, no authorization, approval, consent or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution and delivery by WebWorks of this Plan and the consummation by WebWorks of the transactions contemplated hereby.
4.15 Compliance with Laws and Regulations. WebWorks has complied with all applicable statutes and regulations of any federal, state, or other applicable jurisdiction or agency thereof, except to the extent that noncompliance would not materially and adversely effect the business, operations, properties, assets, or condition of WebWorks or except to the extent that noncompliance would not result in the occurrence of any material liability, not otherwise disclosed to Asphalt.
4.16 Approval of Plan. The Board of Directors of WebWorks have authorized the execution and delivery of this Plan by WebWorks and have approved the Plan and the transactions contemplated hereby. WebWorks has full power, authority, and legal right to enter into this Plan and to consummate the transactions contemplated hereby.
4.17 Information. The information concerning WebWorks set forth in this Plan, and the WebWorks Schedules attached hereto, are complete and accurate in all material respects and do not contain, or will not contain, when delivered, any untrue statement or a material fact or omit to state a material fact the omission of which would be misleading to Asphalt in connection with this Plan.
4.18 WebWorks Schedules. WebWorks has delivered to Asphalt the following items listed below, hereafter referred to as the "WebWorks Schedules", which is hereby incorporated by reference and made a part hereof. A certification executed by a duly authorized officer of WebWorks on or about the date within the Plan is executed to certify that the WebWorks Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements;
(c) Resolutions of Board of Directors approving Plan;
(d) Consent of Shareholders approving Plan;
(e) A list of key employees, including current compensation, with notation as to job description and whether or not such employee is subject to written contract, and if subject to a contract or employment agreement, a copy of the same;
(f) A schedule showing the name and location of each bank or other institution with which WebWorks has an account and the names of the authorized persons to draw thereon or having access thereto;
(g) A schedule setting forth the shareholders, together with the number of shares owned beneficially or of record by each (also attached as Exhibit A);
(h) A schedule setting forth all material contracts
(i) Officers' Certificate as required by Section 7.2 of the Plan;
(j) Schedule of all debts, mortgages, security interests, pledges, liens, encumbrances, claims and the like;
(k) Certificate of Good Standing
Section 5 Special Covenants
5.1 WebWorks Information Incorporated in Asphalt's Reports. WebWorks represents and warrants to Asphalt that all the information furnished under this Plan shall be true and correct in all material respects and that there is no omission of any material fact required to make the information stated not misleading. WebWorks agrees to indemnify and hold Asphalt harmless, including each of its Directors and Officers, and each person, if any, who controls such party, under any applicable law from and against any and all losses, claims, damages, expenses or liabilities to which any of them may become subject under applicable law, or reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based on any untrue statement, alleged untrue statement, or omission of a material fact contained in such information delivered hereunder.
5.2 Asphalt Information Incorporated in WebWorks's Reports. Asphalt represents and warrants to WebWorks that all the information furnished under this Plan shall be true and correct in all material respects and that there is no omission of any material fact required to make the information stated not misleading. The current officers and directors of Asphalt agree to indemnify and hold WebWorks harmless, including each of its Directors and Officers, and each person, if any, who controls such party, under any applicable law from and against any and all losses, claims, damages, expenses or liabilities to which any of them may become subject under applicable law, or reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based on any untrue statement, alleged untrue statement, or omission of a material fact contained in such information delivered hereunder.
5.3 Special Covenants and Representations Regarding the Exchanged Asphalt Stock. The consummation of this Plan and the transactions herein contemplated, including the issuance of the Asphalt shares in exchange for one hundred percent (100%) of the issued and outstanding shares of WebWorks to the Shareholders constitutes the offer and sale of securities under the Securities Act and the applicable state statutes, which depend, inter alia, on the circumstances under which the Shareholders acquire such securities. Asphalt intends to rely on the exemption of the registration provision of Section 5 of the Securities Act as provided for under Section 4.2 of the Securities Act of 1933, which states "transactions not involving a public offering", among others. Each Shareholder upon submission of his WebWorks shares and the receipt of the Asphalt shares exchanged therefor, shall execute and deliver to Asphalt a letter of investment intent to indicate, among other representations, that the Shareholder is exchanging the WebWorks shares for Asphalt shares for investment purposes and not with a view to the subsequent distribution thereof. A proposed Investment Letter is attached hereto as Exhibit B and incorporated herein by reference for the general use by the Shareholders, as they may determine.
5.4 Action Prior to Closing. Upon the execution hereof until the Closing Date, and the completion of the consolidated audited financials,
(a) WebWorks and Asphalt will (i) perform all of its obligations under material contracts, leases, insurance policies and/or documents relating to its assets and business; (ii) use its best efforts to maintain and preserve its business organization intact, to retain its key employees, and to maintain its relationship with existing potential customers and clients; and (iii) fully comply with and perform in all material respects all duties and obligations imposed on it by all federal and state laws and all rules, regulations, and orders imposed by all federal or state governmental authorities.
(b) Neither WebWorks nor Asphalt will (i) make any change in its Articles of Incorporation or Bylaws except and unless as contemplated pursuant to Section 3 of this Plan; (ii) enter into or amend any contract, agreement, or other instrument of the types described in the parties' schedules, except that a party may enter into or amend any contract or other instrument in the ordinary course of business involving the sale of goods or services, provided that such contract does not involve obligations in excess of $ 10,000.
Section 6 Conditions Precedent to Obligations of WebWorks and the Shareholders
All obligations of WebWorks and the Shareholders under this Plan are subject to the satisfaction, on or before the Closing date, except as otherwise provided for herein, or waived or extended in writing by the parties hereto, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties made by Asphalt in this Plan were true when made and shall be true as of the Closing date (except for changes therein permitted by this Plan) with the same force and effect as if such representations and warranties were made at and as of the Closing date; and, Asphalt shall have performed and complied with all aspects of this Agreement, unless waived or extended in writing by the parties hereto. WebWorks shall have been furnished with a certificate, signed by a duly authorized executive officer of Asphalt and dated the Closing date, to the foregoing effect.
6.2 Officers' Certificate. WebWorks and the Shareholders shall have been furnished with a certificate dated the Closing date and signed by a duly authorized executive officer of Asphalt, to the effect that no litigation, proceeding, investigation, claim, demand or inquiry is pending, or to the best knowledge of Asphalt, threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Plan, or which might result in any material adverse change in the assets, properties, business, or operations of Asphalt, and that this Agreement has been complied with in all material respects.
6.3 No Material Adverse Change. Prior to the Closing date, there shall have not occurred any material adverse change in the financial condition, business or operations of Asphalt, nor shall any event have occurred which, with lapse of time or the giving of notice or both, may cause or create any material adverse change in the financial condition, business or operations of Asphalt, except as otherwise disclosed to WebWorks.
6.4 Opinion of Counsel of Asphalt. Asphalt shall furnish to WebWorks and the Shareholders an opinion dated as of the Closing date and in form and substance satisfactory to WebWorks and the Shareholders to the effect that:
(a) Asphalt is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, and with all requisite corporate power to perform its obligations under this Plan.
(b) The business of Asphalt, as presently conducted, including, upon the consummation hereof, the ownership of all of the issued and outstanding shares of WebWorks, does not require it to register it to do business as a foreign corporation on any jurisdiction other than under the jurisdiction of its Articles of Incorporation or Bylaws and Asphalt has complied to the best of its knowledge in all material respects with all the laws, regulations, licensing requirements and orders applicable to its business activities and has filed with the proper authorities, including the Department of Commerce, Division of Corporations, and Secretary of State for the State of Nevada, all statements and reports required to be filed.
(c) The authorized and outstanding capital stock of Asphalt as set forth in Section 3.2 above, and all issued and outstanding shares have been duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings pending or threatened against Asphalt of any court or before or by any governmental body which might materially effect the business of Asphalt or the financial condition of Asphalt as a whole and no such claims, suits or legal proceedings are contemplated by governmental. authorities against Asphalt.
(e) To the best knowledge of such counsel, the consummation of the transactions contemplated by this Plan will not violate or contravene the provisions of the Certificate of Incorporation or Bylaws of Asphalt, or any contract, agreement, indenture, mortgage, or order by which Asphalt is bound.
(f) This Plan constitutes a legal, valid and binding obligation of Asphalt enforceable in accordance with its terms, subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, or similar law effecting creditors' rights generally and general principles of equity (regardless of whether such principles are considered in a proceeding in equity or law).
(g) The execution and delivery of this Plan and the consummation of the transactions contemplated hereby have been ratified by a majority of the Shareholders of Asphalt and have been duly authorized by its Board of Directors.
(h) Asphalt has not, nor will it undertake any action, the result of which would endanger the tax-free nature of the Plan.
6.5 Good Standing. WebWorks shall have received a Certificate of Good Standing from the State of Nevada, dated within sixty (60) days prior to Closing, but in no event later than ten days subsequent to the execution hereof certifying that Asphalt is in good standing as a corporation in the State of Nevada.
6.6 Other Items. WebWorks and the Shareholders shall have received such further documents, certifications or instruments relating to the transactions contemplated hereby as WebWorks and the Shareholders may reasonably request.
Section 7 Conditions Precedent to Obligations of Asphalt
All obligations of Asphalt under this Plan are subject, at its option, to the fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties made by WebWorks and the Shareholders under this Plan were true when made and shall be true as Of the Closing date (except for changes therein permitted by this Plan) with the same force and effect as if such representations and warranties were made at and as of the Closing date; and, Asphalt shall have performed and complied with all aspects of this Agreement, unless waived or extended in writing by the parties hereto. Asphalt shall have been furnished with a certificate, signed by a duly authorized executive officer of WebWorks and dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. Asphalt shall have been furnished with a certificate dated the Closing date and signed by a duly authorized executive officer of WebWorks, to the effect that no litigation, proceeding, investigation, claim, deed, or inquiry is pending, or to the best knowledge of WebWorks, threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Plan, or which might result in any material adverse change in the assets, properties, business, or operations of WebWorks, and that this Agreement has been complied with in all material respects.
7.3 No Material Adverse Change. Prior to the Closing date, there shall have not occurred any material adverse change in the financial condition, business or operations of Asphalt, nor shall any event have occurred which, with lapse of time or the giving of notice or both, may cause or create any material adverse change in the financial condition, business or operations of WebWorks, except as otherwise disclosed to Asphalt.
7.4 Good Standing. Asphalt shall have received a Certificate of Good Standing from the State of Utah, dated within sixty (60) days prior to Closing, but in no event later than ten days subsequent to the execution hereof certifying that WebWorks is in good standing as a corporation in the State of Utah.
7.5 Dissenters' Rights Waived. Shareholders representing at one hundred percent (100%) of the issued and outstanding shares of WebWorks, and each of them, have agreed and hereby waive any dissenters' rights, if any, under the laws of the State of Utah in regards to any objection to this Plan as outlined herein and otherwise consent to and agree and authorize the execution and consummation of the within Plan in accordance to the terms and conditions of this Plan by the management of WebWorks.
7.6 Other Items. Asphalt shall have received such further documents, certifications or instruments relating to the transactions contemplated hereby as Asphalt may reasonably request.
7.7 Execution of Investment Letter. The Shareholders shall have delivered copies of Exhibit B to Asphalt.
Section 8 Termination
8.1 Termination by WebWorks or the Shareholders. This Plan may be terminated at any time prior to the Closing date by action of WebWorks or the Shareholders, if Asphalt shall fall to comply in any material respect with any of the covenants or agreements contained in this Plan, or if any of its representations and warranties contained herein shall be inaccurate in any material respect.
8.2 Termination by Asphalt. This Plan may be terminated at any time prior to the Closing date by action of Asphalt if WebWorks shall fail to comply in any material respect with any of the covenants or agreements contained in this Plan, or if any of its representations or warranties contained herein shall be inaccurate in any material respect.
8.3 Termination by Mutual Consent.
(a) This Plan may be terminated at any time prior to the Closing date by mutual consent of Asphalt, expressed by action of its Board of Directors, WebWorks or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan shall be of no further force and effect and no obligation, right or liability shall arise hereunder. Each party shall bare its own costs in connection herewith.
Section 9 Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Lamar Taylor, as their agent and attorney in fact (the "Shareholders' Representative") with full power and authority until the Closing to execute, deliver and receive on their behalf all notices, requests and other communications hereunder; to fix and alter on their behalf the date, time and place of the Closing; to waive, amend or modify any provisions of this Plan and to take such other action on their behalf in connection with this Plan, the Closing and the transactions contemplated hereby as such agent deems appropriate; provided, however, that 'no such waiver, amendment or modification may be made if it would decrease the number of shares to be issued to the Shareholders under Section I hereof or increase the extent of their obligation to Asphalt hereunder, unless agreed in writing by the Shareholders.
Section 10 General Provisions
10.1 Further Assurances. At any time, and from time to time, after the Closing date, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of the Plan.
10.2 Payments of Costs and Fees. Asphalt and WebWorks shall each bear their own costs and expenses, including any legal and accounting fees in connection with the negotiation, execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of Closing, or as soon thereafter as practicable, WebWorks and the Shareholders shall cause to have promptly prepared and disseminated a WebWorks release concerning the execution and consummation of the Plan, such press release and communication to be released promptly and within the time required by the laws, rules and regulations as promulgated by the United States Securities and Exchange Commission, and concomitant therewith to cause to be prepared a full and complete letter to Asphalt's shareholders which shall contain information required by Regulation 240.14f-1 as promulgated under Section 14(f) as mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or permitted hereunder shall be sufficiently given if personally delivered, sent by registered mail, or certified mail, return receipt requested, postage prepaid, or by facsimile transmission addressed to the following parties hereto or at such other addresses as follows:
If to Asphalt: Asphalt Associates, Inc. 525 South 300 East Salt Lake City, Utah 84111 With a copy to: Daniel W. Jackson 525 South 300 East Salt Lake City, Utah 84111 If to WebWorks: Utah WebWorks, Inc. 180 South 300 West, Suite 220 Salt Lake City, Utah 84101 With a copy to: James Craig Carmen 311 South State Street, Suite 380 Salt Lake City, Utah 84111
or at such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given as of the date so delivered, mailed, sent by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement between the parties relating to the subject matter hereof, including any previous letters of intent, understandings, or agreements between Asphalt, WebWorks and the Shareholders with respect to the subject matter hereof, all of which are hereby merged into this Plan, which alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. Excepting the foregoing agreement, there are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and enforced in accordance with the laws of the State of Nevada, except to the extent preempted by federal law, in which event (and to that extent only) federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. WebWorks and Asphalt acknowledge, however, that each are being represented by their own tax advisors in connection with this transaction, and neither has made any representations or warranties to the other with respect to treatment of such transaction or any part or effect thereof under applicable tax laws, regulations or interpretations; and no attorney's opinion or tax revenue ruling has been obtained with respect to the tax consequences of the transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action or suit to enforce this Plan, or secure relief from any default hereunder or breach hereof, the nonprevailing party or parties shall reimburse the prevailing party or parties for all costs, including reasonable attorney fees, incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Plan may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which together shall constitute one and the same instruments..
10.11 Headings. The section and subsection headings in this Plan are inserted for convenience only and shall not effect in any way the meaning or interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly provided herein, all terms and provisions of this Plan shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, beneficiaries, personal and legal representatives and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of Reorganization effective the day and year first set forth above.
ASPHALT ASSOCIATES, INC.
/s/ ------------------------- By: /s/ ----------------------------- Its President UTAH WEBWORKS, INC. Attest: /s/ ------------------------- By: /s/ ----------------------------- Its President
LVT INVESTMENTS, LLC
/s/ ------------------------- By: /s/ ----------------------------- Lamar Taylor, Member NET STRATEGIC INVESTMENTS, LLC Attest: /s/ ------------------------- By: /s/ ----------------------------- Milton R. Larsen, Member Attest: /s/ ------------------------- By: /s/ ----------------------------- Allen Oepping Attest: /s/ ------------------------- By: /s/ ----------------------------- Eric Schmitter Attest: /s/ ------------------------- By: /s/ ----------------------------- Benjamin Black Attest: /s/ ------------------------- By: /s/ ----------------------------- Robyn Erkelens
SHAREHOLDERS OF UTAH WEBWORKS, INC.
Name Ownership Percentage ---- -------------------- LVT Investments, LLC 49.5% Net Strategic Investments, LLC 14.5% Allan Oepping 14.5% Eric Schmitter 10.0% Benjamin Black 10.0% Robyn Erkelens 1.5%
ARTICLES OF INCORPORATION
ASPHALT ASSOCIATES, INC.
I. NAME. The name of the corporation is:
ASPHALT ASSOCIATES, INC.
II. PRINCIPAL OFFICE. The location of the principal office of this corporation within the State of Nevada is located at:
c/o Kay Carter
1372 Idaho Street
Elko, NV 89801
III. PURPOSE. The purpose for which this corporation is formed is to engage in any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK. The amount of the total authorization of capital stock of the corporation shall be TWENTY THOUSAND DOLLARS ($20,000.00), consisting of twenty million (20,000,000) shares of common stock with a par value of ONE TENTH OF ONE CENT ($0.001) per share.
V. INCORPORATOR. The name and address of the incorporator signing these Articles of Incorporation is as follows:
James R. Glavas
2920 South ____________ Salt Lake City, UT 84115
(Initial number of shareholders will be less than three)
VI. DIRECTORS. The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be specified by the by-laws of the corporation; provided, however, the number of directors shall not be reduced to less than one (1).
The name and address of the Director comprising the first Board of Directors is as follows:
James R. Glavas
2920 South ____________ Salt Lake City, UT 84115
(Initial number of shareholders will be less than three)
The name and residence address within the state of Nevada of this Corporation's initial resident agent shall be
1372 Idaho Street
Elko, NV 89801
VII. STOCK NON-ASSESSABLE. The capital stock or holder thereof, after the amount of the subscription price has been paid in, shall not be subject to any assessment whatsoever to pay the debts of the corporation.
VIII. TERM OF EXISTENCE. This corporation shall have perpetual existence.
IV. CUMULATIVE VOTING. No cumulative voting shall be permitted in the election of Directors.
X. PRE-EMPTIVE RIGHTS. Stockholders shall not be entitled to pre-emptive rights.
THE UNDERSIGNED, being the incorporator hereinbefore named for the purpose of forming a corporation pursuant to the General Corporation Laws of the state of Nevada, does make and file these Articles of Incorporation, hereby declaring and certifying the facts stated are true, and accordingly has hereunto set his hand this 9th day of May, 1987.
/S/ --------------------------------------- JAMES R. GLAVAS
STATE OF UTAH )
COUNTY OF SALT LAKE)
I, Ben Russo, a Notary Public, hereby certify that on the 9th day of May, 1987, James R. Glavas personally appeared before me who, being duly sworn, severally declared that he is the person who signed the foregoing document as incorporator and that the statements therein contained are true.
DATED this 9th day of May, 1987.
/S/ --------------------------------------- Notary Public Residing in Salt Lake County, Utah My commission expires: Feb. 10, 1989 --------------------
AMENDED AND RESTATED
PACIFIC WEBWORKS, INC.
1.1 Business Office. The principal office of the corporation shall be located at any place either within or outside the State of Nevada as designated in the corporation's most recent document on file with the Nevada Secretary of State, Division of Corporations. The corporation may have such other offices, either within or without the State of Nevada as the board of directors may designate or as the business of the corporation may require from time to time.
1.2 Registered Office. The registered office of the corporation shall be located within the State of Nevada and may be, but need not be, identical with the principal office. The address of the registered office may be changed from time to time.
2.1 Annual Shareholder Meeting. The annual meeting of the shareholders shall be held on the 1st day of March in each year, beginning with the year 1999 at the hour of 10:00 a.m., or at such other time on such other day within such month as shall be fixed by the board of directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Nevada, such meeting shall be held on the next succeeding business day.
2.2 Special Shareholder Meeting. Special meetings of the shareholders, for any purpose or purposes described in the meeting notice, may be called by the president, or by the board of directors, and shall be called by the president at the request of the holders of not less than one-fourth of all outstanding votes of the corporation entitled to be cast on any issue at the meeting.
2.3 Place of Shareholder Meeting. The board of directors may designate any place, either within or without the State of Nevada, as the place of meeting for any annual or any special meeting of the shareholders, unless by written consent, which may be in the form of waivers of notice or otherwise, all shareholders entitled to vote at the meeting designate a different place, either within or without the State of Nevada, as the place for the holding of such meeting.
2.4 Notice of Shareholder Meeting. Written notice stating the date,
time, and place of any annual or special shareholder meeting shall be delivered
not less than 10 nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the board of
directors, or other persons calling the meeting, to each shareholder of record
entitled to vote at such meeting and to any other shareholder entitled by the
Nevada Revised Statutes (the "Statutes") or the articles of incorporation to
receive notice of the meeting. Notice shall be deemed to be effective at the
earlier of: (1) when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid; (2) on the date shown on the return
receipt if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee; (3) when received; or
(4) 3 days after deposit in the United States mail, if mailed postpaid and correctly addressed to an address other than that shown in the corporation's current record of shareholders.
If any shareholder meeting is adjourned to a different date, time or place, notice need not be given of the new date, time and place, if the new date, time and place is announced at the meeting before adjournment. But if the adjournment is for more than 30 days or if a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of the previous paragraph, to those persons who are shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by the Statutes, the articles of. incorporation, or these bylaws, by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice) for inclusion in the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting because of lack of notice or effective notice; and
(b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
2.6 Fixing of Record Date. For the purpose of determining shareholders of any voting group entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment Of any distribution, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a date as the record date. Such record date shall not be more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is so fixed by the board for the determination of shareholders entitled to notice of, or to vote at a meeting of shareholders, the record date for determination of such shareholders shall be at the close of business on the day the first notice is delivered to shareholders. If no record date is fixed by the board for the determination of shareholders entitled to receive a distribution, the record date shall be the date the board authorizes the distribution. With respect to actions taken in writing without a meeting, the record date shall be the date the first shareholder signs the consent.
When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof unless the board of directors fixes a new record date which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
2.7 Shareholder List. After fixing a record date for a shareholder meeting, the corporation shall prepare a list of the names of its shareholders entitled to be given notice of the meeting. The shareholder list must be available for inspection by any shareholder, beginning on the earlier of 10 days before the meeting for which the list was prepared or 2 business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, and any adjournment thereof. The list shall be available at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting is to be held.
2.8 Shareholder Quorum and Voting Requirements.
2.8.1 Quorum. Except as otherwise required by the Statutes or the articles of incorporation, a majority of the outstanding shares of the corporation, represented by person or by proxy, shall constitute a quorum at each meeting of the shareholders. If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or the Statutes require a greater number of affirmative votes.
2.8.2 Voting of Shares. Unless otherwise provided in the articles of incorporation or these bylaws, each outstanding share, regardless of class, is entitled to one vote upon each matter submitted to a vote at a meeting of shareholders.
2.9 Quorum and Voting requirements of Voting Groups. If the articles of incorporation or the Statutes provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group.
Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.
Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or the Statutes provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.
If the articles of incorporation or the Statutes provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter.
If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or the Statutes require a greater number of affirmative votes.
2.10 Greater Quorum or Voting Requirements. The articles of incorporation may provide for a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is provided for by these bylaws. An amendment to the articles of incorporation that adds, changes, or deletes a greater quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy which is executed in writing by the shareholder or which is executed by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution unless otherwise provided in the proxy. All proxies are revocable unless they meet specific requirements of irrevocability set forth in the Statutes. The death or incapacity of a voter does not invalidate a proxy unless the corporation is put on notice. A transferee for value who receives shares subject to an irrevocable proxy, can revoke the proxy if he had no notice of the proxy.
2.12 Corporation's Acceptance of Votes.
2.12.1 If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder.
2.12.2 If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder if:
(a) the shareholder is an entity as defined in the Statutes and the name signed purports to be that of an officer or agent of the entity;
(b) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(c) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment, or proxy appointment revocation; or
(d) the name signed purports to be that of a pledgee, beneficial owner, or attomey-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation; or
(e) two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the coowners and the person signing appears to be acting on behalf of all co-tenants or fiduciaries.
2.12.3 If shares are registered in the names of two or more persons, whether fiduciaries, members of a partnership, co-tenants, husband and wife as community property, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxy holders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation or other officer or agent entitled to tabulate votes is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:
(a) if only one votes, such act binds all;
(b) if more than one votes, the act of the majority so voting bind all;
(c) if more than one votes, but the vote is evenly split on any particular matter, each fraction may vote the securities in question proportionately.
If the instrument so filed or the registration of the shares shows that any tenancy is held in unequal interests, a majority or even split for the purpose of this Section shall be a majority or even split in interest.
2.12.4 The corporation is entitled to reject a vote, consent, waiver, proxy appointment or proxy appointment revocation if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.
2.12.5 The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, proxy appointment or proxy appointment revocation in good faith and in accordance with the standards of this Section are not liable in damages to the shareholder for the consequences of the acceptance or rejection.
2.12.6 Corporate action based on the acceptance or rejection of a vote, consent, waiver, proxy appointment or proxy appointment revocation under this Section is valid unless a court of competent jurisdiction determines otherwise.
2.13 Action by Shareholders Without a Meeting.
2.13.1 Written Consent. Any action required or permitted to betaken at a meeting of the shareholders may be taken without a meeting and without prior notice if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote with respect to the subject matter thereof were present and voted. Action taken under this Section has the same effect as action taken at a duly called and convened meeting of shareholders and may be described as such in any document.
2.13.2 Post-Consent Notice. Unless the written consents of all shareholders entitled to vote have been obtained, notice of any shareholder approval without a meeting shall be given at least ten days before the consummation of the action authorized by such approval to (1) those shareholders entitled to vote who did not consent in writing, and (ii) those shareholders not entitled to vote. Any such notice must be accompanied by the same material that is required under the Statutes to be sent in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
2.13.3 Effective Date and Revocation of Consents. No action taken pursuant to this Section shall be effective unless all written consents necessary to support the action are received by the corporation within a sixty-day period and not revoked. Such action is effective as of the date the last written consent is received necessary to effect the action, unless all of the written consents specify an earlier or later date as the effective date of the action. Any shareholder giving a written consent pursuant to this Section may revoke the consent by a signed writing describing the action and stating that the consent is revoked, provided that such writing is received by the corporation prior to the effective date of the action.
2.13.4 Unanimous Consent for Election of Directors. Notwithstanding .subsection (a), directors may not be elected by written consent unless such consent is unanimous by all shares entitled to vote for the election of directors.
2.14 Voting for Directors. Unless otherwise provided in the articles of incorporation, every shareholder entitled to vote for the election of directors has the right to cast, in person or by proxy, all of the votes to which the shareholder's shares are entitled for as many persons as there are directors to be elected and for whom election such shareholder has the right to vote. Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
3.1 General Powers. Unless the articles of incorporation have dispensed with or limited the authority of the board of directors by describing who will perform some or all of the duties of a board of directors, all corporate powers shall be exercised by or under the authority, and the business and affairs of the corporation shall be managed under the direction, of the board of directors.
3.2 Number, Tenure and Qualification of Directions. The authorized number of directors shall be three (3); provided, however, that if the corporation has less than three shareholders entitled to vote for the election of directors, the board of directors may consist of a number of individuals equal to or greater than the number of those shareholders. The current number of directors shall be within the limit specified above, as determined (or as amended form time to time) by a resolution adopted by either the shareholders or the directors. Each director shall hold office until the next annual meeting of shareholders or until the director's earlier death, resignation, or removal. However, if his term expires, he shall continue to serve until his successor shall have been elected and qualified, or until there is a decrease in the number of directors. Directors do not need to be residents of Nevada or shareholders of the corporation.
3.3 Regular Meetings of the Board of Directors. A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders, for the purpose of appointing officers and transacting such other business as may come before the meeting. The board of directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.
3.4 Special Meetings of the Board of Directors. Special meetings of the board directors may be called by or at the request of the president or any director. The person authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors.
3.5 Notice of, and Waiver of Notice for, Special Director Meeting. Unless the articles of incorporation provide for a longer or shorter period, notice of the date, time, and place of any special director meeting shall be given at least two days previously thereto either orally or in writing. Any director may waive notice of any meeting. Except as provided in the next sentence, the waiver must be in writing and signed by the director entitled to the notice. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business and at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or transacting business at the meeting, and does not thereafter vote for or assent to action taken at the meeting. Unless required by the articles of incorporation, neither the business to be transacted at, nor the purpose of, any special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
3.6 Director Quorum and Voting.
3.6.1 Quorum. A majority of the number of directors prescribed by resolution shall constitute a quorum for the transaction of business at any meeting of the board of directors unless the articles of incorporation require a greater percentage.
Unless the articles of incorporation provide otherwise, any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless: (1) the director objects at the beginning of the meeting (or promptly upon his arrival) to holding or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting; and (2) the director contemporaneously requests his dissent or abstention as to any specific action be entered in the minutes of the meeting; or (3) the director causes written notice of his dissent or abstention as to any specific action be received by the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
3.7 Director Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if all the directors consent to such action in writing. Action taken by consent is effective when the last director signs the consent, unless, prior to such time, any director has revoked, a consent by a signed writing received by the corporation, or unless the consent specifies a different effective date. A signed consent has the effect of a meeting vote and may be described as such in any document.
3.8 Resignation of Directors. A director may resign at any time by giving a written notice of resignation to the corporation. Such resignation is effective when the notice is received by the corporation, unless the notice specifies a later effective date.
3.9 Removal of Directors. The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause unless the articles of incorporation provide that directors may only be removed with cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. A director may be removed only if the number of votes cast to remove him exceeds the number of votes cast not to remove him.
3.10 Board of Director Vacancies. Unless the articles of incorporation provide otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the shareholders may fill the vacancy. During such time that the shareholders fail or are unable to fill such vacancies then and until the shareholders act:
(a) the board of directors may fill the vacancy; or
(b) if the board of directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group of shareholders:
(a) if there are one or more directors elected by the same voting group, only such directors are entitled to vote to fill the vacancy if it is filled by the directors; and
(b) only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
3.11 Director Compensation. By resolution of the board of directors, each director may be paid his expenses, if any, of attendance at each meeting of the board of directors and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
3.12 Director Committees.
3.12.1 Creation of Committees. Unless the articles of incorporation provide otherwise, the board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee must have one or more members, who shall serve at the pleasure of the board of directors.
3.12.2 Selection of Members. The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken or (2) the number of directors required by the articles of incorporation to take such action.
3.12.3 Required Procedures. Those Sections of this Article 3 which govern meetings, actions without meetings, notice and waiver of notice'. quorum and voting requirements of the board of directors, apply to committees and their members.
3.12.4 Authority. Unless limited by the articles of incorporation, each committee may exercise those aspects of the authority of the board of directors which the board of directors confers upon such committee in the resolution creating the committee. Provided, however, a committee may not:
(a) authorize distributions;
(b) approve or propose to shareholders action that the Statutes require be approved by shareholders;
(c) fill vacancies on the board of directors or on any of its committees;
(d) amend the articles of incorporation pursuant to the authority of directors to do so;
(e) adopt, amend or repeal bylaws;
(f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the board of directors; or
(h) authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the board of directors may authorize a committee (or an officer) to do so within limits specifically prescribed by the board of directors.
4.1 Number of Officers. The officers of the corporation shall be a president, a secretary and a treasurer, each of whom shall be appointed by the board of directors. Such other officers and assistant officers as may be deemed necessary, including any vice presidents, may also be appointed by the board of directors. If specifically authorized by the board of directors, an officer may appoint one or more officers or assistant officers. The same individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office. The officers of the corporation shall be appointed by the board of directors for a term as determined by the board of directors. If no term is specified, they shall hold office until the first meeting of the directors held after the next annual meeting of shareholders. If the appointment of officers shall not be made at such meeting, such appointment shall be made as soon thereafter as is convenient. Each officer shall hold office until his successor shall have been duly appointed and shall have qualified until his death, or until he shall resign or is removed.
The designation of a specified term does not grant to the officer any contract rights, and the board may remove the officer at any time prior to the termination of such term.
4.3 Removal of Officers. Any officer or agent may be removed by the board of directors at any time, with or without cause. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Appointment of an officer or agent shall not of itself create contract fights.
4.4 Resignation of Officers. Any officer may resign at any time, subject to any rights or obligations under any existing contracts between the officers and the corporation, by giving notice to the president or board of directors. An officer's resignation shall take effect at the time specified therein, and the acceptance of such resignation shall not be necessary to make it effective.
4.5 President. Unless the board of directors has designated the chairman of the board as chief executive officer, the president shall be the chief executive officer of the corporation and, subject to the control of the board of directors, shall in general supervise and control all of the business and affairs of the corporation. Unless there is a chairman of the board, the president shall, when present, preside at all meetings of the shareholders and of the board of directors. The president may sign, with the secretary or any other proper officer of the corporation thereunder authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to lime.
4.6 Vice Presidents. If appointed, in the absence of the president or in the event of his death, inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designate at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the president, and when so acting, shall have all the powers of, and be subject to, all the restrictions upon the president.
4.7 Secretary. The secretary shall: (a) keep the minutes of the proceedings of the shareholders, the board of directors, and any committees of the board in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records; (d) when requested or required, authenticate any records of the corporation; (e) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (f) sign with the president, or a vice president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; (g) have general charge of the stock transfer books of the corporation; and (h) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to the supervision of the secretary.
4.8 Treasurer. The treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such bank, trust companies, or other depositaries as shall be selected by the board of directors; and (c) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the board of directors shall determine. Assistant treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer.
4.9 Salaries. The salaries of the officers shall be fixed from time to time by the board of directors.
5.1 Indemnification of Directors. Unless otherwise provided in the articles to incorporation, the corporation shall indemnify any individual made a party to a proceeding because the individual is or was a director of the corporation, against liability incurred in the proceeding, but only if such indemnification is both (i) determined permissible and (ii) authorized, as such are defined in subsection (a) of this Section 5. 1.
5.1.1 Determination of Authorization. The corporation shall not indemnify a director under this Section unless:
(a) a determination has been made in accordance with the procedures set forth in the Statutes that the director met the standard of conduct set forth in subsection (b) below, and
(b) payment has been authorized in accordance with the procedures set forth in the Statutes based on a conclusion that the expenses are reasonable, the corporation has the financial ability to make the payment, and the financial resources of the corporation should be devoted to this use rather than some other use by the corporation.
5.1.2 Standard of Conduct. The individual shall demonstrate that:
(a) he or she conducted himself in good faith; and
(b) he or she reasonably believed:
(i) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interests;
(ii) in all other cases, that his conduct was at least not opposed to its best interests; and
(iii) in the case of any criminal proceeding, he or she had no reasonable cause to believe his conduct was unlawful.
5.1.3 Indemnification in Derivative Actions Limited. Indemnification permitted under this Section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.
5.1.4 Limitation on Indemnification. The corporation a director under this Section of Article 5:
(a) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or
(b) in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in his or her official capacity, in which he or she was adjudged liable on the basis that personal benefit was improperly received by the director.
5.2 Advance of Expenses for Directors. If a determination is made following the procedures of the Statutes, that the director has met the following requirements, and if an authorization of payment is made following the procedures and standards set forth in the Statutes,- then unless otherwise provided in the articles of incorporation, the corporation shall pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding, if:
(a) the director furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct described in this section;
(b) the director furnishes the corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct;
(c) a determination is made that the facts then known to those making the determination would not preclude indemnification under this Section or the Statutes.
5.3 Indemnification of Officers, Agents and Employees Who Are Not Directors. Unless otherwise provided in the articles of incorporation, the board of directors may indemnify and advance expenses to any officer, employee, or agent of the corporation, who is not a director of the corporation, to the same extent as to a director, or to any greater extent consistent with public policy, as determined by the general or specific actions of the board of directors.
5.4 Insurance. By action of the board of directors, notwithstanding any interest of the directors in such action, the corporation may purchase and maintain insurance on behalf of a person who is or was a director, officer, employee, fiduciary or agent of the corporation, against any liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary, or agent, whether or not the corporation would have the power to indemnify such person under the applicable provisions of the Statutes.
6.1 Issuance of Shares. The issuance or sale by the corporation of any shares of its authorized capital stock of any class, including treasury shares, shall be made only upon authorization by the board of directors, unless otherwise provided by statute. The board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts or arrangements for services to be performed, or other securities of the corporation. Shares shall be issued for such consideration expressed in dollars as shall be fixed from time to time by the board of directors.
6.2 Certificates for Shares.
6.2.1 Content. Certificates representing shares of the corporation shall at minimum, state on their face the name of the issuing corporation and that it is formed under the laws of the State of Nevada; the name of the person to whom issued; and the number and class of shares and the designation of the series, if any, the certificate represents; and be in such form as determined by the board of directors. Such certificates shall be signed (either manually or by facsimile) by the president or a vice president and by the secretary or an assistant secretary and may be sealed with a corporate seal or a facsimile thereof Each certificate for shares shall be consecutively numbered or otherwise identified.
6.2.2 Legend as to Class or Series. If the corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series (and the authority of the board of directors to determine variations for future series) must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
6.2.3 Shareholder List. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation.
6.2.4 Transferring Shares. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in cash of a lost, destroyed, or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates.
6.3.1 Issuing Shares Without Certificates. Unless the articles of incorporation provide otherwise, the board of directors may authorize the issue of some or all the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation.
6.3.2 Information Statement Required. Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement containing, at a minimum, the information required by the Statutes.
6.4 Registration of the Transfer of Shares. Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation. In order to register a transfer, the record owner shall surrender the shares to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand in the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
6.5 Restrictions on Transfer or Registration of Shares. The board of directors or shareholders may impose restrictions on the transfer or registration of transfer of shares (including any security convertible into, or carrying a right to subscribe for or acquire shares). A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of or otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may be authorized:
(a) to maintain the corporation's status when it is dependent on the number or identity of its shareholders;
(b) to preserve entitlements, benefits or exemptions under federal or local laws; and
(c) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(a) obligate the shareholder first to offer the corporation or other persons (separately, consecutively or simultaneously) an opportunity to acquire the restricted shares;
(b) obligate the corporation or other persons (separately, consecutively or simultaneously) to acquire the restricted shares;
(c) require as a condition to such transfer or registration, that any one or more persons, including the holders of any of its shares, approve the transfer or registration if the requirement is not manifestly unreasonable; or
(d) prohibit the transfer or the registration of transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this Section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by this Article 6 with regard to shares issued without certificates. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.
6.6 Corporation's Acquisition of Shares. The corporation may acquire its own shares and the shares so acquired constitute authorized but unissued shares.
If the articles of incorporation prohibit the reissue of acquired shares, the number of authorized shares is reduced by the number of shares acquired, effective upon amendment of the articles of incorporation, which amendment may be adopted by the shareholders or the board of directors without shareholder action. The articles of amendment must be delivered to the Secretary of State and must set forth:
(a) the name of the corporation;
(b) the reduction in the number of authorized shares, itemized by class and series;
(c) the total number of authorized shares, itemized by class and series, remaining after reduction of the shares; and
(d) a statement that the amendment was adopted by the board of directors without shareholder action and that shareholder action was not required.
7.1 Distributions to Shareholders. The board of directors may authorize, and the corporation may make, distributions to the shareholders of the corporation subject to any restriction sin the corporation's articles of incorporation and in the Statutes.
7.2 Unclaimed Distributions. If the corporation has mailed three successive distributions to a shareholder at the shareholder's address as shown on the corporation's current record of shareholders and the distributions have been returned as undeliverable, no further attempt to deliver distributions to the shareholder need be made until another address for the shareholder is made known to the corporation, at which time all distributions accumulated by reason of this Section, except as otherwise provided by law, be mailed to the shareholder at such other address.
8.1 Inspection of Records by Shareholders and Directors. A shareholder or director of a corporation is entitled to inspect and copy, during regular business hours at the corporation's principal office, any of the records of the corporation required to be maintained by the corporation under the Statutes, if such person gives the corporation written notice of the demand at least five business days before the date on which such a person wishes to inspect and copy. The scope of such inspection right shall be as provided under the Statutes.
8.2 Corporate Seal. The board of directors may provide a corporate sea] which may be circular in form and have inscribed thereon any designation including the name of the corporation, the state of incorporation, and the words "Corporate Seal."
8.3 Amendments. The corporation's board of directors may amend or repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Statutes reserve this power exclusively to the shareholders in whole or part; or
(b) the shareholders in adopting, amending, or repealing a particular bylaw provide expressly that the board of directors repeal may not amend or repeal that bylaw; or
(c) the bylaw either establishes, amends, or deletes, a greater shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the board must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever are greater.
8.4 Fiscal Year. The fiscal year of the corporation shall be established by the board of directors.
DATED as of this 11th day of March, 1999.
/S/ ----------------------------------- President
MASTER SERVICE AGREEMENT
This Agreement made this 2nd day of Feb. in the year 1998 by and between Electric Lightwave, Inc. ("ELI"), a Delaware corporation and Utah Webworks, Inc. ("Customer").
WHEREAS, ELI is duly authorized to provide telecommunications services and facilities and;
WHEREAS, Customer wishes to purchase such services as set forth herein.
NOW, THEREFORE, it is agreed that service will be provided pursuant to ELI's Interstate Tariff No. 1 and any subsequent tariffs on file with the Federal Communications Commission for interstate services, or pursuant to tariff or price list, if applicable, for intrastate services and it is further agreed as follows:
During the Term of this Agreement, ELI will provide Customer the specific services identified on the Sales Order(s).
2. TERM AND TERMINATION.
(a) Attached hereto and incorporated herein are Sales Orders containing details applicable to the telecommunications services and facilities ("the Services") to be provided under this Agreement. Additional Sales Orders may be prepared by ELI and when executed, shall be binding upon Customer and ELI and shall be deemed a part of this Agreement. Each Sales Order shall also set forth, the respective requested service, the mutually agreed to service date ("Service Date"), the term of service applicable thereto ("Term") the recurring (monthly and/or non-recurring (provisioning or other) charges.
(b) Customer must provide ELI with thirty (30) days prior written notice to terminate service. Termination of service for billing purposes is effective upon the end of the thirty (30) day notice period and not upon notification. If Customer cancels a Sales Order or terminates service before completion of the Term of Service specified in the Sales Order(s), Customer agrees to pay ELI all costs, fees and expenses reasonably incurred in connection with pending Sales orders or customer specific special construction.
(c) Customer is liable for termination charges up to a maximum amount equal to the total charges applicable for the remaining term as specified in the Sales Order(s).
(d) ELI may terminate the Agreement immediately if (a) Customer commits a material breach of any provision of this Agreement; (b) Customer makes an assignment for the benefit of creditors, or any petition or proceeding is filed against customer under any law relating to creditor's rights generally; or (c) Customer fails to pay invoices within thirty (30) days of the date of invoice.
During the Term of this Agreement and subject to either Tariff or contract limits, if applicable, Customer shall pay ELI for services as set forth in the Sales Order(s).
Billing for services begins when customer has been notified of end-to-end connectivity on the facility provided by ELI. Failure of customer to provide customer-owned or leased equipment at time of notification by ELI of end-to-end connectivity does not preclude billing by ELI for services rendered under this Agreement.
Charges shall be invoiced monthly and payment shall be due upon receipt. Customer will pay all sales and use taxes, as well as duties or levies, arising in connection with the services. The first bill will include monthly charges pro-rated for the first 30 days, applicable installation charges and taxes, if any. (Some cities impose franchise fees for certain categories of services which if applicable, will be charged to Customer as "Additional Fees.")
At the expiration of the initial Term specified in each Sales Order,
this Agreement shall continue in effect with respect to the Services specified
therein on a month to month basis until terminated by either party upon thirty
(30) days prior written notice.
A monthly interest charge will be applied to delinquent amounts over thirty (30) days. Customer's payment obligation to ELI is not contingent on the performance of any third party. Customer's failure to make payment in full within 30 days of invoice shall constitute a material breach of this Agreement. ELI will have the option of temporarily suspending services to Customer until such time as satisfactory payment is made or immediately terminating this Agreement and pursuing any remedy available at law or in equity.
4. SERVICE CALL CHARGES.
ELI may charge Customer for service calls (if service problem is determined not to be the fault of ELI) at the rates generally charged by ELI to its customers.
Neither ELI nor its affiliates, agents, officers, directors or employees shall be liable to Customer for indirect, incidental, special, consequential damages (including, but not limited to any claim from any client, or customer of Customer for loss of services, lost profits or lost revenues) arising under and in connection with this Agreement, or the performance thereunder, from any breach of partial breach of the provisions of this Agreement or arising out of any act or omission by ELI, its employees, servants or agents whether based on breach of warranty, negligence or any other theory of liability.
ELI's liability arising out of delays in construction or installation under this Agreement, or out of mistakes, accidents, omissions, errors or defects in transmission in the provision of service hereunder shall in no event exceed the amount paid to ELI for service for the period of time of the failure rendered under this Agreement.
6. EXCUSABLE DELAY.
ELI will be excused from delays or failures in performance, caused by force majeure conditions including but not limited to the following: (I) Acts of God, including fire, earthquake, volcanic action and flood, (II) War, civil disturbances and civil or military authority and (III) services provided by others as part of total service provided by ELI. Customer will receive service interruption credits pursuant to Section 7 of this Agreement during a service interruption caused by a force majeure event.
7. INTERRUPTION OF SERVICE.
In the event of any interruption of service through no fault of ELI, unless such interruption is caused by ELI's willful misconduct or gross negligence, ELI's sole obligation shall be to provide credit on a pro rata basis against Customer's obligation to make payments pursuant to Section 2 hereof.
ELI reserves the right to suspend service without notice to Customer for a non service affecting Planned Service Outage caused by scheduled maintenance or planned enhancements or upgrades to the network of thirty (30) seconds or less. ELI reserves the right to suspend service with at least twenty-four (24) hours notice to Customer for a Planned Service Outage caused by scheduled maintenance or planned enhancements or upgrades to the network of over thirty (30) seconds. Such Planned Service Outages shall occur between 12:00 AM and 6:00 AM on weekends only. ELI shall make all reasonable efforts to accommodate Customer in regard to the timing of Planned Service Outages, however, ELI reserves the right to proceed with Planned Service Outages in the event Customer objects to the timing of such outages. A Planned Service Outage will not be considered an out-of-service condition provided service is restored by the end of the time stated therein. A Planned Service Outage shall not be considered an out-of-service condition provided service is restored by the end of the period specified in the notice.
OTHER THAN AS EXPRESSED IN THIS AGREEMENT, OR IN ELI'S TARIFF OR PRICE LIST, THERE ARE NO WARRANTIES, REPRESENTATIONS OR AGREEMENTS, EXPRESSED OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OR MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN.
9. RESPONSIBILITIES OF THE CUSTOMER.
The Customer shall:
a) arrange for disconnection of existing service if applicable;
b) notify long distance carrier of intent to do business with ELI and place appropriate orders with such carrier, if applicable;
c) schedule a complete site survey with ELI, if deemed necessary by ELI;
d) mutually agree with ELI on location for ELI equipment;
e) mutually agree with ELI on network interface;
f) provide to ELI all technical information necessary to install service;
g) provide an equipment technician on-site throughout installation if required;
h) verify ELI's completion of installation and testing and accept service within two days of written notification by ELI that service has been provisioned.
10. STATE REGULATION.
If the Service is provided solely within a single state in a manner which subjects the Service to regulation by such state then the terms and conditions of such Service and this Agreement shall be subject to such regulations and to any addendum to this Agreement relating thereto agreed upon by ELI and Customer.
11. EQUIPMENT OR SOFTWARE NOT PROVIDED BY ELI.
(a) Except as otherwise agreed to by the parties, ELI shall not be responsible for the provision and installation of equipment or software not provided by ELI; nor shall ELI be responsible for the transmission or reception of information by equipment or software not provided by ELI.
(b) It is expressly understood that Customer shall be responsible for the use and compatibility of equipment or software not provided by ELI. In the event that Customer uses equipment or software not provided by ELI which impairs Customer's use of the Service(s), Customer shall nonetheless be liable for payment for the Service(s).
(c) Services provided will meet or exceed industry standard for similar services and failure by customer to order or specify correct service shall not release customer from charges incurred to install an order.
12. GOVERNING LAW.
This Agreement shall be governed by the laws of the state of Utah.
13. ENTIRE AGREEMENT.
This Agreement, together with the attached Sales Order(s) and any Addendum(s) and ELI's Tariff or Price List on file with the Federal Communications Commission or appropriate state utility commission, if applicable, which is incorporated by reference and made a part hereof, sets forth the entire Agreement of the parties with respect to the subject matter hereof, and supersedes any prior agreement or understanding. If any provision hereof is held by a court to be invalid, void or unenforceable, the remainder of the Agreement shall nevertheless remain unimpaired and in effect. To the extent of a conflict between or among any provisions of this Agreement, the attached Sales Order and/or Tariff/Price List, the provisions of this Agreement will control.
ELI may require the Customer, prior to or during the provision of service pursuant to this Agreement, to tender a deposit in an amount to be determined by ELI in its reasonable discretion to be held by ELI as a guarantee for the payment of charges. To determine the financial responsibility of Customer and/or the specific amount of any deposit required, ELI may rely upon commercially reasonable factors to assess and manage the risk of non-payment, including but not limited to payment history for telecommunications service, number of years in business, bankruptcy or insolvency history, financial statement analysis and commercial credit bureau rating.
It shall be Customer's responsibility to provide to ELI upon request such information as is necessary for ELI to determine the financial responsibility of Customer, including but not limited to Customer's tax returns, audited and unaudited financial statements and loan application. A deposit does not relieve Customer of the responsibility for the prompt payment of bills upon presentation. The failure of Customer to post a deposit as required by ELI pursuant to this paragraph shall constitute a material breach of this Agreement by Customer which shall entitle ELI to terminate this Agreement and the service provided hereunder upon five (5) days written notice to Customer. When the service for which the deposit has been required is discontinued, the deposit will be applied to the final bill and any credit balance will be refunded to the Customer.
(a) Any dispute arising out of or related to this Agreement, which cannot be resolved by negotiation, shall be settled by binding arbitration in accordance with the rules of the American Arbitration Association. The costs of arbitration, including the fees and expenses of the arbitrator, shall be shared equally by the parties unless the arbitration award provides otherwise. The arbitrator shall have no power or authority to make awards or issue orders of any kind except as expressly permitted by the Agreement and in no event shall the arbitrator have the authority to make any award that provides for punitive or exemplary damages.
Customer shall not disclose to any third party during the term of Service, any of the material terms and conditions set forth in this Agreement (including but not limited to price-related terms), unless such disclosure is lawfully required by any government agency or is otherwise required to be disclosed by law.
Neither this Agreement nor rights or obligations of the Customer shall be transferable or assignable by Customer without ELI's prior written consent, such consent not to be unreasonably withheld, provided however, either party may assign and transfer this Agreement to any parent, subsidiary, successor or affiliated company without the prior written consent of the other party. Provided further, assignee of Customer may be required to render a deposit pursuant to Section 14 of this Agreement if assignee does not meet credit standards.
CUSTOMER ELECTRIC LIGHTWAVE, INC. Print Name: Lamar Taylor Representative: Susie DuBell Signature: /S/ Signature: /S/ --------------------- ------------------------ Title: President Title: Account Executive Company: Utah WebWorks, Inc. Electric Lightwave Date: 2/2/98 Date: 2/2/98
ELECTRIC LIGHTWAVE PRICING SHEET ATTACHED HERE
INTERNET ACCESS AGREEMENT
Addendum to Master Service Agreement
Electric Lightwave Incorporated, hereafter called ELI, and Utah WebWorks Inc., hereafter called Customer, execute this disclosure and document of understanding between them for the purpose of defining responsibilities and expectations associated with ELI's Internet Access Service offerings hereafter referred to as Service. Service is comprised of, but not limited to: Access to ELI's Internet, DNS, News Feed, News Reader Service, or NetVista. This document does not supersede or replace in any way, other contracts that have been entered into by both parties or contracts that may be entered into by both parties and is incorporated as part of the Master Service Agreement between ELI and Customer. The sole intent of this document is to make both parties aware of the limitations that are inherent in providing and accepting internet data communications services. The signature of this document signifies that both parties have read it and understand the nature and scope of doing business in and on the Internet and its related services.
Domain Name Service (DNS)
Domain name service is a corner stone capability/requirement in any use of the Internet. Domain names and DNS servers are essential to the proper function of anyone who uses or provides services via the Internet. DNS is the responsibility of Customer and not ELI. Typically an Internet provider will install and maintain a domain name server. This is a network engineering and design issue and not a routing issue. Network routers may lookup a domain name on a DNS server to learn how to properly route data packets. Routers do not maintain domain name listings. Customer is responsible for setting up and maintaining or arranging for primary domain name service. ELI will, if requested by Customer, provide secondary domain name service. As secondary DNS is updated by the primary DNS, Customer must establish his/her primary DNS in a working manner before secondary DNS can be updated. ELI will not be liable in any way for troubles, slow or no routing capability, lost packets or other troubles caused by improperly deployed DNS services by Customer or Customer's agent. ELI will provide primary domain name service in an interim time frame not to exceed 90 days to allow Customer to establish a registered domain name(s) with the InterNIC. ELI will provide primary domain name service on a fee basis for the length of the service agreement, if agreed to in writing prior to installation of DNS service.
Routing Ability on the Internet
Customer acknowledges and recognizes that the Internet is a World Wide interconnection of privately owned networks and as such, the ability to route or transmit or receive messages, data and/or files is limited to the capabilities of the various systems and the individual policies of the network owners. ELI will maintain its own network in a fashion that will provide the necessary bandwidth to carry Customer's contracted traffic in an efficient manner. ELI will filter non-aggregated routes at a level that is consistent with best engineering practices and enhances ELI's network stability. While ELI strives to deliver as near error free transmission and access services as reasonably possible, it accepts no responsibility for failure of routes, connections, packet loss or router/server rejections that are beyond its control. ELI, from time to time, purchases network access from other national service providers to facilitate its own deployed backbone networks. Because the information flow and network traffic changes dynamically, ELI may find it necessary to rebalance its own backbone to provide efficient routing capabilities. These changes may impact the routing paths that a customer's information uses to enter or exit ELI's network. For these reasons, ELI does not guarantee specific network entrance or exit points.
Demonstration of a Working Connection
ELI will use the following methods to demonstrate that its Internet data network is functioning between its equipment and the Customer's equipment, as specified, and constitutes the extent of its responsibility determining that it has met its contract to provide a working interconnection with its routing equipment. (1) If Customer has no terminating equipment installed at their end of the circuit, Customer or ELI will provide an electrical loopback at the furthest reasonable point. ELI will transmit a properly framed signal to the loopback and will monitor the returned data for proper timing and framing. This demonstrates a functioning circuit. (2) If Customer installs a CSU/DSU, ELI will send a loopup command to the CSU/DSU and will perform the same tests as in (1) above, provided the CSU/DSU responds to the loopup command. (3) If Customer has a working router attached to the CSU/DSU, ELI will perform the tests in (2) above plus ELI will send data grams to the router and watch for them to be echoed back without errors. If the physical link tests good and the datagrams return without error, then ELI has met its obligation for connectivity between Customers location and ELI's terminating equipment.
Demonstration of Routing in ELI's Autonomous System
ELI requires that Customer uses static routing protocol according to the specifications contained in RFC1812. BGP4 routing protocol may be used if approved by ELI's Data Engineering department in writing prior to implementation and use of the BGP4 protocol. IF BGP4 is approved, Customer will be allowed to transit Customer's approved autonomous system number across ELI's network. Requests to transit any additional autonomous system numbers across ELI's network may be approved on a fee basis to be determined at the time of request. Customer's static routes will automatically trigger a re-distribution of any static route to BGP routing protocol. ELI will broadcast its BGP4 information to its network 's IP networks by providing copies of the routing table entries contained in its routers if requested. Customer may request that ELI respond to route failures. If the failure is caused by Customer's network, this assistance may be chargeable for time and materials at ELI's prevailing rates.
Rights and Obligations of Customer
(a) Customer shall at its own expenses undertake all necessary preparation required to comply with ELI's installation and maintenance instructions. Customer is responsible for obtaining IP addresses prior to order completion. IP addresses may be obtained from the InterNIC directly or via ELI. Clients must complete the appropriate InterNIC template located at the Internet address http://rs.internic.net/help/templates.html or follow the ELI instructions located on the Internet at http://www.eli.net/ipaddress.html. Customer failure to obtain IP addresses prior to completion of the Sales Order does not release Customer from ELI contractual obligations. In addition, if any routers or other customer premises equipment ("Equipment") is being supplied as part of ELI services to Customer by ELI, Customer shall be responsible for the costs of relocation of such Equipment once installed by ELI, and shall provide to ELI and to suppliers of communications lines reasonable access to Customer's premises to maintain such Equipment or to perform any acts required by this Agreement.
(b) Customer shall not do any of the following or permit any third party under its control (including its customers and their authorized users) to do the following and must include provisions in its service agreements for its customers and authorized users that restrict them for doing any of the following:
- restrict or inhibit any other user from using and enjoying the Service and/or the Internet;
- post or transmit any unlawful, illegal, obscene, or pornographic information of any kind, including without limitation any transmission constituting or encouraging conduct that would constitute a criminal offense, give rise to civil liability, or otherwise violate any local, state, national or international law, including without limitation the U.S. export control laws and regulations;
- post or transmit any information or software which contains a virus, worm, cancelbot or other harmful component;
- upload, post, publish, transmit, reproduce, distribute, or participate in the transfer or sale, or in any way exploit any information, software or other material obtained through the Internet which is PROTECTED BY COPYRIGHT or other proprietary rights or derivative works with respect thereto, without obtaining permission of the copyright owner or rightholder, or
- Use the Service in violation or contravention of the Telecommunications Act of 1996, or any other applicable law, regulation, order or other governmental directive, or abuse or fraudulently use the Service in any way not specifically set forth above.
Should Customer discover that any of its customers or authorized users have committed any of the above, Customer must take reasonable steps to enforce its agreement with its customer or authorized user.
In addition, neither Customer nor any third party under its control (including its customers and their authorized users) may affect or participate in any of the following activities through the Service:
- post a single article or advertisement to more than ten (10) Usenet or other newsgroups, fora, email mailing lists or similar groups or lists;
- post to any Usenet or other newsgroups, fora, email mailing list or similar group or list articles which are off-topic according to the charter or other public statement of the group;
- send unsolicited mass mailings to more than twenty-five (25) email users, if such unsolicited electronic mailings provoke complaints from the recipients;
- engage in any of the foregoing activities using the service of another provider, but channeling such activities through an ELI account or remailer, or using an ELI account as a mail drop for responses; or
- falsify or "spoof" user information provided to ELI or to other users of the Service, and for handling all complaints and trouble reports made by its own customers and authorized users.
Equipment or Software not Provided by ELI
(a) Except as otherwise agreed to by the parties, ELI shall not be responsible for the provision and installation of equipment or software not provided by ELI; nor shall ELI be responsible for the transmission or reception of information by equipment or software not provided by ELI.
(b) It is expressly understood that Customer shall be responsible for the use and compatibility of equipment or software not provided by ELI. In the event that Customer uses equipment or software not provided by ELI which impairs Customer's use of the Service, Customer shall nonetheless be liable for payment for the Service. Upon notice for ELI that the equipment or software not provided by ELI is causing or is likely to cause hazard, interference or service obstruction, Customer shall eliminate the likelihood of hazard, interference or service obstruction. At Customer's request, ELI will troubleshoot difficulties caused by equipment or software not provided by ELI. Customer shall pay ELI for these troubleshooting services at current prevailing rates.
(c) ELI shall not be responsible if any changes in the Service cause Customer's equipment or hardware to become obsolete, require modification or alteration, or otherwise affect performance of equipment or hardware.
(d) In the event Customer provides one or more routers to interface with the Service, the following terms apply:
- ELI reserves the right to allow or refuse the make, model and/or software revision of customer-provided router to be used as the gateway to the Service.
- Customer will cooperate with ELI in setting the initial configuration for the router's interface into the Service.
Rights and Obligations of ELI; Disclaimer of Warranties
(a) ELI shall operate and maintain the Service. Customer shall be responsible for maintaining its own network and routers that interface with the Service. ELI shall not be responsible for cabling that connects equipment not provided by ELI to ELI equipment or the Service.
(b) If ELI provides equipment to Customer, Customer agrees that such equipment may not be used for unauthorized purposes. Equipment provided by ELI to Customer is owned and controlled by ELI and such equipment must be returned to ELI upon termination of this Agreement. Customer hereby grants to ELI the right to recovery ELI provided equipment from Customer's premises upon termination of this Agreement.
(c) Customer understands that Customer, Customer's customers, and Customer's authorized users may access the Internet through the Service. Customer understands further that, except for certain products and services specifically identified as being offered by ELI, neither ELI nor any of its affiliates operates or controls the Internet in any way, and that all merchandise, information and services offered or made available or accessible on the Internet are offered or made available or accessible by third parties who are not affiliated with ELI or its affiliates. Customer assumes total responsibility and risk for customer's use and customer's customers' and authorized users' use of the service and the Internet. Neither ELI nor its affiliates makes any express or implied warranties, representations or endorsements whatsoever (including without limitation warranties of title or noninfringement, or the implied warranties of merchantability or fitness for a particular purpose) with regard to any merchandise, information or service provided through the Internet, and they shall not be liable for any cost or damage arising either directly or indirectly from any such transaction. It is solely customer's responsibility and customer's customers' and customer's authorized users' responsibility to evaluate the accuracy, completeness and usefulness of all opinions, advice, services and other information, and the quality and merchantability of all merchandise, provided through the service or on the Internet generally.
(d) Customer understands further that the Internet contains unedited materials some of which are sexually explicit or may be offensive to some people. Customer and customer's customers and authorized users access such materials at their own risk. ELI has no control over and accepts no responsibility whatsoever for such materials.
(e) The service is provided on an "as is" and "as available" basis without warranties of any kind, either expressed or implied, including but not limited to warranties of title, noninfringement or implied warranties of merchantability or fitness for a particular purpose. No advice or information given by ELI, its affiliates or its contractors or their respective employees shall create a warranty. Neither ELI nor its affiliates warrants that the service will be uninterrupted or error free or that any information, software or other material accessible on the service is free of viruses, worms, trojan horses or other harmful components. (f) Under no circumstances shall ELI, its affiliates or its or their employees or contractors be liable for any direct, indirect, incidental, special, punitive or consequential damages that result in any way from customer's (or customer's customers or authorized users') use of or inability to use the service or to access the Internet or any part thereof, or customer's (or customer's authorized users') reliance on or use of information, services or merchandise provided on or through the service, or that result from mistakes, omissions, interruptions, deletion of files, errors, defects, delays in operation, or transmission, or any failure of performance.
(g) If Customer is dissatisfied with the Service or with any terms, conditions, rules, policies, guidelines, or practices of ELI in operating the Service, Customer's sole and exclusive remedy is to terminate this Agreement in accordance with the Master Service Agreement and discontinue using the Service.
(h) ELI has no obligation to monitor the Service. However, Customer agrees that ELI has the right to monitor the Service electronically from time to time and to disclose any information as necessary to satisfy any law, regulation or other governmental request, to operate the Service properly, or to protect itself or its subscribers. ELI will not intentionally monitor or disclose any private electronic-mail message unless required by law. ELI reserves the right to refuse to post or to remove any information or materials, in whole or in part, that, in its sole discretion, are unacceptable, undesirable, or in violation of this Agreement.
ELI may require Customer, prior to or during the provision of service pursuant to this Agreement, to tender a deposit in an amount to be determined by ELI in its reasonable discretion to be held by ELI as a guarantee for the payment of charges. To determine the financial responsibility of Customer and/or the specific amount of any deposit required, ELI may rely upon commercially reasonable factors to assess and manage the risk of non-payment, including but not limited to payment history for telecommunications service, number of years in business, bankruptcy or insolvency history, financial statement analysis and commercial credit bureau rating.
It shall be Customer's responsibility to provide to ELI upon request such information as is necessary for ELI to determine the financial responsibility of Customer, including but not limited to Customer's tax returns, audited and unaudited financial statements and loan applications. A deposit does not relieve Customer of the responsibility for the prompt payment of bills upon presentation. The failure of Customer to post a deposit as required by ELI pursuant to this paragraph shall constitute a material breach of this Agreement by Customer which shall entitle ELI to terminate this Agreement and the service provided hereunder upon five (5) days written notice to Customer. When the service for which the deposit has been required is discontinued, the deposit will be applied to the final bill and any credit card balance will be refunded to Customer.
Failure to Comply With Agreement
ELI may deny Customer access to all or part of the Service, or may cut off Customer's access or refuse to post or remove any information or materials proposed to be posted by Customer or Customer's customers or authorized users, if Customer or Customer's customers or authorized users engages in any conduct or activities that ELI in its sole discretion believes violates any of the terms and conditions in this Agreement; provided that, in the case of denial or cut-off of access. ELI shall give Customer twenty-four (24) hours notice of its intention to deny or cut-off access. If ELI denies Customer access to the Service because of such a violation, neither Customer nor Customer's customers or authorized users shall have any right to access through ELI any materials stored on the Internet, to obtain any credit(s) otherwise due to Customer, and such credit(s) will be forfeited, and to access third party services, merchandise or information on the Internet through ELI. Further, in the event ELI denies or cuts off access to the Service, ELI shall have no responsibility to notify any third-party providers of services, merchandise or information of such action nor shall ELI assume any responsibility for any consequences resulting from any lack of notification.
Notwithstanding the foregoing, ELI reserves the right to terminate service immediately and without notice to Customer in order to maintain system integrity or to comply with any law, regulation, court order, or other governmental request. If you have any questions regarding the above policies, please contact email@example.com.
CUSTOMER ELECTRIC LIGHTWAVE, INC. Print Name: Lamar Taylor Representative: Susie Dubell Signature: /S/ Signature: /S/ ---------------------- --------------------------- Title: President Title: Account Executive Company: Utah WebWorks, Inc. Electric Lightwave Incorporated
EMPLOYMENT AGREEMENT dated April 24, 1999, (the "Effective Date"), by and between Pacific WebWorks, Inc., (the "Company) and Christian Larsen ("Executive"). The Company desires to engage the services of the Executive as President of the Company on the terms and subject to the conditions of this Agreement, and Executive desires to accept such employment.
In consideration of the terms and mutual covenants contained in this Agreement, the Company and Executive agree as follows:
1. Employment. The company hereby engages the services of Executive as President of the Company with powers and duties consistent with such position, and Executive hereby accepts such engagement. During the terms of this Agreement, Executive shall perform such additional duties and accept election or appointment to such additional offices or positions of the Company or its affiliates of an executive nature as may be specified by the Board of Directors of the Company. Executive shall perform his obligations to the Company and its subsidiaries pursuant to this Agreement under the direction of the Board of Directors of the Company and/or the President, and Executive shall devote approximately all of his business time and efforts to such performance.
2. Term. This Agreement shall continue in full force and effect for a
term of one year beginning on the Effective Date, unless sooner terminated
pursuant to the provisions contained herein (the "Initial Term"). Unless
terminated, this Agreement will be renewed automatically for one or more
successive one-year terms (the "Renewal Terms"), unless Executive or the Company
gives its written notice of non-renewal to the other party not less than ninety
(90) days prior to the expiration of the then-current term. Executive's period of employment hereunder, including the Initial Terms and all Renewal Terms, shall constitute and be hereinafter referred to as the "Term" of this Agreement.
3. Compensation. For services rendered pursuant to this Agreement, Executive shall receive, commencing on the Effective Date, the following compensation: (i) a base salary of Sixty Thousand Dollars ($60,000.00) per year; and (ii) such bonuses and/or increases as from time to time as referenced herein or as authorized by the Board of Directors in their sole discretion, but not exceeding One Hundred Twenty Five Thousand Dollars ($125,000.00) in combined annual salary and bonus. Executive's base salary shall be paid in equal bi-monthly installments.
4. Incentive Bonus. In addition to the base salary, Executive shall be eligible for an incentive bonus ("Incentive Bonus") each year in the amount as identified herein. The Incentive Bonus shall be based upon the operating results for that year of the Company and shall be issued, if earned, within thirty days after such operating results have been determined by the company's accountants. The operating results shall be measured by company profits and shall be distributed on a per quarter basis to Executive. The criteria upon which the Incentive Bonus is awarded shall be set by the Board of Directors.
5. Employment Benefits. Executive shall be entitled to two weeks of paid vacation each calendar year, beginning January 1, 1999. Unused vacation time shall not accrue or carry over to future years, so that two weeks will be the maximum amount of paid vacation to which Executive shall be entitled hereunder during any calendar year. In addition, Executive shall be entitled to nine paid holidays, and six paid sick days.
During the term of this Agreement, the Company will provide to Executive the following:
(a) Medical and short and long-term disability insurance programs for the benefit of Executive;
(b) Executive shall have the ability to purchase Medical Benefits at the cost of the company for any immediate family members.
6. Reimbursement of Future Expenses. Executive shall be reimbursed by the Company for all reasonable out-of-pocket expenses documented and incurred by Executive in performance of his duties under this Agreement.
7. Termination. Executive's employment will terminate upon the first to occur of the following:
(a) Termination of the Company for "cause," as reasonably determined by the Company's board of directors in good faith. For the purpose of this section 7, "cause" shall mean:
(i) misfeasance or negligence in the performance of his duties hereunder;
(ii) engagement by Executive in dishonest or illegal conduct that is injurious to the Company; or
(iii) a breach of the Company's policy and procedure as reasonably established from time to time by the Board of Directors of the company that is not cured within 30 days of notice being sent by the Company.
Executive shall be given 30 days notice of any anticipated termination of his employment for cause, and a 30 days opportunity to rectify or correct the alleged problem.
(b) Termination by the company (in its sole discretion) in the event of Executive's disability. "Disability" will be deemed to exist if Executive has substantially failed to perform his duties hereunder for 90 consecutive days for reasons of mental or physical health and is no longer able to perform his duties hereunder with or without reasonable accommodations by the Company, or if a physician selected in good faith by the Company examines Executive (and Executive agrees to permit such examinations at the Company's expense) and advises the Company that Executive will not be able to perform his duties hereunder with or without reasonable accommodations by the Company for the following 90 consecutive days. In determining what are reasonable accommodations, the Company shall comply with the American Disability Act. If the Company terminated Executive's employment for disability, Executive shall receive compensation due under section 3 of this agreement and the employee benefits due under section 4 of this Agreement through the date of termination and the Company will have no further obligation under this Agreement other than the continuation of insurance policies to the extent required by law upon termination. At the sole discretion of the Board of Directors, the employee stock option may be extended, for the period of time to be determined by the Board, following the Disability.
(c) Executive's death. In the event of the Executive's death, Executive's estate or surviving spouse, as applicable, shall receive all compensation due to Executive under this Agreement through the date of death and the Company will have no further obligation under this agreement other than the continuance of insurance policies to the extent required by law and continuation of other benefits under this Agreement for six months following the date of death. At the sole discretion of the Board of Directors, the employee stock option plan may be extended, for a period of time to be determined by the Board, following the Death.
8. Notice of Termination. Any Termination of Executive's employment under this Agreement shall be communicated by a written Notice of Termination to the other party hereto, which notice shall specify the particular termination provision in this Agreement relied upon by the Terminating party and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under such provision.
9. Executive's Devotion of Time. Executive hereby agrees to devote his full time, abilities and energy to the faithful performance of the duties assigned to him or her and to the promotion and forwarding of the business affairs of the Company, and not to divert any business opportunities from the Company to himself or to any other person or business entity without approval of the Board of Directors.
10. Agreement Not to Compete. In the event that this Agreement expires
in accordance with its terms of is terminated for any reason, Executive
covenants and agrees that for a period of one year after his employment under
this Agreement expires or is so terminated, he will not directly or indirectly
whether as employee, director, owner, 5% or greater stockholder, consultant,
partner (limited or general) or otherwise engage in or have any interest in any
business that competes with the business of the Company or its subsidiaries
provided, except as approved by the Board of Directors on a case by case basis.
The Company may, in its discretion, give Executive written approval(s) to
personally engage in any activity or render any services referred to in this
Section if Company secures written assurances (satisfactory to the Company and its counsel) from the Executive and any prospective employer(s) of Executive that the integrity of the Company's Confidential or Proprietary Information will not in any way be jeopardized by such activities, provided that the burden or so establishing the foregoing to the satisfaction of the Company and its counsel shall be upon the executive and prospective employer(s).
11. Agreement not to Solicit Employees, Customers, or Others. Executive covenants and agrees that, for a period of two years after this Agreement is terminated, he will not, directly or indirectly, (i) solicit, induce or hire away, or assist any third party in soliciting, diverting or hiring away, any employee of the Company or its subsidiaries, whether or not the employee's employment is for a specified term or is at will, or (ii) induce or attempt to induce any customer, supplier, dealer, lender, licensee, consultant, or other business relation of the Company or its subsidiaries to cease doing business with the Company or its subsidiaries.
12. Inventions and Improvements. Executive agrees that all inventions, innovations, or improvements in the Company's or its subsidiaries' products or methods of conducting its business (including new combinations, applications, improvements, ideas, and discoveries, whether or not copyrightable or patentable) conceived or made by him while he is employed by the Company or its subsidiaries is and will remain the property of the Company. Executive will promptly disclose such inventions, innovations, or improvements to the Board of Directors of the Company and perform all actions reasonably requested to establish or confirm the ownership of the Company or its subsidiaries thereof.
13. Ownership, Non-Disclosure and Non-Use of Confidential or Proprietary Information.
(a) Executive covenants and agrees that while he is employed by the Company and after termination of employment he will not, directly or indirectly:
(i) give any person not authorized by Company to receive it or use it, except for the sole benefit of the company or its subsidiaries, any of the Company's or subsidiaries' proprietary date of information whether relating to management, know-how, patents or otherwise; or
(ii) give to any person not authorized by the Company to receive in any specifications, reports or technical information or the like owned by the Company or its subsidiaries; or
(iii) give to any person not authorized by the Company to receive it any information that is not generally known outside the Company or that is designated by the Company or its subsidiaries as limited, private, or confidential.
(b) If Executive is employed in a sales capacity, Executive will not render services, directly or indirectly, to any competitor of the Company or its subsidiaries.
(c) Executive covenants and agrees that he will keep himself informed of the Company's policies and procedures for safeguarding the Company property including proprietary data and information and will strictly comply therewith at all times. Executive will return to the Company or its subsidiaries immediately upon termination of his employment all Company or its subsidiaries property in his possession or control.
14. Limitations. The parties agree that in the event any court of competent jurisdiction should determine that the term or restrictions set forth herein is unreasonable in scope, then in such event the court shall fix the term or restrictions so as to be reasonable, enforceable and consistent with the intent of this Agreement.
15. Independent Agreements: Survival. Executive and Company agree that the covenants made in Sections 7 through and including 12 herein shall be construed as agreements independent of any other provision of the Agreement, and shall survive the termination of the Agreement. Moreover, the existence of any claim or cause of action of Executive against the Company, or the Company against Executive, whether or not predicated upon the terms of this Agreement, shall not constitute a defense to the enforcement of any of these covenants against Executive by Company, or against Company by Executive, respectively. Any reference to the Company in Sections 6 through and including 11 shall include the Company and its subsidiaries where applicable.
16. Complete Agreement. This Agreement embodies the complete Agreement and understanding between the parties and supersedes any prior understandings, agreements, or representations by or among the parties, whether written or oral, concerning the subject matter hereof in any way.
17. Amendments: Waivers. This Agreement may not be amended except by a writing signed by both an appropriate member of the Company's management or Board of Directors and Executive. Any waiver by a party hereof of any right hereunder shall be effective only if evidenced by a signed writing, and only to the extent set forth in such writing.
18. Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, heirs, and assigns, except that Executive may not assign any of his obligations hereunder without the prior written consent of the Company.
19. Remedies. Each of the parties to this Agreement will be entitled to specifically enforce its rights under this Agreement, to recover damages by reason of any breach of any provisions of this Agreement and to exercise all other rights to which it may be entitled. The parties agree and acknowledge that money damages may not be an adequate remedy for breach of provision of the Agreement and accordingly, each party hereby agrees and consents that in the event of any material breach of this Agreement by it, the non-breaching party may obtain appropriate injunctive relief or an order for specific performance, in order to enforce or prevent any violations of the provisions of this Agreement.
20. Governing Law. In the event of any disputes arising under this Agreement, it is agreed between the parties that the laws of the State of Utah will govern the interpretation, validity, and effect of this Agreement without regard to the place of execution or performance hereof.
21. Dispute Resolution. In the event of any dispute between the parties arising out of or related to this Agreement, the parties agree to use the following procedure prior to either party pursuing other available remedies:
(a) A meeting shall be held promptly between the parties, attended by representatives having decision-making authority regarding the disputes, to attempt in good faith to negotiate a resolution of the dispute.
(b) If, within thirty (30) days after such meeting, the parties will have not succeeded in negotiating a resolution of the disputes, they will jointly appoint mutually acceptable neutral person not affiliated with either of the parties (the "Neutral"), seeking in such regard from the American Arbitration Association, Center for Public Resources, or other mutually agreed-upon organization if they have been unable to agree upon such appointment within forth (40 ) days from the initial meeting. The fees of, and authorized costs incurred by, the Neutral shall be shared equally by the parties.
(c) In consultation with the Neutral, the parties will select or devise an Alternative Disputes Resolution procedure ("ADR") by which they will attempt to resolve the dispute, and a time and place for the ADR to be held, with the Neutral making the decision as to the procedure and/or place and time, if the parties have been unable to agree on any of such matters within twenty (20) days after initial consultation with the Neutral. In any case, the ADR shall be held no later than sixty (60) days after selection of the Neutral.
(d) The parties agree to participate in good faith in the ADR to its conclusion. If the parties are not successful in resolving the dispute through the ADR, then either party may pursue other available remedies upon seven (7) days written notice to the other party specifying its intended course of action.
22. Notices. Any notice to be given hereunder shall be in writing and shall be effective when personally delivered or sent to the other party by registered or certified mail, return receipt requested, or overnight courier, postage prepaid, or otherwise when received by the other party, at the address set forth at the end of this Agreement.
23. Severability. Any provision of this agreement that is deemed invalid, illegal, or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality, or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If the covenant should be deemed invalid, illegal, or unenforceable because its scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.
24. Attorney Fees. In the event any action or proceeding is brought by any party, against any other party, to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney fees, whether such sums are expended with or without suit, at trial or on appeal.
25. Taxes. All applicable state and federal employment taxes shall be withheld by the Company and paid directly to the taxing agency. Payroll checks and other disbursements to Executive shall be net after taxes.
26. Construction. This Agreement shall not be construed against the party preparing it, and shall be construed without regard to the identity of the person who drafted it or the party who caused it to be drafted and shall be construed as if all parties had jointly prepared this Agreement and it shall be deemed their joint work product, and each and every provision of this Agreement shall be construed as though all the parties hereto participated equally in the drafting hereof; and any uncertainty or ambiguity shall not be interpreted against any one party. As a result of the foregoing, any rule of construction that a document is to be construed against the drafting party shall not be applicable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this 24th day of April, 1999.
Pacific WebWorks, Inc. EXECUTIVE By: /S/ /S/ --------------------------- ----------------------------- Name: Bryan Larsen Christian Larsen, President
DEVELOPMENT, LICENSE AND SERVICE
This Development License and Service Agreement ("Agreement") is made and entered into this 15th day of April 1998 by and between Utah WebWorks, Inc., a closely held Utah corporation, ("UWT") and American Home Business Association, ("Customer"), a closely held Utah corporation.
WHEREAS, Utah WebWorks owns certain software known as Iquest ("Software"), a search engine used on the Internet, and
WHEREAS, Customer is desirous of obtaining a license to use the Software, and
WHEREAS, UWI has agreed to provide (1) certain maintenance of the
Software, and (2) certain bandwidth (also known as an Internet connection), and
(3) certain enhancements for Customer for a fee, and
WHEREAS, UWI will customize the Software for Customer and help create a Web Site and a database on the Internet as more specifically set forth herein.
NOW THEREFORE, in consideration of the covenants and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties mutually agree as follows:
1. License. UWI hereby grants to Customer an exclusive license to use the Software for Customer's exclusive use only within the Internet Home Business Directory Industry. Customer agrees to pay a royalty fee of $10,000 per year, per Central Processing Unit (CPU) on which the Software is installed, to UWI in consideration for this exclusive license. The term of this license shall continue during the term of this agreement. The license fees shall be paid as follows:
a. $5,000 upon the execution of this Agreement.
b. The balance of the fee shall be paid on or before May 15, 1998.
c. Annual renewal fees shall be due on or before May 15, 1999 and on the same date of all subsequent years during the term of this Agreement.
2. Maintenance Service. UWI shall provide maintenance service for the Software as follows:
a. Correct system errors.
b. Make adjustments to the Software in the event it ceases to operate.
c. Provide day to day site maintenance.
3. Maintenance Fee. In consideration for the maintenance services to be provided by UWI as described in Paragraph 2 above, Customer agrees to pay UWI a monthly maintenance fee of $250. The maintenance fee shall be paid on the first day of the month preceding the date the maintenance service is to be provided. The fee for the first month will be prorated from the time the Web Site is completed to the end of said month. The Web Site will be deemed completed when it is available for use on the Internet. The maintenance fee for each month after the initial month shall be paid on the first day of each and every month during the term of this Agreement.
4. Bandwidth. At the present time, UWI has a bandwidth which it uses in its business. UWI agrees to allow Customer the right to use up to 4% of the capacity of said bandwidth (61.6 kb per second) as part of the maintenance service. At such time as Customer's use of the bandwidth exceeds 4% of the bandwidth's capacity, UWI, at it's election, may either require Customer to obtain an independent bandwidth for their own use at which time Customer shall no longer have the right to use UWI's bandwidth, or UWI may increase the bandwidth available to Customer for a fee. Said bandwidth will either be obtained by UWI and charged to Customer or the cost of the bandwidth will be billed directly to Customer by the provider of said bandwidth as UWI shall arrange.
5. Enhancements. It is anticipated that UWI will perform certain Software enhancements for Customer. At the time said enhancements are to be provided, UWI will prepare a Work Order describing work to be performed and the price to be paid by Customer. Work described in the work order must be approved by both parties prior to the time UWI begins work on the enhancement. UWI will be the exclusive owner of any improvements made to the Software; provided, however, that Customer shall continue to have a license to use said enhancement as part of the license agreement relating to the use of the Software.
6. Advertisement Production. It is anticipated that UWI will provide certain advertisement production services for Customer. These services shall include graphics and other services. The charges for said services will be based upon UWI's Standard Service List and Price Schedule.
7. Computer System Hardware. In order to make Customer's Web Site productive, it is necessary for Customer to provide certain computer hardware items. UWI will specify the hardware which Customer needs to obtain in order to operate the Web Site. Customer agreed to promptly supply said hardware upon receiving the written specifications from UWI.
8. Startup Costs. In addition to the maintenance services set forth above, UWI shall also provide certain start up services for Customer. These services consist of creating the Web Site, customizing the Software, preparing the first version of the Web Site and putting the data base on the Internet. At the time said start up services are to be provided, the parties shall enter into UWI's Standard Service Agreement with respect to said services. The exact specification for this work will be set forth in a Work Order which shall be prepared by UWI and shall accompany the Standard Service Agreement. The Work Order shall set forth the costs and fees associated with providing said startup services. The Standard Service Agreement shall set forth the payment schedule for services described in the Work Order.
9. Term of Agreement. This agreement shall commence as of the date set forth above and shall continue for a period of two years; provided, however, UWI shall have the right to terminate this Agreement and/or suspend any services described herein if Customer is in default under any of the terms of this Agreement. Customer shall have the right to terminate this agreement if UWI is in default under any of the terms of this Agreement. Customer shall have the first right of refusal to renew this Agreement after the term described herein has expired.
10. Miscellaneous. The following miscellaneous provisions shall apply:
a. Related Agreements. The parties to this Agreement may also enter into additional agreements between them. A default or breach under any of these agreements shall constitute a default and breach of all of the agreements.
b. Notice. All demands and notices to be given hereunder, if any, shall be personally delivered or sent by registered mail addressed to the respective parties at their postal addresses as of the date of this Agreement or to such other addresses as each may hereafter designate in writing.
c. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties and supersedes all prior agreements or understandings with respect to the subject matter of this Agreement.
d. Amendment. This Agreement may not be altered or amended except by a subsequent written agreement executed by all of the parties hereto.
e. Attorney's Fees. In the event of any controversy or claim or dispute between the parties hereto arising out of or relating to this Agreement or any of the documents provided for herein, or the breach thereof, the prevailing party shall be entitled to recover reasonable attorneys' fees, expenses and costs, whether incurred prior to, during or subsequent to trial including appeals from the losing party.
f. Nonwaiver. The failure of any party to enforce the provisions of this Agreement shall not constitute a waiver unless specifically stated in writing, signed by the party whose rights are deemed waived, regardless of a party's knowledge of a breach hereunder.
g. Severability. The invalidity or unenforceability of any provision hereof shall not affect nor impair any other provision hereof.
h. Paragraph Headings. Paragraph headings in this Agreement are for convenience only and shall not be deemed to modify, interpret or limit the provisions hereof.
i. Interest. In the event any money obligation described herein is not paid when due, interest shall accrue (both before and after judgment) thereon at the greater of the Annual Percentage Rate of eighteen percent (18%) per annum or at the highest legal rate.
j. Authorization. The individuals who have signed this Agreement represent and warrant that they are duly authorized to execute this Agreement, in either their individual or representative capacity as indicated, and that this Agreement is enforceable according to its terms.
k. Assignment. No interests or obligations under this Agreement are assignable without the written consent of all parties. If such consent is given, no assignment shall relieve any party from the performance of all of the covenants and conditions set forth herein.
l. Limitations of Warranties. It is expressly understood and agreed between the parties hereto that there are no warranties, representations, covenants, or agreements between, the parties hereto except as specifically set forth herein.
m. Right of Offset. None of the payments set forth in this Agreement shall be subject to any right of offset or abatement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year above written.
UTAH WEBWORKS, INC.
/s/ ---------------------------------- Lamar Taylor - President
AMERICAN HOME BUSINESS ASSOCIATION, INC.
/s/ ---------------------------------- Larry Brockman - President
This Reseller Agreement is made and entered into this 8 day of October, 1998 by and between Utah WebWorks, Inc. ("UWI"), a Utah corporation, and ________________________________ ("Reseller").
For ten dollars and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties mutually agree as follows:
1. Use of Software and Services Provided. UWI has created software known as Visual WebTools, which is accessible via the Internet. Said software shall hereinafter be referred to as "the Software". UWI will provide licenses to use the Software to the Reseller's End Users for the purpose of creating Internet projects for the fees set forth herein.
2. Pricing. Reseller agrees to pay UWI according to the Pricing Schedule, which is attached hereto as Exhibit A and incorporated herein by reference.
3. Payment Terms. The following payments terms shall apply:
1. Time of Payment. Reseller agrees to pay UWI the amounts due within five business days after receipt of UWI's invoice.
2. Payment Not Contingent. The amounts due UWI from Reseller are not contingent upon receipt of payment to Reseller by the End User.
4. Use of Purchase Agreement With End User. Reseller agrees to have each End User sign a Purchase Agreement, which agreement has been provided by UWI to Reseller.
5. Training of Reseller. UWI will provide Reseller with initial, training with respect to the use of the Software. Said training shall consist of up to 5 days of on site training during the first three months after the date of this Agreement as requested by Reseller.
6. Support of End User. Reseller shall be responsible to provide all support for the End Users solicited by Reseller. If End User requests support form UWI, said support will be provided by a 900 telephone number with appropriate charges assessed to the End User. Until otherwise notified, Reseller may represent to End Users that UWI will provide support, for which charges will be assessed at the rate of one dollar per minute billed to the nearest one minute interval and that such rates will prevail until End User is otherwise notified by UWI.
7. Use of Software. Reseller will use its best efforts to assure that the End User will not use the Software in any way which violates any international, federal, state or local laws, including without limitation, laws dealing with copyrights, indecent material, misrepresentation or other illegal or improper purpose. End User shall not send or allow anyone else to send any unsolicited e-mail messages or advertising as relates to the Software, domain or web site of End User. UWI reserves the right to terminate services for any End User which is breach of this paragraph.
8. Sales Materials. UWI will make available any sales materials it has developed relating to the Software. If Reseller produces its own sales materials, said materials shall first be approved by UWI in writing.
9. Independent Contractor. Reseller is an independent contractor and is not authorized to make any representations or incur any obligations on behalf of UWI without UWI's written permission.
10. Warranty Limitation.
1. Limitation. NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARE MADE AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER MATER WITH RESPECT TO THIS AGREEMENT, unless specifically set forth herein.
2. Service. UWI makes no warranties as to the delivery, completeness, accuracy or relevance of information provided to End User through the use of the Software.
3. Reseller Indemnified. UWI will indemnify Reseller against any damage claims by End users resulting from the fault of UWI in failing to reasonably provide access to UWI's servers with regard to the use of the Software or to provide support pursuant to this Agreement or the Purchase Agreement with End User. UWI does not assume responsibility for service interruptions, delays, non-delivery of information, or the End Users inability to access UWI's servers which are beyond UWI's control such as power outages, telephone line failures, acts of God or similar circumstances. For service interruptions which are reasonably within UWI's control, UWI shall have 15 days to correct said service interruption without any recourse from Reseller.
11. Payment for Internet Domain Name. UWI and Reseller agree to pay and share equally the fees due Network Solutions, e.g. Internic, to acquire the use of a domain name. T he End User shall be responsible to pay these charges after the first two years of their Purchase Agreement.
12. Invoicing End User. Reseller shall be responsible to invoice and collect amounts due from End Users.
13. Default. Any breach of the terms of this Agreement by Reseller or UWI, which is not cured within thirty days after notice, shall constitute a default under this Agreement.
14. Termination of Agreement. Upon default by Reseller, UWI may elect to terminate this Agreement upon ten days written notice and shall be entitled to collect any unpaid amounts that are due pursuant to this Agreement. In addition, after default, UWI shall be entitled to any other remedies allowed under Utah law. In the event this Agreement is terminated, UWI can take over and/or transfer and service the End Users that were solicited by Reseller and enter into new Purchase Agreements. However, all commissions and residuals, as those terms are defined herein, which would be due Reseller based upon fees and charges paid by End users who have signed Purchase Agreements prior to the termination of this Agreement, shall not be forfeited by Reseller upon termination of this Agreement but shall continue for a period of twelve months from the date of termination so long as the particular End User continues to utilize services of UWI without substantial interruption. For purposes of this paragraph, substantial interruption shall mean at least six months. UWI will pay Reseller its commissions and residuals on the first day of each month after receipt of fees from any End User to which Reseller is entitled to commissions or residuals, less a twenty five percent fee for servicing said accounts after default.
For purposes of this Agreement, the following definitions shall apply:
1. Commissions. The term "commission" as used herein shall mean the entire purchase price and fees paid by End User under the Purchase Agreement less the amount owed to UWI by Reseller under the price schedule attached hereto as Exhibit A.
2. Residuals. The term "residuals" shall mean the entire purchase price and all fees paid by End User in any year subsequent to the first year after execution of a Purchase Agreement, less amounts owed to UWI by Reseller under the price schedule attached hereto as Exhibit A.
15. Indemnification. Reseller agrees to indemnify and hold UWI harmless against, and in respect of, any and all claims, losses, expenses, costs, obligations, and liabilities they may incur by reason of Reseller's failure to perform any of its warranties, guaranties, commitments, or covenants set forth in this Agreement. If a party shall bring suit to enforce this indemnification provision, the party making the indemnification shall be liable for all costs and expenses, including fees of attorneys, incurred in prosecuting such action (or any appeal thereto), and such costs and expenses shall be included in any judgment that may be rendered.
16. Arbitration. In the event of a dispute under this Agreement, the parties agree that any dispute shall be resolved by arbitration according to the rules of the American Arbitration Association. The arbitration hearing shall be held in Salt Lake City, Utah. One arbitrator shall be selected. The costs of arbitration shall be equally divided between the parties. Each party shall pay their own attorney's fees.
17. Dealer Network. Reseller may establish a network of dealers, which shall have the right to resell the Software to End Users. UWI agrees not to directly solicit any party while they are actively reselling the Software for Reseller.
18. Exclusivity. As otherwise provided in this paragraph, UWI shall not solicit or contract with any party within Salt Lake County, in the State of Utah for the purpose of establishing a dealer network as described above so long as Reseller meets its milestones in sales as set forth on Exhibit B, attached hereto and incorporated herein by reference. For parties in Salt Lake County which inquire of UWI about purchasing the Software, or selling the Software to businesses in Salt Lake County, UWI agrees to refer them to Reseller for sale of the Software within Resellers sales organization. Notwithstanding any provision hereof to the contrary, UWI may solicit and establish dealer networks with the parties listed on Exhibit C, attached hereto and incorporated herein by reference. UWI agrees to limit any future Resellers form selling the Software within Salt Lake County, unless said sales are conducted from outside said county without face to face contact.
19. Retail Price Stipulations. Reseller agrees to sell the Software according to the price schedule attached hereto as Exhibit A. Said price schedule may be revised by UWI at its sole discretion and redistributed to its Resellers. UWI agrees to provide the same price schedule to all of its Resellers in Salt Lake County so as not to create an unfair market advantage for any Reseller.
20. Use of Name. Reseller may represent themselves as an authorized dealer of UWI. Reseller agrees to use UWI's name, logo, slogan or anything, which represents the corporate image of UWI or the Software subject to approval by UWI. Reseller agrees to represent the Software and its capabilities accurately and correctly and agrees not to make false claims or representations as to the same.
1. Notice. All demands and notice to be given hereunder, if any, shall be personally delivered or sent by registered mail addressed to the respective parties at their postal addresses as of the date of this Agreement or to such other address as each may hereafter designate in writing.
2. Successors. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors and assigns.
3. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties and supersedes all prior agreements or understandings with respect to the subject matter of this Agreement.
4. Amendment. This Agreement may not be altered or amended except by a subsequent written agreement executed by all of the parties hereto.
5. Governing Law. The terms of the Agreement shall be governed by and construed in accordance with Utah law. The parties agree that any legal proceedings relating to the subject matter of this agreement shall be brought exclusively in the State of Utah. The parties represent to each other that the Agreement to bring legal proceedings exclusively in the State of Utah will not place a serious inconvenience or be unfair or unreasonable to any of the parties hereto.
6. Severability. If any of the terms and conditions of this Agreement shall be declared invalid by a tribunal or entity having jurisdiction thereof, the application of such provisions to parties or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each of them not so declared invalid or unenforceable shall be valid and be enforced to the fullest extent permitted by law.
7. Place of Payment. The obligation to make payment as provided herein shall be made in Salt Lake County, State of Utah.
8. Interest. In the event any money obligation described herein is not paid when due, interest shall accrue (both before and after judgment) thereon at the Annual Percentage Rate of eighteen percent (18%) per annum.
9. Authorization. The individuals who have signed this Agreement represent and warrant that they are duly authorized to execute this Agreement, in either their individual or representative capacity as indicated, and that this Agreement is enforceable according to its terms.
10. Assignment. No interests or obligations under this Agreement are assignable without the written consent of all parties. If such consent is given, no assignment shall relieve any party from the performance of all of the covenants and conditions set forth herein.
22. Sale of UWI. In the event that UWI is sold, this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year above indicated.
Utah WebWorks, Inc.
Visual WebTool(TM) Reseller Pricing Guide
Product Reseller Cost MRP WebWizard $500.00 $1,500.00 WebWizard - FPA $335.00 $1,005.00 WebShopper TBD TBD WebChannels TBD TBD WebProfiler TBD TBD WebStats TBD TBD
Visual WebTool(TM) Reseller Sales Schedule
Month Number of Sales of WebWizard or WebWizard FPS October 1998 5 November 1998 10 December 1998 20 January 1999 20 February 1999 35 March 1999 50
For 6 months following March 1999 the number of sales shall be at least 50 per month.
For 4 years starting in September 1999 the number of sales shall be at least 75 per month.
Utah WebWorks(TM) Prospects - State of Utah
Global Marketing Alliance (GMA)
The American Home Business Association (AHBA) Home Business Works (HBW)
This agreement made and entered into as of the 11th day of January, 1999, by and between Westgate Business Center, hereinafter referred to as "Lessor" and Utah Webworks, Inc., of 180 South 300 West, Suite 400, Salt Lake City, Utah 84101, Chris Larsen (h) 523-5915 and Lamar Taylor (h) 583-6211, hereinafter referred to as "Lessee."
The Lessee desires to lease from the Lessor the Premises described herein, and the Lessor is willing to enter into such lease on the terms and conditions set forth hereafter.
NOW, THEREFORE, in consideration of their mutual covenants and agreement contained herein, the Lessor and Lessee hereby agree as follows:
1. Premises Leased to Tenant.
(a) Lessor hereby leases and demises to Lessee those certain premises more particularly described upon Exhibit A, attached hereto and incorporated herein by reference thereto, which are located at 200 South and between 300 West and 400 West, Salt Lake City, Utah. Lessee hereby leases and takes from the Lessor on a temporary lease those premises which are outlined in red on a copy of the floor plan of the building, Exhibit A, bounded by the interior surfaces of the floors, walls, ceilings, windows and doors, together with all fixtures and improvements contained therein.
(b) The space identified on Exhibit A constitutes a portion of a group of buildings identified as the Westgate Business Center with over 200,000 square feet of floor space.
(c) Lessee shall have a nonexclusive right-of-way with respect to the leased premises, its improvements and the land on which they are located as may be reasonably necessary for access to and ingress and egress from the premises and the right to use for necessary purposes along with other lessees and users of the buildings any improvements associated with the building such as rest rooms and other non-restricted common areas. Lessee shall have a nonexclusive right to the use of the parking lots as required for reasonable use of the space leased and occupied by lessee, but Lessee is hereby advised that on occasion parking lots are leased for other events after 5:30 p.m. on weekdays and on weekends and spaces may not always then be conveniently available.
(d) It is expressly agreed that Lessee shall utilize ____ parking spaces at $15 per stall per month in the parking lots on a regular basis.
2. Term of Lease. This lease shall commence on January 15, 1999, and shall continue through December 31, 2002, for a total of 36 months. In the event Lessee remains in tenancy after the expiration of this lease, either party may terminate by giving the other party written notice of at least thirty (30) days prior thereto; but without such 30-day written notice this lease shall continue upon the same terms, covenants and conditions as before, on a month-to-month tenancy basis until terminated.
3. Rent and Payment of Rent. Lessee agrees to pay to the Lessor as rental for the space leased on a regular monthly basis the amount of $5,940.00, which payment shall be due on the first day of each month and shall be late after five o'clock p.m. on the fifth day of each month. All late payments shall bear a five percent (5%) late fee equal to $279.00 for each month for which the payment is received after the fifth day. All payments are payable at Lessor's office at 180 South 300 West, Suite 120, Salt Lake City, Utah 84101, in advance and without demand, claims set-offs, or counterclaims of any kind against the Lessor. The Lessee's failure to pay such payments and late fees shall be a material breach of this lease. The payments shall be the same amount for each month except for the second month of this lease which shall be pro rated to the amount of $ N/A and shall be due on ________, 19_____.
Lessee to "use" Front Reception console but it shall remain property of Lessor and shall be returned to Lessor upon move-out.
Lessee shall have permission to install sign in nail across from elevator.
Plus $340 Deposit transferred from Suite 450 Lease (for extra office).
4. Security Deposit. Concurrently with the execution of this Lease, Lessee shall deposit with the Lessor the sum of Five Thousand Six Hundred dollars ($5,600.00) to be held as a security deposit to insure the faithful performance by Lessee of all of the terms, covenants, and conditions of this lease. When Lessee terminates the lease and vacates the leased premises, Lessor shall refund to Lessee within ten (10) days said deposit less any sum spent by Lessor to clean up the premises or repair damages caused by Lessee during the term of its lease.
5. Use of Premises. The Lessee shall use the premises for office space and/or warehousing or storage of materials. Such materials can include paper products of all types but shall not otherwise include flammables, explosives, nor give off gases or odors, shall not contain foodstuffs except in sealed containers, shall not contain anything living, except as otherwise specifically provided herein, and shall not in any manner be offensive to nor cause danger to the other tenants of the building nor shall it violate any provision of Lessor's insurance policy covering the building. Lessee shall not keep nor use on the premises any article, item or thing prohibited by the terms of the hazard insurance policy covering the building. Lessee shall not commit nor allow to be committed any waste on the premises or any nuisance or act which would disturb the quiet enjoyment of the space by any other occupant of the building. Lessee shall at its own cost and expense comply with all applicable requirements of all municipal, county, state, federal and other governmental authorities at all times and shall obtain all permits or licenses and approvals that may be necessary for conduct of Lessee's business in the Premises.
6. Condition of Leased Premises. Lessor shall provide Lessee within the leased premises with secure walls, doors, windows and ceilings. The building elevator, all access doors to the building, and access doors to the leased premises shall be in working order. Lessee shall be provided with keys to any areas necessary to allow it free and unencumbered use of its leased premises. Office spaces of the building shall be heated and air conditioned but no other areas. All other conditions of the building are accepted by Lessee as is with no additional burden on Lessor to make improvements or changes during the term of the lease except as expressly provided herein. At the termination of the lease, Lessee shall peacefully surrender the premises and all improvements therein to Lessor in the condition as good as when received, subject to reasonable wear and tear.
7. Maintenance of Premises. Upon accepting the leased premises, Lessee shall pay all costs of maintenance in regard to the leased premises including any decorating or improvements required by it during the term of the lease to keep it in good order. Lessor shall provide adequate electrical power to the premises but Lessee shall replace any light globes or tubes which shall burn out during the term of the lease. Any structural repairs or outside glass breakage, trash removal and snow removal shall be at the expense of Lessor. Any damages caused by Lessee shall be repaired at the expense of Lessee. No alterations to the premises shall be permitted by Lessee without the express prior written consent of Lessor.
8. Taxes and Utilities. Lessor shall pay all general property taxes levied or assessed on the leased premises during the term of this lease. Lessee shall pay all personal property taxes assessed upon the materials placed within the leased premises by Lessee. Lessee shall pay all taxes, fees and permits assessed to it or its business upon the leased premises during the term of this lease. In the event Lessee uses any electrical equipment other than those required for normal office use, Lessee shall pay any costs incurred in the use of such equipment including utility charges.
9. Insurance. Lessor shall provide and maintain throughout the term of the lease a policy of fire and extended coverage insurance upon the premises and all fixtures and improvements thereon against loss by fire and other casualty in an amount determined by Lessor in its reasonable discretion, but such policy shall not insure Lessee's property nor office contents. Lessee shall at its own cost and expense maintain throughout the term of the lease a policy of public liability and property damage insurance against all liabilities related to its use of the premises with limits of not less than $100,000 per occurrence for personal injuries to or deaths of persons and not less than $300,000 for damage to property resulting from any one occurrence. The policy shall name as insured the Lessor and the Lessee and persons designated by Lessor. In the event Lessee fails to maintain such a policy Lessee shall be deemed to be a self-insurer for the same coverages. Lessee shall furnish Lessor with satisfactory evidence of such insurance within fifteen (15) days following Lessor's written request. Such policy shall provide that Lessor be given at least fifteen (15) days notice prior to the effective date of cancellation or of any material change in such policy of Lessee. Lessee shall obtain and maintain any required workmen's compensation insurance upon its own employees. Lessee waives all rights of recovery against Lessor or its agents on account of loss or damage occasioned to Lessee to the extent that such loss or damages are covered under any insurance policies carried by Lessee in force at any time of such loss or damage. Lessee shall cause each insurance policy obtained by it hereunder to provide such waiver.
10. Indemnification and Liens. Each party agrees to protect, defend, indemnify and save harmless the other from all claims, liability and damages arising out of or in connection with injuries to any person or persons or the property of any person arising out of or in any manner related to Lessee's operations on the leased premises. This indemnification applies to all acts or omissions of Lessee, its agents, employees and invitees and to all acts and omissions of Lessor, its agents, employees and invitees except and only for the negligence of Lessee or Lessor or their agents or employees and invitees.
11. Casualty Loss. If the premises are completely destroyed by fire or other casualty, this lease shall terminate on the date of such fire or casualty, and no rental amount shall accrue or be paid on this lease thereafter. In the event of partial destruction or damage so as to render the premises totally or partially untenable, either party may terminate this lease by giving written notice thereof to the other party within fifteen (15) days after said destruction or damage. In the event of either of the foregoing terminations, the Lessor shall not be liable for damages of any kind because of such termination. In the event of any such casualty, Lessor shall give written notice of such event within three (3) days of such occurrence.
12. Condemnation. If at any time during the term hereof the leased premises or any part thereof is taken or condemned by public authority under the laws of eminent domain, this lease shall terminate and all compensation if any awarded by reason of the taking shall be paid to Lessor, and Lessee shall not be entitled to any portion of the condemnation award.
13. Assignment and Subletting. Lessee shall not have the right to assign or encumber its rights in this lease or in the premises or to let or sublet premises or any part thereof without the prior written consent of Lessor. No consent to any such assignment, encumbrance or subletting shall constitute a waiver or consent as to any future assignment, encumbrance or subletting.
14. Inspection of Premises. Lessor may at all reasonable times enter upon the leased premises for the purposes of inspection.
15. Signs. Lessor shall provide a directory to the premises and shall identify by appropriate signs the location of Lessee's business space. No other signs of any kind shall be erected or displayed by Lessee without the prior written consent of Lessor.
16. Termination. Upon the expiration of the term of this lease or upon any sooner termination, Lessee shall in ten (10) days thereafter remove from the leased premises all of its personal property and clean up and remove from the premises all rubbish and debris and restore and leave the premises in an orderly and safe condition and surrender possession thereof to Lessor, also subject to Lessor's final approval. In the event Lessee fails to comply with these requirements, Lessor may undertake such removal and clean-up at the sole cost of Lessee. In the event Lessee fails to make payment of any rentals due hereunder or otherwise defaults in the performance of any covenant or condition of this lease, Lessor may at its option give Lessee written notice of intention to terminate the lease. Lessee shall have a period of ten (10) days after such notice within which to cure such default. At the expiration of said ten (10) days the lease shall terminate without further notice and upon such termination all rights of Lessee hereunder shall cease and terminate and Lessor may reenter and retake possession of the leased premises without legal process and remove Lessee therefrom. No such termination shall release Lessee from the payment of any sums that may then be due or from any other obligations it has undertaken under the terms of this agreement. Lessee hereby expressly waives any and all rights of redemption granted by present or future laws in the event of such default.
17. Remedies. In addition to the remedies provided elsewhere herein, Lessor shall have all remedies now or hereafter provided by law for enforcing the provisions of this lease and the Lessor's rights hereunder. In the event of any default hereunder by the Lessee, Lessor shall be entitled to recover from Lessee all costs and expenses incurred by Lessor in the enforcement of this lease agreement and its rights hereunder including reasonable attorneys' fees and costs of court. In the event of default by Lessor, Lessee shall give Lessor written notice thereof specifying the default and Lessor shall have thirty (30) days within which to cure the default and Lessor shall have thirty (30) days within which to cure or rectify the same. Lessee's sole remedy in the event of a breach or default by Lessor shall be to terminate the lease agreement in which event Lessee shall vacate the premises within fifteen (15) days after such termination. If Lessor does not elect to terminate Lessee's obligations to pay rent and perform according to the lease, this agreement shall continue unabated.
18. Notices. All notices to be served hereunder by either party shall be in writing and shall be served by registered U.S. Mail addressed to the party to be notified with return receipt requested. Any notices to Lessor, Westgate Business Center, shall be sent to the attention of Richard F. Gordon, 180 South 300 West, Suite 120, Salt Lake City, Utah 84101. All notices to the Lessee shall be sent as follows:
Utah Webworks, Inc.
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
or to such other address as the parties from time to time may hereinafter designate by notice to each other.
19. Binding Effect. This lease shall be binding upon and inure to the benefit of the parties hereto and their heirs, legal representatives, successors-in-interest and assigns.
20. Enforcement. This agreement shall be interpreted in accordance with the laws of the State of Utah and all actions brought to enforce it shall be brought in the courts of the State of Utah and in the Third Judicial District.
IN WITNESS WHEREOF, the parties do each hereby execute and deliver this lease as of the date above.
LESSEE: LESSOR: Utah Webworks, Inc. Westgate Business Center /s/ Lamar Taylor /s/ Carole Street ------------------------------------- ------------------------------------- President Manager
DRAWING OF OFFICE PLAN ATTACHED HERE
IntelliPAY Inc. (TM)
39899 Balentine Drive, Suite 210
Newark, CA 94560
Re: Letter of Intention between Utah WebWorks, Inc. and IntelliPAY Inc.
This letter is to confirm our various discussions regarding the terms and conditions of a proposed Agreement (Agreement) between Utah WebWorks, Inc., a Utah Corporation with offices at 180 South 300 West, #450, Salt Lake City, Utah 84101 (hereinafter referred to as UWI) and IntelliPAY, Inc., a California Corporation with offices at 39899 Balentine Drive, Suite 210, Newark, CA 94560. (hereinafter referred to as IntelliPAY). The Agreement, among other things, will provide for the various matters as set forth below:
1. IntelliPAY products provided to UWI - UWI will purchase, for a fee, products and services from IntelliPAY to bundle as added value into it's WebShopper product. In consideration of this Agreement IntelliPAY will discount such products and services. These products include merchant accounts, IntelliPAY software and E-Check. IntelliPAY, after receiving a purchase agreement from UWI will setup and install such services on behalf of UWI. IntelliPAY will then bill UWI for the completion of each such purchase agreement. UWI shall pay such invoice no later than 30 days from the date the invoice was issued to UWI.
2. UWI products provided to IntelliPAY - In consideration to sales and marketing efforts of IntelliPAY, UWI will engineer at its cost a scaled down version of its WebWizard product. This product shall be named WebWizard - Retail. UWI will supply this product to IntelliPAY for distribution in sales networks. In consideration of this Agreement UWI will charge IntelliPAY a fixed monthly fee for an unlimited number of WebWizard - Retail accounts. It is understood by the parties that there are up-sell opportunities to recipients of UWIs, Web Wizard - Retail product. It is the intent of the parties that monies received from up sales will be distributed to both IntelliPAY and UWI.
3. IntelliPAY leasing for UWI - UWI wishes to offer payment terms for the sales of UWI products. In consideration of this agreement, IntelliPAY having a relationship with a leasing company intends to allow UWI to send lease applications for potential purchasers of UWI products to IntelliPAY. IntelliPAY intends to perform to the best of their abilities to shop such applications to purchasers of such lease arrangements on behalf of UWI. If an application is purchased, IntelliPAY intends to pay such funds to UWI minus a processing fee which is yet to be determined by the parties.
4. Integration into WebShopper - UWI agrees to integrate the IntelliPAY gateway into its WebShopper product at UWIs cost of integration and maintenance of such integration. IntelliPAY agrees to supply to UWI such documentation and other support as necessary to ensure proper and accurate integration of IntelliPAY with WebShopper.
5. Joint Venture - In order to take advantage of market opportunities IntelliPAY and UWI wish to enter into a joint venture for the creation and implementation of an online shopping mall (mall). When a UWI End User saves a web site using its WebWizard product, the site is saved and can be accessed through either a domain name or by going to world.visualwebtools.com. With this joint venture each web site will also create an electronic store front in this mall. It is anticipated that other services will be added to this mall such as a vacation giveaway product, a yellow page director, a white page directory, press release services, stored value cards and other items as may from time to time may be added by agreement of UWI and IntelliPAY. It is understood by UWI and IntelliPAY that negotiations of payments, sales prices, promotions and other financial arrangements relating to this joint venture have not been discussed at this time of this letter of intent and will be discussed at a future date between the parties.
6. Sales Materials and PR - UWI agrees to create and supply IntelliPAY at no charge, with sales and product fulfillment materials as relates to the marketing, sales and fulfillment of UWI products or other products related to the joint venture mentioned above. IntelliPay agrees to create and supply UWI at no charge, with sales and product fulfillment materials as relates to the marketing, sales and fulfillment of IntelliPAY products.
7. Good Faith - It is understood that the parties hereto agree to the contents hereof and agree to proceed in good faith to work out and consummate the transaction. This letter of intent is intended only to express the desires of the parties hereto and does not constitute a binding agreement. This letter may not be assigned by either of the parties hereto. Neither party shall be responsible for any of the other's expenses in connection with the negotiations, document preparation or transactions contemplated hereby.
If the foregoing meets with the approval of IntelliPAY, kindly so signify, by signing and returning the enclosed duplicate copy of this letter. This Letter of Intent may be executed in any number of counter parts, each of which when executed and delivered shall be deemed to be an original, and all of which together shall constitute one and the same instruments.
Utah WebWorks, Inc.
By: /s/ ___________________________ Lamar Taylor, President/CEO
AGREED TO AND ACCEPTED BY:
By: /s/ ____________________________ Tom Hill, President/CEO
[HANDWRITTEN - Tom Hill 1/13/99:]
UWI agrees not to "go around" or circumvent IntelliPAY to establish new business relationships with any other vendors, partners, or like entities IntelliPAY introduces, and UWI agrees to prevent such introduced companies from "going direct" to UWI unless specifically agreed to by IntelliPAY.
Columbia Financial Group is an investor relations, direct marketing, publishing, public relations and advertising firm with expertise in the dissemination of information about publicly traded companies. Also in the business of providing investor relations services, public relations services, publishing, advertising services, fulfillment services, as well as internet related services.
Agreement made this 26th day of January, 1999, between Pacific Webworks, Inc. (hereinafter referred to as "Corporation"), and Columbia Financial Group, Inc. (hereinafter referred to as "Consultant"):
This Corporation desires to engage the services of the Consultant to perform for the Corporation consulting services regarding all phases of the Corporation's "Public Relations" in the area of investor relations and broker/dealer relations as such may pertain to the operation of the Corporation's business.
The Consultant desires to consult with the Board of Directors, the Officers of the Corporation, and certain administrative staff members of the Corporation, and to undertake for the Corporation consultation as to the company's public relations activities involving corporate relations and relationships with various broker/dealers involved in the regulated securities industry.
1. The respective duties and obligations of the contracting parties shall be for a period of twelve (12) months commencing on the date first appearing above. This Agreement may be terminated by either parties only in accordance with the terms and conditions set forth in Paragraph 7 below.
Services Provided by Consultant
2. Consultant will provide consulting services in connection with the Corporation's "public relations" dealings with NASD broker/dealers and the investing public. (At no time shall the Consultant provide services which would require Consultant to be registered and licensed with any federal or state regulatory body or self-regulating agency.) During the term of this Agreement. Consultant will provide those services customarily provided for a public relations firm to a Corporation, including but not necessarily limited to the following:
(1) Aiding a Corporation in developing a marketing plan directed at informing the public as to the business of the Corporation; and
(2) Providing assistance and expertise in devising an advertising campaign in conjunction with the marketing campaign as set forth in (a) above; and
(3) Advise the Corporation and provide assistance in dealing with institutional investors as it pertains to the Company's offerings of its securities; and
(4) Aid and assist the Corporation in the Corporation's efforts to secure "market makers" which will trade the Corporation's stock to the public by providing such information as may be required.
(5) Aid and advise the Corporation in establishing a means of securing nationwide interest in the Corporation's securities; and
(6) Aid and assist the Corporation in creating a "web site"; and
(7) Aid and assist the Corporation in creating an "institutional site program" to provide ongoing and continuous information to fund managers; and
(8) Aid and consult the Corporation in the preparation and dissemination of press releases and new announcements; and
(9) Aid and consult the Corporation in the preparation and dissemination of all "due diligence" packages requested by and furnished to NASD registered broker/dealers, and /or other institutional and/or fund managers requesting such information from the Corporation.
3. In consideration for the services provided by Consultant to the Corporation the Corporation shall pay or cause to be delivered and in existence to the Consultant on the execution of this agreement 400,000 five year warrants with the following exercise prices:
150,000 warrants at $2.50
100,000 warrants at $3.50
100,000 warrants at $4.50
50,000 warrants at $6.00
4. In the event the shares of the Corporation are not presently trading on any recognized market, the said shares delivered by Corporation to Consultant will, at that particular time, be "free trading," or, if a registration is contemplated, the shares shall have "piggy back" registration rights and will, at the expense of the Corporation, be included in said registration.
Representation of Corporation
5. (a). The Corporation, upon entering this Agreement, hereby warrants and guarantees to the Consultant that all statements, either written or oral made by the Corporation to the Consultant are true and accurate, and contain no misstatements of a material fact. The Corporation acknowledges that the information it delivers to the Consultant will be used by the Consultant in preparing materials regarding the Company's business, including but not necessarily limited to, its financial condition, for dissemination to the public. Therefore, in accordance with Paragraph 6 below, the Corporation shall hold harmless the Consultant from any and all errors, omissions, misstatements, negligent or intentional misrepresentations in connection with all information furnished by Corporation to Consultant, in accordance with and pursuant to the terms and conditions of this Agreement for whatever purpose or purposes the Consultant sees fit to use said information. The Corporation further represents and warrants that as to all matters set forth within this Agreement, the Corporation has had independent legal counsel to advise the Corporation of all matters concerning, but not necessarily limited to, corporate law, corporate relations, investor relations, all manners concerning and in connection with Company's activities regarding the Securities Act of 1933 and 1934, at state Blue Sky laws.
1. Authorized: ____________ shares.
2. Issued: ________________ shares.
3. Outstanding: _______________shares.
4. Free trading (float): ___________ shares.
5. Shares subject to Rule 144 restrictions: _________shares.
6. With regard to the services to be performed by the Consultant pursuant to the terms of this Agreement, the Consultant shall not be liable to the Corporation, or to anyone who may claim any right due to any relationship with the Corporation, or any acts or omissions in the performance of services on the part of the Consultant, except when said acts or omissions of the Consultant are due to its willful misconduct or culpable negligence.
7. This Agreement may be terminated by either party upon the giving of not less than sixty (60) days written notice, delivered to the parties at such address or addresses as set forth in Paragraph 8 below. In the event this Agreement is terminated by the Corporation, all compensation paid by Corporation to the Consultant shall be "back-charged" to Consultant, and payable to the Corporation as follows:
(a) In the event the Agreement is terminated by the Consultant in months 1 through 6, Consultant shall repay to Corporation two thirds (2/3rds) of the fees paid pursuant to the Paragraph 3 above.
(b) In the event the Consultant terminates this Agreement during months 7 through 10, the Corporation shall be entitled to a return of fifty percent (50%) of the fees paid in accordance with Paragraph 3 above; thereafter, all fees paid shall be deemed earned.
(c) In the event of a termination by either party, any repayment of funds or stock due from Consultant to Corporation may be paid either in cash or the equivalent number of shares of the Corporation received by Consultant from the Corporation in accordance with Paragraph 3 above, payable at the option of the Consultant.
The valuation of said shares for purposes of repayment of shares shall be the bid price of said shares of the date shares are tendered back to the Corporation. If there is no bid price, then the price shall be agreed to, by separate writing to be determined by the parties upon the execution of this Agreement.
8. Notice to be sent pursuant to the terms and conditions of this Agreement, shall be sent as follows:
In the event any litigation or controversy, including arbitration, arises out of or in connection with this Agreement between the parties hereto, the prevailing party in such litigation, arbitration or controversy, shall be entitled to recover from the other party or parties, all reasonable attorney's fees expenses and suit costs, including those associated within the appellate or post judgment collections proceedings.
10. In connection with any controversy or claim arising out of or relating to this Agreement, the parties hereto agree that such controversy shall be submitted to arbitration, in conformity with the Federal Arbitration Act (Section 9 U.S. Code Section 901 et seq.), and shall be conducted in accordance with the Rules of the American Arbitration Association. Any judgment rendered as a result of the arbitration of any dispute herein, shall upon bring rendered by the arbitrators be submitted to a Court of competent jurisdiction with the State of Maryland or in any state where a party to this action maintains its principal business or is a Corporation incorporated in said state.
11. This Agreement shall be construed under and in accordance with the laws of the State of Maryland and the State of Utah, and all obligations of the parties created under it are performed in Baltimore County, Maryland, and Salt Lake City, Utah, venue for said arbitration shall be in Baltimore County, Maryland, and Salt Lake City, Utah, and all parties hereby consent to that venue as the proper jurisdiction for said proceedings provided herein.
12. This Agreement shall be binding on and inure to the benefit of the contracting parties and their respective heirs, executors, administrations, legal representatives, successors, and assigns when permitted by this Agreement.
13. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the invalidity, illegality, or unenforceability shall not affect any other provision, and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision had never been contained in it.
Prior Agreements Superseded
14. This Agreement constitutes the sole and only Agreement of the contracting parties and supersedes any prior understandings or written or oral agreements between the respective parties. Further, this Agreement may only be modified or changed by written agreement signed by all the parties hereto.
Multiple Copies or Counterparts of Agreement
15. The original and one or more copies of this Agreement may be executed by one or more of the parties hereto. In such event, all of such executed copies shall have the same force and effect as the executed original, and all of such counterparts taken together shall have the effect of a fully executed original. Further, this Agreement may be signed by the parties and copies hereof delivered to each party by way of facsimile transmission, and such facsimile copies shall be deemed original copies for all purposes if original copies of the parties' signatures are not delivered.
16. Headings throughout this Agreement are for reference and convenience, and in no way define, limit to describe the scope or intent of this Agreement or effect its provisions.
IN WITNESS WHEREOF, the parties have set their hands and seal as of the date written above.
BY: /s/ -------------------------------------- Timothy J. Rieu, President Columbia Financial Group BY: /s/ -------------------------------------- Pacific Webworks, Inc. 180 South West, Suite 220 Salt Lake City, Utah 84101
|NAME: PACIFIC WEBWORKS, INC.|
|CURRENCY: U.S. DOLLARS|
|PERIOD TYPE||3 MOS|
|FISCAL YEAR END||DEC 31 1999|
|PERIOD START||JAN 1 1999|
|PERIOD END||MAR 31 1999|
|TOTAL LIABILITY AND EQUITY||623,676|