U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934
COMMERCIAL CONCEPTS, INC.
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(Name of Small Business Issuer in Its Charter)
Utah 87- 0409620
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
324 South 400 West, Suite B, Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
(801) 328-0540
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of Class)
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PART I
FORM 10-SB
ITEM 1. THE BUSINESS OF THE COMPANY.
Commercial Concepts, Inc., (the "Company") has made forward-looking
statements in this Form 10-SB. Forward-looking statements are statements
regarding the Company's "belief," "anticipation," "desire," "plan,"
"expectations," etc. Such statements are subject to risks and uncertainties. The
forward-looking statements include information about future results of the
Company's operation and are made with the understanding that actual future
results and events will vary, perhaps significantly, from the beliefs,
anticipation, plans, desires and expectations of the Company at the present
time.
History and Development of the Company
The Company was incorporated in the state of Utah on March 1, 1984. The
Company was originally organized to engage in the milling and recovery of
precious minerals. In November 1997, the Company's last asset, an option to
acquire mining property, expired. As a result, the Company changed its business
focus by acquiring the rights to certain software developed to fix computer date
recognition problems associated with the year 2000 ("Y2K"). The Company acquired
computer equipment and hired software developers to refine and further develop
the program. The software tests the internal clock found in personal computers
each time the computer is turned on to determine if the date is correct. If the
date is incorrect, the software permits the user to correct the date on a
one-time basis or automatically each time the user turns-on the computer. The
Company holds a registered copyright for such software which it began marketing
in April, 1998. The software is sold at Fedco Drug Stores, Navarro Supermarkets,
and through Tiger Direct, a mail order catalog that has a circulation of over
1,000,000. The software is also marketed on the Company's web site. There are a
number of other software products, including Check It 98, 2000 Tool Box, Year
2000 Now, Norton 2000, and Check 2000 PC, that are marketed by larger companies
with more resources and a better marketing network than the Company. Because of
its late entry into the market and lack of name recognition and a limited
marketing network, the Company's sales of the Y2K software have been
insignificant and are expected to disappear by the end of the year 2000.
Nevertheless, the computer equipment acquired and software developers
hired by the Company to develop the Y2K software provided the means for the
Company to become a software development and technology company. Building on
this foundation, the Company hired a new President and Chief Executive Officer
in February, 1999, a new Executive Vice President in July, 1999 and a new Chief
Financial Officer in August, 1999. In addition, in June, 1999, the Company
acquired 100% of the stock of Advice Productions, Inc. a graphic design company
specializing in customized video marketing and training tools. The assets and
technology of Advice Productions enables the Company to create customized
compact discs.
Products and Services
The Company's primary focus is on the development of "canned" software
programs. The Company's primary source of revenue, however, presently comes from
the development of
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customized software and products for clients. Customized software development
permits the Company to generate revenues from research and development. The
Company's programmers develop customized software programs to meet specific
needs such as data entry and retrieval, multi media, and information
dissemination. The Company generally retains all rights, title and interest in
the customized software it develops, including source codes, with the
expectation that the Company will revise and improve such programs so the
programs can be "canned" and sold to other customers. The Y2K software program
is the only canned software program marketed by the Company at the present time.
The Company, however, is developing several additional software products.
Electronic Brochures. Using photos, logos, advertising and other
information provided by clients, and templates it has designed, the Company
creates customized presentations and advertising on mini-compact discs. The
compact discs are designed to replace traditional printed advertising and
brochures, and even business cards. The compact discs come in a variety of
designs (the most common of which is a disc the size of a business card) and can
be uniquely packaged for each client. Because the Company uses a pre-designed
template, the compact discs can be created at an affordable cost of between
$3,000 and $5,000. The average price of compact discs from the Company's local
competitors is approximately $10,000. The Company's lower production costs give
it a strategic advantage. The Company is currently developing software that will
permit clients to create their own presentations using the software thereby
further reducing production costs. However, there can be no guarantee that the
software will be developed, or if developed, that it will not be obsolete
when complete, or that it will be accepted by the public.
Medical Imaging Software. The Company is presently under contract with
Intermountain Health Care ("IHC") to develop medical imaging software to capture
images generated by equipment used in medical procedures such as ultra-sound,
catheter cameras, MRI's, and CAT scans. The software, which is currently being
beta tested in nine operating rooms at IHC's Cottonwood Hospital, is designed to
store images generated during medical procedures on a computer network. The
software permits physicians and administrators to access and notate the images
during or after the procedure from any computer on the network. The software
also reduces the storage space required to maintain the images. The Company has
by contract with IHC retained all rights, title and interest in and to the
software except that the Company has agreed to license IHC to use the software
in up to 30 operating rooms at no additional cost. The Company has filed a
patent application to protect the source code. The Company expects beta testing
to be completed by January 30, 2000. The Company then expects to market the
software to other hospitals and medical professionals nationwide. The Company is
aware of only one direct competitor, Smith & Nephew Dionics, Inc., which markets
a product that stores medical images on a floppy disk and is not compatible with
many networks. Unlike Smith & Nephew Dionics' program, the Company's software is
a cross-platform system that works on most networks or as a stand-alone product
and stores the data directly on a hard drive.
Screen Saver Technology. The Company has developed technology for an
interactive screen-saver for which a patent is pending. The screen saver
technology permits network administrators to place any image they choose on the
computer screen and to change or update the images as often as they desire. The
screen saver software is also interactive. A link to a web site or a document
can be placed on the screen saver to connect users to the advertised site if the
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user clicks on the link. The screen saver also monitors when the screen saver
appears and who is logged on to the computer when it appears and records the
information for marketing purposes. The Company expects to generate revenues
from one-time licensing, advertising and annual maintenance fees.
The Company believes that there are several uses for this software.
First, businesses can use the screen saver to disseminate information and
control what employees have on their computer screens when they are not in use
since the program records when the screen saver appears. Second, schools and
other organizations can use the program to raise funds from advertising as well
as to disseminate information. Based on initial market research advertisers are
paying 2(cent) per impression per day for banner advertisements. The Company
believes, although it has conducted limited research to determine, that
advertisers will pay at least 1(cent) per impression for screen saver
advertising.
The Company faces competition in the screen saver market from numerous
competitors, some of whom have greater resources than the Company and technology
presently in the market that permits network administrators to place any image
they choose on the computer screen and to change or update the images as often
as they desire. To the knowledge of the Company, none of screen saver software
in the market is interactive. To be exact, none of the existing screen saver
software keeps a record of when the screen saver appears and who is logged on
the computer when the screen saver appears, nor does such software permit links
to be placed on the screen saver. The Company believes the interactive features
of its screen saver software program will give it a competitive advantage.
However, there can be no assurance that the Company will be first to market with
this technology, that its patent application will be approved or that there will
be sufficient public interest to successfully market the software.
Video Conferencing Technology. The Company has developed technology to
compress video images transmitted over telephone lines thus reducing the
bandwidth and therefore the time required for transmission. High-speed
transmission of high-resolution video images presently requires a bandwidth of
approximately 124 Kbs. The video conferencing equipment required to handle such
bandwidth can be expensive, ranging from between $10,000 to $100,000. By
compressing the bandwidth less sophisticated and less costly equipment can be
used for video conferencing. A third party is presently using the Company's
technology to operate video conferencing facilities in Guatemala City and Miami,
Florida. The Company anticipates the opening of additional video conferencing
centers in the year 2000. The Company is continuing to develop its video
conferencing technology in hopes of reducing the cost of video conferencing to
an amount comparable to the cost of a telephone call.
Merchanttranders, Inc.
Merchanttranders, Inc. is a wholly owned subsidiary of the Company.
Merchanttranders was organized in February 1999, as an e-commerce business to
offer goods and services to the general public and members on a web site located
at www.merchanttranders.com. Merchanttranders members are expected to receive
discounts on all products and services sold plus benefits like discounts on
hotels, rental cars and airfares. The general public is not expected to receive
discounts or benefits. Merchanttraders' primary source of revenues is expected
to come from selling memberships. Merchanttraders is negotiating with
manufacturers and suppliers to advertise and sell their products and services
on-line and hopes to commence operations by mid-2000.
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Sales and Marketing
The Company has two full-time sales persons, but expects to rely on
wholesale distributors and sales persons with established distribution networks
and contacts to market its products as they are developed. Such persons or
organizations will be paid on a commission basis.
Employees
As of December 31, 1999, the Company had 14 full and part-time
employees. None of the Company's employees are represented by a union or other
collective bargaining group. Management believes its relations with its
employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
General
Effective March 1, 1998, the Company began earning revenues and was no
longer classified as a development stage company.
Results of Operations
Six Months Ended August 31, 1999 Compared to the Six Months Ended
August 31, 1998.
Sales increased by $45,244 or 79%, to $102,530 for the six months ended
August 31, 1999 from $57,286 for the comparable period in 1998. This increase
was a result of sales of Quick Fixx 2000(R) software and customized software and
computer products for clients. Costs of sales increased from $6,390 to $36,542
as the result of the increased sales.
Marketing and selling expenses decreased by $17,727 or 83.35%, to
$3,541 for the six months ended August 31, 1999 from $21,268 for the comparable
period in 1998. This decrease was a result of focusing our sales efforts for
Quick Fixx 2000(R) on the domestic market and only paying commissions and
royalties on product that was actually bought and paid for. The Company expects
its marketing and selling expenses to increase as it continues to increase its
marketing and selling efforts as it acquires or develops additional technology
products and services.
General and administrative expenses increased by $207,550 or 243%, to
$352,725 for the six months ended August 31, 1999 from $145,175 for the
comparable period in 1998. This increase was a result of an increase in the
number of employees and consultants employed by the Company as well as legal
expenses. The Company expects that such expenses will continue to increase as
the Company's operations expand and continue to develop.
The Company did not incur research and development expenses for the six
months ended August 31, 1999, nor in the comparable period in 1998. The
Company's practice is to develop future products from the customized software it
develops. Its research and development expenses are therefore substantially paid
for by customers who retain the Company to develop customized software programs.
The Company typically retains all rights to the software it develops.
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During the six months ended August 31, 1999, the Company incurred
$5,512.83 of expenses in connection with the settlement of a lawsuit by Rex
Pitcher, a shareholder, against the Company based upon the sale by a former
officer of the Company of stock of the Company held by that officer to Mr.
Pitcher. The former officer allegedly made promises and incurred obligations
that he could not legally fulfill.
Fiscal Year Ended February 28, 1999 Compared to the Fiscal Year Ended
February 28, 1998.
For the first time in its operating history, the Company generated
revenue from sales in fiscal year 1999. The amount of such revenue was $64,557.
This was a result of sales of Quick Fixx 2000(R) software. Costs of such sales
equaled $31,336.
Although the Company did not generate revenue until fiscal year 1999,
it did incur marketing and selling expenses in the prior fiscal year. Marketing
and selling expenses increased by $35,999 or 720%, to $40,999 for the fiscal
year ended February 28, 1999 from $5,000 for the fiscal year ended February 28,
1998. This increase was the result of increased marketing efforts. The Company
expects to continue to increase its marketing and selling efforts as it acquires
or develops additional technology products and services and as the current
products are taken to market.
General and administrative expenses increased by $313,820, or 671%, to
$360,571 for the 1999 fiscal year end from $46,751 for the 1998 fiscal year end.
This increase was a result of an increase in the number of employees and
consultants employed by the Company as well as legal expenses. The Company
expects that such expenses will continue to increase as the Company's operations
expand, but at a slower rate, as the Company continues to develop.
There were no research and development costs in fiscal year 1999.
Liquidity and Capital Resources
At February 28, 1999, the Company had cash and other current assets of
$94,535 as compared to cash and other current assets of $6,106 at February 28,
1998. The increase of $88,429 was primarily due to a private placement of the
Company's common stock pursuant to Rule 504 of Regulation D promulgated under
the Securities Act of 1933 (the "1933 Act") and an increase in revenues from
sales. The increase was partially offset by increased general and administrative
costs and payments on debt obligations. As of February 28, 1999, the Company had
no long-term debt obligations.
The Company generated $155,000 from the private placement of 700,000
shares of common stock in March of 1999. The Company also borrowed $15,000 from
an individual and an additional $10,000 from a second individual, neither of
whom are shareholders of the Corporation, in August of 1999 pursuant to
promissory notes, at the rate of 10% per annum with each note being respectively
due and payable on August 12, 2000 and August 16, 2000. From August 26, 1998 to
November 28, 1998 the Company raised a total of $310,000 from a private
placement of its common stock.
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ITEM 3. PROPERTIES.
The Company conducts its business operations at 324 South 400 West,
Suite B, Salt Lake City, Utah, where it has approximately 7,105 square feet of
office space under lease through February 29, 2004. Under the terms of the
lease, the Company pays $6,051 per month, which amount increases by 4% annually.
There is no renewal option under the terms of this lease. The Company, however,
has an option to purchase the office building in which its offices are located
for $800,000. The option expires on October 31, 2000. Management of the Company
believes that it will either be able to negotiate a new lease on its existing
space or obtain suitable other space in the Salt Lake City area upon the
expiration of the existing lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of December 31, 1999 by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's common shares; (ii) each of the Company's directors; (iii) each
executive officer of the Company; and (iv) all the directors and executive
officers as a group (4 persons). As of December 31, 1999, the Company had
23,151,330 shares of common stock issued and outstanding.
NAME AND ADDRESS NUMBER OF PERCENT OF
OF BENEFICIAL OWNER SHARES OWNED CLASS
- ------------------- ------------ -----
George E. Richards Jr. 2,147,500(1) 8.49%
1992 S. Chokecherry
Bountiful, Utah 84010
Scott G. Adamson 2,121,750(2) 8.4%
2485 S. Elaine Dr.
Bountiful, Utah 84010
Ron Poulton Trustee of Tech Trust 2,236,000 8.81%
136 E. South Temple, Suite 1700-A
Salt Lake City, Utah 84111
Wilfred R. Blum 1,785,000(3) 7.16%
1756 E. Wasatch Blvd.
Sandy, Utah 84092
- ------------------------------
1 The shares were issued to Richards & Associates, Inc., a Utah
corporation, of which Mr. Richards is the sole shareholder, on May 5,
1999, as described in Item 7 - Related Party Transactions.
2 Shares were acquired by Mr. Adamson on August 9, 1999 as described in
Item 7 - Related Party Transactions.
3 Consists of 685,000 shares held by Blum, Inc., a Utah corporation,
of which Mr. Blum is a controlling shareholder, 300,000 shares held by
Laura Blum, 100,000 shares held by Amber Blum, 100,000 shares held by
Karli Blum, 100,000 shares held by Kerri Blum (all immediate family of
Mr. Blum) and 500,000 options to purchase common stock of the company
at an exercise price of $ 0.104 per share, which the
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Larry D. Rogers 1,000,000 4.14%
1985 No. 1120 West
Provo, Utah 84604
Lombardi Research Foundation 4,000,000(4) 14.73%
47 East 400 South
Salt Lake City, UT 84111
All Officers and Directors 7,054,250 23.35%
as a Group (4 persons)
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PARTNERS AND CONTROL PERSONS.
The following table sets forth the name, office and age of each officer
and director of the Company:
Name Title Age
---- ----- ---
George E. Richards, Jr. Chairman, President & CEO 37
Wilfred R. Blum Director 46
Scott G. Adamson Executive Vice President and Director 43
Larry D. Rogers Vice President and Director 43
George E. Richards, Jr. has served as Chief Executive Officer and a
director of the Company since March 1, 1999. Mr. Richards may be elected to
successive terms of office. Since June, 1996 Mr. Richards has served as the
President and a director of Richards & Associates, Inc., a financial consulting
firm of which Mr. Richards is the sole shareholder. From May, 1993 to June,
1996, Mr. Richards was employed by The Goldenberg Group, Inc., a division of
Plygem, Inc. Mr. Richards attended Cal State Fullerton.
Scott G. Adamson has served as an Executive Vice President and a
director of the Company since July, 1999. Mr. Adamson may be elected to
successive terms of office. Since 1986, Mr. Adamson has served as the President
and a director of SGA Financial Group, Inc, a financial company which he founded
to provide project and debt financing, and currency conversion services. From
1981 to 1986, Chase Manhattan Bank employed Mr. Adamson in its Latin America
division as a 2nd Vice President. Mr. Adamson received a Bachelors of Science in
Business Administration from Weber State University in 1979 and a Masters of
International Management from the American Graduate School of International
Management in 1981.
Larry D. Rogers has served as a Vice President and a director of the
Company since June, 1999. Mr. Rogers may be elected to successive terms of
office. From 1986 to June, 1999, Mr. Rogers served as
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Company agreed to issue to Mr. Blum on December 15, 1999.
4 Shares were acquired by Lombardi Research Foundation in September of
1999 as described in Item 7 - Related Party Transactions.
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the President and a director of Advice Productions, Inc., a production company
developing video and multimedia marketing and training tools, which he founded
and which was acquired by the Company in June 1999. From 1984 to 1986, Mr.
Rogers was employed as an advertising account executive by Barenz & Associates,
a Salt Lake City based advertising agency, where he produced video and graphical
marketing products for clients. From 1980 to 1984, Mr. Rogers was employed first
as the sales manager and then as the general manager of KEYY Radio. Mr. Rogers
received a Bachelors of Arts in communications with emphasis in marketing and
advertising from Brigham Young University in 1980.
Wilfred R. Blum has served as a director since November, 1997. From May
1998 through February, 1999, Mr. Blum served as President and Chief Executive
Officer of the Company. Mr. Blum is a licensed real estate agent and has been
employed by Butch Johnson Reality as a land developer since 1996. Mr. Blum
attended the Northern Alberta Institute of Technology.
During the past five years, none of the officers and/or directors of
the Company, nor any of the affiliates or promoters of the Company filed any
bankruptcy petition, have been convicted in or been the subject of any pending
criminal proceedings, or the subject of any order, judgment or decree involving
the violation of any state or federal securities laws. There is no unresolved
significant litigation outstanding against the Company or its officers and/or
directors
ITEM 6. EXECUTIVE COMPENSATION.
The Company does not have a bonus, profit sharing, or deferred
compensation plan. The following sets forth a summary of cash and non-cash
compensation for each of the last three fiscal years ended February 28, 1999,
1998 and 1997, with respect to the Company's former and current Chief Executive
Officer. No executive officer of the Company has earned a salary greater than
$100,000 annually for any of the periods depicted.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
========================================================
Annual Compensation Long-term Compensation
Awards
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Name and Fiscal Salary Bonus Restricted Options/ All Other
Principal Position Year ($) ($) Stock SARs Compensation
Award(s) (#) ($)
($)
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<S> <C> <C> <C> <C> <C> <C>
Wilfred Blum 1999 $96,000(1) -0- -0- -0- -0-
Former Chief Exec. Officer 1998 -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
George E. Richards, Jr. 1999 $10,000(2) -0- -0- -0- -0-
Current Chief Exec. Officer 1998 -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0-
==============================================================================================================================
</TABLE>
1 Salary paid in stock. On January 25, 1999, the Company issued 1,600,000
shares of common stock valued at $.06 per share to Mr. Blum.
2 Salary paid in stock. On February 3, 1999, the Company issued 50,000
shares of common stock to Mr. Richards valued at $.20 per share.
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OPTION GRANTS TO CERTAIN EXECUTIVE OFFICERS
The Company did not issue any stock options during the last completed
fiscal year ended February 28, 1999.
ITEM 7. RELATED PARTY TRANSACTIONS.
The information set forth herein describes certain transactions between
the Company and certain affiliated parties. Future transactions, if any, will be
approved by a majority of the disinterested members of the Company's Board of
Directors and will be on terms no less favorable to the Company than those that
could be obtained from unaffiliated parties.
Ron Poulton, the trustee of Tech Trust, a shareholder owning more than
five percent of the outstanding shares of stock of the Company, rendered legal
services to the Company from 1985 to November, 1999. Legal fees and expenses
paid or payable to Mr. Poulton in the nine month period ended November 30, 1999
totaled $28,988 and totaled $57,862 and $5,700 for the fiscal years ended
February 28, 1999 and 1998, respectively.
On December 23, 1999, the Company issued 147,500 shares of common stock
to Richards & Associates, Inc., a Utah corporation, of which Mr. George E.
Richards, Jr., the President and Chief Executive Officer of the Company, is the
sole shareholder, 123,750 shares to Scott Adamson, its Executive Vice President,
69,300 shares to Larry D. Rogers, its Vice President, and an aggregate of
134,500 shares to all other employees as year-end employment bonuses.
On December 15, 1999 the Company agreed to issue an option to purchase
500,000 shares of common stock, at an exercise price of $0.104 per share, to Mr.
Wilfred Blum, a director of the Company, as repayment of $52,000 of
reimbursements and other expenses allegedly owed by the Company to Mr. Blum. The
Company is currently negotiating a written agreement regarding the same with Mr.
Blum.
In August of 1999 the Company reached an oral agreement with
Cybercenters International, Inc. ("Cybercenters"), a principal shareholder of
which is Scott Adamson, an Executive Vice President of the Company, to acquire
all of the issued and outstanding stock of Cybercenters after February 28, 2000.
As part of the transaction, the Company issued 342,000 shares of stock to three
shareholders of Cybercenters in consideration for an oral agreement by such
persons to pay an aggregate of $18,642 to the company. Mr. Adamson was issued
2,198,000 shares of common stock in consideration of an oral agreement to pay
$131,880 to the Company. The foregoing obligations are not due and payable until
the stock is sold. The Company has agreed to accept all the issued and
outstanding shares of Cybercenters in lieu of the oral obligations after
February 28, 2000. No interest accrues on the obligations.
In July of 1999, Richards & Associates, Inc., a Utah corporation, of
which Mr. Richards is the sole shareholder, and Wilfred Blum, a director of the
Company, each pledged 2,000,000 shares of stock personally held by them (for an
aggregate amount of 4,000,000 shares) to Lombardi Research Foundation
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to secure a short-term loan to the Company in the amount of $30,000. The
proceeds of the loan were used to finance a business development trip to China
and to purchase assets for the Company. The loan was to be repaid on or before
August, 1999. When the loan was not repaid by August, 1999, Lombardi Research
Foundation caused all 4,000,000 shares to be transferred to it pursuant to a
security agreement. The shares pledged by Richards & Associates to secure the
loan were issued to it on May 5, 1999 as described below. The shares pledged by
Mr. Blum, however, were issued to Mr. Blum by the Company's transfer agent at
Mr. Blum's request without the approval of the Company's Board of Directors.
Since all of the proceeds of the loan were used for the Company's benefit, on
December 23, 1999, the Company issued 2,000,000 shares of common stock to
Richards & Associates to replace the shares that were transferred to Lombardi.
The Company did not issue replacement shares to Mr. Blum. The Company has also
implemented certain procedures to prevent the issuance of stock without the
approval of the Company's Board of Directors.
On May 5, 1999, the Company issued 2,000,000 shares of common stock to
Richards & Associates, Inc., a Utah corporation, of which the current Chief
Executive Officer and President, George E. Richards, Jr., is the sole
shareholder, in consideration of an oral agreement to pay the Company $120,000.
The obligation is not payable until the shares of stock are sold and no interest
accrues on the obligation.
The Company paid Albert Fretz, who at the time of the transaction was
an officer of the Company, a royalty fee of $6,750 for the year ended February
28, 1999 to purchase the proprietary rights to the Quick Fixx 2000 software.
On January 25, 1999, the Company issued 2,000,000 shares of restricted
common stock valued at $.06 per share, for a total amount of $120,000 to Wilfred
Blum, a director of the Company and its former Chief Executive Officer and
President. Of the shares issued, 1.6 million shares or $96,000 worth of stock
was issued for services rendered to the Company during the fiscal year ended
February 28, 1999, and 400,000 shares or $24,000 worth of stock was issued to
repay cash advances to the Company. On or about July, 1999, the Company loaned
$12,340 to Mr. Blum. No note has been executed for this advance. The loan does
not bear interest. The Company's management expects the loan to be repaid in
calendar year 2000.
On February 3, 1999, the Company issued 50,000 shares of restricted
common stock valued at $.20 per share, for a total amount of $10,000 to Richards
& Associates, Inc., a Utah corporation, of which Mr. George E. Richards, Jr.,
the current Chief Executive Officer and President of the Company, is the sole
shareholder, for services rendered by Mr. Richards to the Company during the
fiscal year ended February 28, 1999.
On November 25 and December 2, 1998, the Company issued a total of
234,100 shares of restricted common stock valued at $.22 per share to D. Welker,
who at the time of the transaction was an officer of the Company, to repay
previous net unpaid cash advances to the Company of $51,500.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $.001 par value per share. The holders of common stock
are entitled to one vote for each share held of
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record on all matters to be voted on by stockholders. The holders of common
stock are entitled to receive such dividends, if any, as may be declared from
time to time by the Board of Directors in its discretion from funds legally
available therefore. Upon liquidation or dissolution of the Company, the holders
of common stock are entitled to receive, pro rata, assets remaining available
for distribution to stockholders. The common stock has no cumulative voting,
preemptive or subscription rights and is not subject to any future calls. There
are no conversion rights or redemption or sinking fund provisions applicable to
the shares of common stock. All outstanding shares of common stock are fully
paid and nonassessable.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock was traded on the NASDAQ Bulletin Board
until October 20, 1999, when quotation was transferred to the National Quotation
Bureau's "Pink Sheets" pursuant to NASD Eligibility Rule 6530 issued on January
4, 1999, which provides that issuers who do not make current filings pursuant to
Sections 13 and 15(d) of the Securities and Exchange Act of 1934 are ineligible
for listing on the NASDAQ Bulletin Board. Accordingly, there is currently a
limited market for the Company's shares. The Company expects to apply to be
listed on the NASDAQ Bulletin Board again upon the effectiveness of this
registration statement.
The following table sets forth the high and low bid prices for shares
of the Company's common stock for the periods noted, as reported by the National
Daily Quotation Service and the NASDAQ Bulletin Board. Quotations reflected
inter-dealer prices, without mark-up, markdown or commission and may not
represent actual transactions. There was no trading of the Company's common
stock prior to the second quarter of the 1999 fiscal year, which commenced.
Bid Prices
Fiscal Year Period High Low
----------- ------ ---- ---
Current Period 0.30 0.15
Feb. 28, 2000 Third Quarter 0.20 0.06
Second Quarter 0.54 0.04
First Quarter 1.25 0.13
Feb. 28, 1999 Fourth Quarter 1.40 0.08
Third Quarter 2.98 1.25
Second Quarter 3.00 2.50
As of December 1, 1999, the Company had 22,872,000 shares of its common
stock issued and outstanding, and there were 303 record stockholders. As of the
date hereof, the Company has not paid or declared any cash dividends. The
Company can give no assurance that it will generate future earnings from which
cash dividends can be paid. Future payment of dividends by the Company, if any,
is at the discretion of the Board of Directors and will depend, among other
criteria, upon the Company's earnings, capital requirements, and its financial
condition as well as other relative factors. Management has followed the policy
of retaining any and all earnings to finance the development of the business.
Such a policy is likely to be maintained as long as necessary to provide working
capital for the Company's operations.
12
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
The Company knows of no litigation now pending or threatened against it
or involving any of its properties or contract rights.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On August 31, 1999, Commercial Concepts, Inc. (the "Company")
terminated its independent auditor relationship with David T. Thomson, P.C.
("Thomson").
Thomson's report on the financial statements of the Company for the
fiscal year ended February 28, 1998, did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The Thomson report for the fiscal year
ended February 28, 1998, contained a statement as to the ability of the Company
to continue as a going concern. Other than the foregoing, there were no adverse
opinions or disclaimers of opinion, or qualifications or modifications as to
uncertainty, audit scope or accounting principles.
During the fiscal years ended February 28, 1997, 1998 and 1999, and the
period March 1, 1999 through August 31, 1999, there were no disagreements with
Thomson on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures or any reportable events.
On September 5, 1999 the Company engaged Fitzgerald Sanders, LLC
("Fitzgerald") as its independent auditors to audit and report on the financial
statements of the Company for the fiscal year ended February 28, 1999, which had
not yet been audited.
The decision to change accountants was approved by the Company's Board
of Directors. The Company authorized Thomson to respond fully to Fitzgerald's
inquiries concerning the Company.
Prior to engaging Fitzgerald, neither the Company nor anyone acting on
its behalf consulted with Fitzgerald regarding the application of accounting
principles to any specified transaction or the type of audit opinion that might
be rendered on the Company's financial statements. In addition, during the
Company's fiscal years ended February 28, 1999 and 1998, and during the period
March 1, 1999 through August 31, 1999, neither the Company nor anyone acting on
its behalf consulted with Fitzgerald with respect to any matters that were the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K)
or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On or about December 28, 1999, the company issued 475,050 shares of
common stock to its employees, including each of its officers, as a year-end
bonus for their services. The shares were issued in reliance on Section 4(2) of
the 1933 Act.
On or about October 10, 1999, the Company issued 400,000 shares to
Manoj Associates, LLC, a Colorado limited liability company for $12,000. The
shares were issued in reliance on Rule 504 of Regulation D promulgated under the
1933 Act.
13
<PAGE>
On or about July 19, 1999, the Company issued 370,000 shares to four
persons it hired as employees or consultants as bonuses. The shares were issued
in reliance on Section 4(2) of the 1933 Act.
On or about June 15, 1999, the Company issued 1,000,000 shares to
acquire the stock of Advice Productions, Inc. The shares were issued in reliance
on Section 4(2) of the 1933 Act.
On or about May 1, 1999, the Company sold 2,000,000 shares of common
stock to an officer of the Company for $120,000. The transaction was exempt from
Registration pursuant to Section 4(2) of the 1933 Act.
From March 1, 1999 to date, the Company has sold 1,500,000 shares to
unaffiliated investors in reliance on Rule 504 of Regulation D promulgated under
the 1933 Act for $191,000.
From August 26, 1998 to October 31, 1998 the Company sold a total of
1,221,000 shares to unaffiliated investors for $310,800 in reliance on Rule 504
of Regulation D promulgated under the 1933 Act. Proceeds were used to fund
Company operations.
On or about August 31, 1997 the Company issued 400,000 shares of its
common stock to an unaffiliated third party to acquire sand and gravel rights in
200 acres of property located in Tooele, Utah. The stock was issued pursuant to
Rule 504 of Regulation D promulgated under the 1933 Act.
During fiscal years 1998 & 1997 certain officers, directors and
stockholders of the Company contributed capital to the Company in the amount of
$16,000 and $24,058 respectively no stock was issued in return for this
contribution.
In February 1998, the Company sold 2,500 shares of common stock for
$5,000 and issued 100,000 shares valued at par value ($100) in conjunction with
obtaining a software marketing rights for the original version of Quick Fixx
2000. The stock was issued in reliance on Rule 504 of Regulation D promulgated
under the 1933 Act.
During February 1997, the Company issued 200,000 shares of its common
stock to an individual at par value for payment of services rendered to the
Company. The shares were issued in reliance on Section 4(2) of the 1933 Act.
During February 1997, 98,000 shares of common stock of the Company were
issued in exchange for $197,705. The stock was issued in reliance on Rule 504 of
Regulation D promulgated under the 1933 Act.
Commencing on May 1, 1996 for a period of approximately sixty days, the
Company issued 92,050 shares of common stock to unaffiliated third parties for
$460,250 under Regulation D and similar exemptions from registration under the
laws of various states.
On or about April 29, 1996 the Company issued 4,000,000 common shares
at par value to persons who had performed services for the Company. The shares
were issued in reliance on Section 4(2) of the 1933 Act.
14
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is required pursuant to the Utah Revised Business
Corporation Act to indemnify its officers and directors from liability to the
extent that such officer or director is successful in defense of any
proceedings. The Articles of Incorporation and Bylaws of the Company do not
alter this statutory protection or provide any additional protection from
liability. Under the Utah Revised Business Corporation Act the Company may
purchase and maintain insurance on behalf of any director of officer against any
liability asserted against him and incurred by him in any capacity.
PART F/S
The Company's financial statements for the years ended February 28,
1999 and 1998 and for the six months ended August 31, 1999 (unaudited) are
attached to this Registration Statement.
PART III
ITEMS 1 AND 2. INDEX AND DESCRIPTION OF EXHIBITS
2.1 Articles of Incorporation
2.2 Bylaws
6.1 Lease Agreement, dated Novemeber 10, 1999
6.2 Office Building Lease, dated February 18, 1999
6.3 First Amendment to Office Building Lease, dated
October 5, 1999
6.4 Agreement to Develop Software, dated 7/27/99
10.1 Consent of Fitzgerald Sanders, LLC
10.2 Consent of David T. Thomson, P.C.
15
<PAGE>
SIGNATURES
In accordance with the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
COMMERCIAL CONCEPTS, INC.
Date: January 12, 2000 By: /s/ George Richards, Jr.
------------------------
Name: George Richards, Jr.
Title: President and Chief
Executive Officer
16
<PAGE>
COMMERCIAL CONCEPTS, INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
FEBRUARY 28, 1999, 1998 AND 1997
WITH ACCOUNTANTS' REPORT THEREON
F-1
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders
of Commercial Concepts, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Commercial Concepts, Inc. (a
Utah corporation) as of February 28, 1999 and the related statements of
operations, stockholders' equity, and cash flows for the year 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 audit. The financial statements and supplementary information of Commercial
Concepts, Inc. as of February 28, 1998 and 1997, were audited by other auditors
whose report dated March 11, 1998, on those statements included an explanatory
paragraph that described a substantial doubt about the Company's ability to
continue as a going concern due to losses from operations and limited working
capital discussed on Note 4 to the financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commercial Concepts, Inc. as of
February 28, 1999, and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements as of February 28, 1999, have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 4 to the financial statements, the Company has suffered
recurring losses from operations and has limited working capital. The factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Fitzgerald Sanders
Salt Lake City, Utah
December 21, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
February 28, 1999 and 1998
ASSETS 1999 1998
----------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 77,695 $ 721
Deposits - 5,385
Due from officer 12,340 -
Inventory 4,500 -
----------- -----------
Total current assets 94,535 6,106
----------- -----------
EQUIPMENT
Equipment 38,033 26,202
Less: accumulated depreciation (7,213) (1,010)
----------- -----------
Net property and equipment 30,820 25,192
----------- -----------
OTHER ASSETS
Software marketing rights 100 100
----------- -----------
TOTAL ASSETS $ 125,455 $ 31,398
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 55,661 $ 9,100
Franchise taxes payable - 905
Stockholders' loans payable - 2,975
----------- -----------
Total Current Liabilities 55,661 12,980
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized, 9,136,280, and 4,803,403 shares
issued and outstanding, respectively 9,136 4,803
Additional paid-in capital 1,231,580 727,338
Accumulated Deficit (1,170,922) (713,723)
----------- -----------
Total Stockholders' Equity 69,794 18,418
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 125,455 $ 31,398
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENTS OF OPERATIONS
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
-------------- -------------- --------------
REVENUES:
<S> <C> <C> <C>
Sales $ 64,657 $ - $ -
-------------- -------------- --------------
Total Revenues 64,657 - -
Less cost of goods sold 31,336 - -
-------------- -------------- --------------
Gross Profit 33,321 - -
-------------- -------------- --------------
EXPENSES
General and Administrative expenses 360,571 46,751 204,617
African project-funds transferred
to other members of venture - 43,357 35,025
Services provided for common stock 121,275 - -
Bad Debts - - 198,000
Depreciation 6,203 24,421 9,333
Loss on building reconveyance and
equipment abandonment - 83,600 -
-------------- -------------- --------------
Total Expenses 488,049 198,129 446,975
-------------- -------------- --------------
NET LOSS FROM OPERATIONS (454,728) (198,129) (446,975)
-------------- -------------- --------------
OTHER INCOME (EXPENSE)
Miscellaneous income - 1,244 2,010
Interest income 159 19 806
Interest expense (2,630) - (75)
-------------- -------------- --------------
NET LOSS $ (457,199) $ (196,866) $ (444,234)
============== ============== ==============
LOSS PER SHARE $ (.08) $ (0.04) $ (.12)
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended February 28, 1999, and 1998 and 1997
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
BALANCE, February 28, 1996 310,880 $ 311 $ 63,936 $ (72,623)
Contributed Capital, August 31, 1996 - - 15 -
Issuance of common stock for services at
$.001 per share, April 1996 4,000,000 4,000 - -
Issuance of common stock for cash at
$5.00 per share at various dates during
the period 92,050 92 460,158 -
Contributed capital, September and
October and January, 1997 - - 24,043 -
Issuance of common stock for services at
par value $.001per share, February, 1997 200,000 200 - -
Issuance of common stocks for cash at
approximately $2.02 per share, February 98,000 98 197,607 -
Direct Costs of common stock offering
and common stock issuance - - (39,419) -
Net loss for the year ended,
February 28, 1997 - - - (444,234)
--------- -------- ---------- -----------
Balance, February 28, 1997 4,700,930 $ 4,701 $ 706,340 $ (516,857)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended February 28, 1999, and 1998 and 1997 (Continued)
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
BALANCE, February 28, 1997 4,700,930 $ 4,701 $ 706,340 $ (516,857)
Issuance of shares for software and
documentation at par value ($.001)
February 1998 100,000 100 - -
Contributed capital, January and
February, 1998 - - 16,000 -
Issuance of common stock for cash at
$2.00 per share, February, 1998 2,500 2 4,998 -
Net loss for the year ended
February 28, 1998 - - - (196,866)
--------- -------- ---------- -----------
BALANCE, February 28, 1998 4,803,430 $ 4,803 $ 727,338 $ (713,723)
Issuance of common stock for cash at
various dates during the year 1,221,000 1,671 315,500 -
Issuance of common stock for services at
various dates during the year 2,475,000 2,000 114,150 -
Issuance of common stock for
repayment of officer advances at various
dates during the year 639,000 662 74,592 -
Net loss for the year ended
February 28, 1999 - - - (457,199)
--------- -------- ---------- -----------
Balance, February 28, 1999 9,138,430 $ 9,136 $1,231,580 $(1,170,922)
========= ======== ========== ===========
</TABLE>
The Accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC
STATEMENT OF CASH FLOWS
Years Ended February 28, 1999 and 1998
1999 1998 1997
------------ ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) from current operations $ (457,199) $ (196,866) $ (444,234)
Items not requiring current cash flows:
Services paid in stock 121,275 - 4,200
Decrease in officer loans paid in stock 28,929 - -
Depreciation 6,203 24,421 9,333
Loss on building reconveyance - 83,600 -
Assets conveyed to individuals as
compensation - 21,092 -
Changes in assets and liabilities
(Increase) in deposits 5,385 (5,385) -
(Increase) in due to officer - - (1,750)
(Increase) in receivable - - (175,000)
Increase in bad debt allowance - - 175,000
(Increase) in inventory (4,500) - -
(Increase) in receivable bad debt
allowance - - -
(Increase) in promissory note - - (20,000)
Increase in promissory note bad debt
allowance - - 20,000
(Increase) decrease in stock sales
receivable - 30,023 (30,023)
(Decrease) increase in accounts payable 46,561 8,382 (7,098)
(Decrease) increase in accrued liabilities - (7,488) 7,488
Increase (decrease) in franchise taxes (905) 100 245
------------ ------------- -------------
Net Cash Flows used in Operating Activities (254,251) (42,121) (461,839)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of building and equipment (11,831) (7,850) (405,788)
------------ ------------- -------------
Net Cash Flows used in Investing Activities (11,831) (7,850) (405,788)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from sale of stock and capital
contributions 311,800 21,000 682,013
Cost of stock sales and stock offerings - - (39,419)
Stockholder loans 31,256 4,725 250,000
------------ ------------- -------------
Net Cash Flows from Financing Activities 343,056 25,725 892,594
------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF CASH FLOWS (Continued)
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
------------ ------------- -------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ 76,974 $ (24,246) $ 24,967
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 721 24,967 -
------------ ------------- -------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 77,695 $ 721 $ 24,967
============ ============= =============
SUPPLEMENTAL INFORMATION:
CASH PAID FOR:
Interest $ 2,630 $ - $ 75
============ ============= =============
Income taxes $ 100 $ 100 $ 100
============ ============= =============
NON CASH TRANSACTIONS
Shares issued to pay for services $ 121,275 $ - $ 4,200
============ ============= =============
Shares conveyed to officers for loan
repayments $ 28,929 $ 21,092 $ -
============ ============= =============
Shares issued for software and documentation $ 100 $ - $ -
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
Our report on our audit of the basic financial statements of Commercial
Concepts, Inc. for 1999 appears on page 2. That audit was conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The supplementary Schedule of General and Administrative Expenses is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
statements taken as a whole. The supplementary information of Commercial
Concepts, Inc. as of February 28, 1998, was audited by other auditors whose
report dated March 11, 1998, expressed an unqualified opinion on that
supplementary information.
/s/ Fitzgerald Sanders
Salt Lake City, Utah
December 21, 1999
F-9
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS INC.
Schedule of General and Administrative Expense
Years Ended February 28, 1999, and 1998 and 1997
1999 1998 1997
---------- ---------- ------------
<S> <C> <C> <C>
Accounting $ 6,353 $ 4,880 $ 1,445
Bank Charges 2,091 622 1,074
Taxes and licenses 1,798 - 210
Consulting fees 16,090 26,211 78,183
Education and seminars - 64 747
Postage and deliveries 1,058 - 227
Salaries and wages 131,765 - 23,000
Insurance - - 850
Investor relations - 1,292 7,491
Janitorial - - 933
Laboratory supplies - - 6,216
Legal 57,862 5,700 -
Maintenance and repairs 3,385 81 208
Marketing 40,999 5,000 -
Meals and entertainment - - 1,711
Office lease - 1,340 -
Office supplies 8,346 78 5,016
Rental equipment - - 1,063
Subcontractors - - 3,160
Tools 1,755 424 233
Telephone 21,348 105 9,468
Travel 24,751 594 -
Rent 31,247 - 3,622
Utilities 859 250 2,758
Other Expenses 10,864 10 914
State franchise tax - 100 100
African Project
Travel - - 21,281
Supplies and equipment - - 28,750
Shipping and freight - - 5,957
---------- ---------- ------------
Total general and administrative expense $ 360,571 $ 46,751 $ 204,617
========== ========== ============
</TABLE>
F-10
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business Operations The Company develops, markets and supports multimedia
software, information technology for customers' computer based applications, and
development of telecommunications retail locations for the general public.
Development Stage Classification - Commercial Concepts, Inc. was incorporated in
the state of Utah on March 1, 1984. Until February 28, 1998, the Company has
been defined as a development stage company because it had not commenced planned
principal operations and did not have operational revenues, but only sold its
common stock to the public. In November 1997, the Company experienced a change
in its Board of Directors and management. Under the new management the Company
has been engaged in the purchasing of computer software products and in
marketing and distributing them, and effective March 1, 1998, has been an
operating company not subject to development stage company disclosures.
Revenue Recognition - Revenue consists primarily of sales of software and
information technology for customers' computer based applications. Revenue is
recognized upon sale. The Company provides technical support at no charge to
customers, generally no technical assistance beyond installation support is
required.
Provision for income taxes - No provision for income taxes has been made in the
financial statements due to operating losses. The State of Utah franchise taxes
have been included in operating expenses in the statements of operations. Income
tax expense includes federal and state taxes currently payable and deferred
income taxes arising from temporary differences between income for financial
reporting and income tax purposes. These differences result principally from
depreciable assets where different methods of depreciation are used and the
allowances for bad debt which is not deductible for income tax purposes. Due to
operating losses no provision for deferred income taxes has been made.
Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market on a
first-in, first-out basis and consist of packaged software and related packaging
supplies.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
Equipment - The cost of equipment is depreciated over the estimated useful lives
of the related assets. The cost of leasehold improvements is depreciated
(amortized) over the lesser of the length of the related leases or the estimated
useful lives of the assets. Depreciation is computed on the straight-line method
for financial reporting purposes and on the MACRS method for income tax
purposes.
Income Taxes - Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Concentrations of Credit Risk - The Company develops and markets multimedia
software, information technology for computer based applications. In the course
of such activities, the Company will extend credit to customers located
principally in the Intermountain West. However, the Company is involved in E
commerce with potentially national and global markets and customers.
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
At inception, the Company offered and sold 1,000,000 shares of its authorized
but unissued stock to the public. An offering price of $.10 per share was
determined by the Company. There are no options or warrants outstanding to
acquire the stock of the Company as of February 28, 1999.
In May 1996, the Company commenced a private offering of common stock pursuant
to an exemption from registration under Regulation D of the Security and
Exchange Commission. 92,050 shares were sold and a total of $460,205 in capital
was raised.
Since inception the Company has privately sold for cash and exchanged common
stock for services and property at various times.
NOTE 3 - SOFTWARE DEVELOPMENT COSTS
The Company has capitalized the acquisition cost of Quick Fix 2000, a Y2K fix,
but no other software costs have been capitalized. The Company's policy is to
expense research and development costs until technological feasibility is
reached and all related research and development activities are completed,
subsequent production expenses to bring the product to market are then
capitalized. Capitalization of software costs is discontinued when the product
is available for general release to customers. No amortization of capitalized
software costs has been included in the accompanying statements of operations.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
losses. In addition, the Company has used almost all of its working capital and
has stockholders' deficits from inception, which raise substantial doubt as to
the Company's ability to continue as a going concern.
F-12
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 4 - GOING CONCERN, CONTINUED
In view of these matters, continued existence of the Company is dependent upon
its ability to develop working capital and to attract equity investment, in
order to meet current and future creditors' demands and to attain future
profitable operations. In order to develop additional working capital and
attract continued equity investment the Company has reorganized management,
formulated a new business plan, and developed and marketed new business
products. Management believes that the actions presently being taken will
provide the opportunity for the Company to continue as a going concern.
NOTE 5 - INCOME TAXES
During the year ended February 28, 1998, temporary differences giving rise to
deferred tax assets and liabilities consisted of bad debt allowance reported
differently for tax purposes and financial reporting and excess of depreciation
for tax purposes over the amount for financial reporting purposes.
Deferred tax assets and deferred tax liability comprise the following at
February 28, 1998:
1999 1998
--------- ---------
Deferred tax asset:
Bad debt allowance $ - $ 66,300
Net operating loss carryforwards 340,550 85,102
--------- ---------
340,550 251,402
Deferred tax liability
Excess tax depreciation - (1,305)
--------- ---------
Net deferred tax benefit before allowance 340,550 250,097
Valuation (340,550) (250,097)
--------- ---------
Federal and state net deferred tax benefit $ 0 $ 0
========= =========
For federal and state purposes the Company has unused net operating loss carry
forwards to offset future taxable income which expire as follows:
Year Ending
February 28 Federal State
----------- ------- -----
2000 $43,418 3,763
2001 8,617 1,364
2001 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 -
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
------- --------
$1,001,616 $933,940
========== ========
F-13
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 6 - SUBSEQUENT EVENTS
On June 10, 1999, the Company acquired all the outstanding stock of Advice
Productions, Inc. The acquisition has been accounted for as a purchase. The
total purchase price was $200,000, paid in 1,000,000 shares of restricted
Company common stock valued at $.20 per share. The Company received accounts
receivable, equipment, and liabilities, but the purchase price exceeded the fair
value of net assets received by $200,000, which excess will be recorded as
goodwill in the financial statements. Simultaneous with the acquisition, the
Company entered into a five year employment contract with the principal of the
seller, which set forth, among other matters, the manner in which compensation
will be computed, and also allowed for bonuses and profit sharing. Advice
Productions, Inc. was previously operated as a sole proprietorship, but
incorporated immediately prior to the acquisition, and therefore had no
corporate operations to be combined with Company operations. The operations of
Advice Productions, Inc. from the date of the acquisition will be included with
subsequent Company operations in any subsequent financial statements of the
Company.
Effective March 1, 1999, the Company accepted the resignations of Wilfred R.
Blum as President, David Welcker as Vice President, and Albert E.S. Fretz as
Vice President. The Board of Directors appointed George Richards as the new
President, and appointed Wilfred. S. Blum as Secretary Treasurer. On September
14, 1999, the Board accepted the resignation of Wilfred R. Blum as Secretary
Treasurer, and appointed V. Kelly Randal as Secretary Treasurer. Wilfred R. Blum
will continue as a member of the Board of Directors.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has transactions with certain stockholders and officers who receive
compensation paid in the form of wages, royalties and consulting fees.
The Company paid an officer a royalty fee of $6,750 for the year ended February
28, 1999.
On January 25, 1999, the Company issued 2,000,000 shares of restricted common
stock to an officer valued at $.06 per share, for a total amount of $120,000.
$96,000 was recorded as services for the year ended February 28, 1999, and
$24,000 was a repayment for previous cash advances to the Company. As of
February 28, 1999, the officer owed the Company $12,340. No note has been
executed for this advance. Company management expects this will be repaid in the
following fiscal year.
On February 3, 1999, the Company issued 50,000 shares of restricted common stock
to a Company officer valued at $.20 per share, for a total amount of $10,000,
which was recorded as services for the year ended February 28, 1999.
On November 25 and December 2, 1998, the Company issued a total of 234,100
shares of restricted common stock valued at $.22 per share to repay previous net
unpaid cash advances to the Company of $51,500, from a former Company officer.
F-14
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FEBRUARY 28, 1999 AND 1998
NOTE 8 - OPERATING LEASES
As of February 28, 1999 the Company leased office space under a five year
operating lease commencing March 1, 1999. The agreement provides for an annual
base rent of $27,720.
Net future minimum rental payments required under the operating lease for office
facilities as of February 28, 1999, are as follows:
Year ended February 28, 2000 $27,720
2001 $27,720
2002 $27,720
2003 $27,720
2004 $27,720
As of February 28, 1998, the Company leased office space for $2,885 per month
for 12 months and had an option to purchase the leased space for $225,000 with a
down payment of $22,500. The Company has since moved from this office space, and
the purchase option as of February 28, 1998, has expired.
NOTE 9 - LITIGATION
The Company was a defendant in litigation wherein the plaintiff sought
rescission and monetary damages in connection with the purchase of 50,000 shares
of company common stock directly from a former officer of the Company. Without
authorization from the Board of Directors, the former officer made certain
promises and incurred certain obligations in connection with the stock sale,
which the Company subsequently determined it could not legally fulfill.
On December 21, 1999, this lawsuit was mutually settled and dismissed. All
parties have waived all claims, liabilities and demands. As a part of the
settlement, the Company has agreed to issue 360,000 shares of restricted common
stock to the plaintiff.
NOTE 10 - NON COMPLIANCE WITH NASD REPORTING REQUIREMENTS
Effective April 1999, the NASD enacted new rules requiring all OTC: BB listed
companies to be "fully reporting", as defined by the Securities and Exchange
Commission. Under the new reporting requirements, the Company was delinquent in
filing financial information and was "delisted" on October 20, 1999. Steps have
been taken to cure the deficiency, including completion of the audited
financials for the current year. Upon completion and filing of the current year
audited financials, interim financials statements, and SEC Form 10, the Company
expects the deficiency to be satisfied, and anticipates reinstatement with NASD.
F-15
<PAGE>
COMMERCIAL CONCEPTS, INC.
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
AUGUST 31, 1999 AND 1998
WITH ACCOUNTANTS' REPORT THEREON
F-16
<PAGE>
To the Board of Directors of
Commercial Concepts, Inc.
Salt Lake City, Utah
We have compiled the accompanying balance sheet of Commercial Concepts, Inc. as
of August 31, 1999 and 1998, the related statements of operations and cash
flows, and the schedule of general and administrative expenses for the six
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other from of assurance on them.
/s/ Fitzgerald Sanders
Salt Lake City, Utah
December 21, 1999
F-17
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
BALANCE SHEETS
August 31, 1999 and 1998
ASSETS 1999 1998
---------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 672 $ 28
Accounts receivable 55,850 -
Inventory 4,500 -
Prepaid expenses 9,634 28
---------- -----------
Total current assets 70,656
EQUIPMENT
Equipment 67,815 38,033
Less: accumulated depreciation (14,013) (1,010)
Property and equipment - net 53,802 37,023
---------- -----------
OTHER ASSETS
Investment in Advice Productions, Inc. 200,000 -
Software marketing rights 100 100
Officer and shareholder loans 5,490 -
---------- -----------
TOTAL ASSETS $ 330,048 $ 37,151
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and accrued expenses $ 56,956 $ 14,671
Shareholder advances payable 36,020 71,231
---------- -----------
Total Current Liabilities 92,976 85,902
STOCKHOLDERS EQUITY
Common Stock, $.001 par value, 50,000,000 shares
authorized,19,988,430, and 4,803,403 shares
issued and outstanding, respectively 19,986 4,893
Stock subscriptions receivable (270,522) -
Additional paid-in capital 2,014,193 754,364
Accumulated Deficit (1,526,585) (808,008)
---------- -----------
Total Stockholders' Equity 237,072 (48,751)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 330,048 $ 37,151
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF OPERATIONS
Six Months Ended August 31, 1999 and 1998
1999 1998
---------- -----------
REVENUES:
<S> <C> <C>
Sales $ 102,530 $ 57,286
Less cost of goods sold (36,542) (6,391)
---------- -----------
Gross Profit 65,988 50,895
EXPENSES
General and Administrative Expenses 352,725 145,175
Services provided for common stock 58,995 -
Depreciation 6,800 -
---------- -----------
Total Expenses 418,520 145,175
---------- -----------
NET LOSS FROM OPERATIONS (352,532) (94,280)
---------- -----------
OTHER INCOME (EXPENSE)
Interest 3,131 5
---------- -----------
NET LOSS $ (355,663) $ (94,285)
========== ===========
NET LOSS PER SHARE $ (.05) $ (.02)
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL CONCEPTS, INC.
STATEMENT OF CASH FLOWS
Six Months Ended August 31, 1999 and 1998
1999 1998
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) from current operations $ (355,663) $ (94,285)
Items not requiring current cash flows:
Services paid in stock 58,995 -
Depreciation 6,800 -
Changes in assets and liabilities:
(Increase) in prepaid expenses (9,634) -
(Increase) in receivable (55,850) -
(Decrease) increase in accounts payable 1,295 5,572
Increase (decrease) in franchise taxes - (905)
---------- -----------
Net Cash Flows used in Operating Activities (354,057) (89,618)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of building and /or equipment (29,782) (11,831)
---------- -----------
Net Cash flows used in Investing Activities (29,782) (11,831)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash receipts from sale of stock and capital
contributions 264,928 32,500
Stockholder loans 41,888 68,256
---------- -----------
Net Cash Flows from Financing Activities 306,816 100,756
---------- -----------
NET INCREASE (DECREASE) IN CASH (77,023) (693)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 77,695 721
---------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 672 $ 28
========== ===========
SUPPLEMENTAL INFORMATION:
CASH PAID DURING THE YEAR FOR:
NON CASH TRANSACTIONS $ 3,131 $ 6
========== ===========
Shares issued to pay for services $ 58,995 $ -
========== ===========
Shares issued for investment in
Advice Productions, Inc. $ 200,000 $ -
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
COMMERCIAL CONCEPTS, INC.
Schedule of General and Administrative Expenses
Six Months ended August 31, 1999 and 1998
1999 1998
--------- ----------
Accounting $ 1,000 $ 6,203
Taxes and licenses 114 -
Consulting fees 177,802 5,000
Postage and deliveries 2,946 59
Salaries and wages 69,668 51,987
Insurance 583 -
Investor relations 1,177 -
Legal 18,559 5,455
Maintenance and repairs 611 3,315
Marketing 3,541 21,268
Meals and entertainment 151 -
Office Supplies 4,986 8,306
Rental equipment 2,527 -
Tools 2,298 1,755
Telephone 17,439 8,706
Travel 46,371 16,740
Rent 2,310 13,407
Utilities 138 2,974
Other Expenses 504 -
--------- ----------
Total general and administrative expenses $ 352,725 $ 145,175
========= ==========
F-21
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business Operations The Company develops, markets and supports multimedia
software, information technology for customers' computer based applications, and
development of telecommunications retail locations for the general public.
Development Stage Classification - Commercial Concepts, Inc. was incorporated in
the state of Utah on March 1, 1984. Until February 28, 1998, the Company has
been defined as a development stage company because it had not commenced planned
principal operations and did not have operational revenues, but only sold its
common stock to the public. In November 1997, the Company experienced a change
in its Board of Directors and management. Under the new management the Company
has been engaged in the purchasing of computer software products and in
marketing and distributing them, and effective March 1, 1998, has been an
operating company not subject to development stage company disclosures.
The Company has elected a February 28 fiscal year end for accounting and
reporting purposes.
Provision for income taxes - No provision for income taxes has been made in the
financial statements due to operating losses. The State of Utah franchise taxes
have been included in operating expenses in the statements of operations. Income
tax expense includes federal and state taxes currently payable and deferred
income taxes arising from temporary differences between income for financial
reporting and income tax purposes. These differences result principally from
depreciable assets where different methods of depreciation are used and the
allowances for bad debt which is not deductible for income tax purposes.
Inventories - Inventories are stated at the lower of cost or market on a
first-in, first-out basis, and consist of packaged software and related
packaging supplies.
Cash Equivalents - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Equipment - The cost of equipment is depreciated over the estimated useful lives
of the related assets. The cost of leasehold improvements is depreciated
(amortized) over the lesser of the length of the related leases or the estimated
useful lives of the assets. Depreciation is computed on the straight-line method
for financial reporting purposes and on the MACRS method for income tax
purposes.
Income Taxes - Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
F-22
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998, CONTINUED
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
At inception, the Company offered and sold 1,000,000 shares of its authorized
but unissued stock to the public. An offering price of $.10 per share was
determined by the Company. There are no options or warrants outstanding to
acquire the stock of the Company as of February 28, 1999.
In May 1996, the Company commenced a private offering of common stock pursuant
to an exemption from registration under Regulation D of the Security and
Exchange Commission. 92,050 shares were sold and a total of $460,205 in capital
was raised.
Since inception the Company has privately sold for cash and exchanged common
stock for services and property at various times.
NOTE 3 - SOFTWARE DEVELOPMENT COSTS
The Company has capitalized the acquisition cost of Quick Fix 2000, a Y2K fix,
but no other software costs have been capitalized. The Company's policy is to
expense research and development costs until technological feasibility is
reached and all related research and development activities are completed,
subsequent production expenses to bring the product to market are then
capitalized. Capitalization of software costs o discontinued when the product is
available for general release to customers. No amortization of capitalized
software costs has been included in the accompanying statements of operations.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
losses. In addition, the Company has used almost all of its working capital and
has stockholders' deficits from inception, which raise substantial doubt as to
the Company's ability to continue as a going concern.
In view of these matters, continued existence of the Company is dependent upon
its ability to develop working capital and to attract equity investment, in
order to meet future and current creditors' demands and to attain future
profitable operations. In order to develop additional working capital and
attract continued equity investment the Company has reorganized management,
formulated a new business plan, and developed and marketed new business
products. Management believes that the actions presently being taken will
provide the opportunity for the Company to continue as a going concern.
F-23
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998, CONTINUED
NOTE 5 - INCOME TAXES
For federal and state purposes the Company has unused net operating loss carry
forwards to offset future taxable income which expire as follows:
Year Ending
February 28 Federal State
----------- ------- -----
2000 $43,418 3,763
2001 8,617 1,364
2001 14,355 249,924
2007 548 221,790
2008 115 457,099
2009 123 -
2010 3,863 -
2011 1,464 -
2012 250,024 -
2013 221,890 -
2019 457,199 -
---------- --------
$1,001,616 $933,940
========== ========
NOTE 6 - Purchase of Advice Productions, Inc.
On June 10, 1999, the Company acquired all the outstanding stock of Advice
Productions, Inc. The acquisition has been accounted for as a purchase. The
total purchase price was $200,000, paid in 1,000,000 shares of restricted
Company common stock valued at $.20 per share. The Company received accounts
receivable, equipment, and liabilities, but the purchase price exceeded the fair
value of net assets received by $200,000, which excess will be recorded as
goodwill in the financial statements. Simultaneous with the acquisition, the
Company entered into a five year employment contract with the principal of the
seller, which set forth, among other matters, the manner in which compensation
will be computed and allowed for bonuses and profit sharing. Advice Productions,
Inc. was previously operated as a sole proprietorship, but incorporated
immediately prior to the acquisition, and therefore had no corporate operations
to be combined with Company operations. The operations of Advice Productions,
Inc. from the date of the acquisition will be included with Company operations
in any subsequent financial statements of the Company.
NOTE 7 - SUBSEQUENT EVENTS
Effective March 1, 1999, the Company accepted the resignations of Wilfred R.
Blum as President, David Welcker as Vice President, and Albert E.S. Fretz as
Vice President. The Board of Directors appointed George Richards as the new
President, and appointed Wilfred. S. Blum as Secretary Treasurer. On September
14, 1999, the Board accepted the resignation of Wilfred R. Blum as Secretary
Treasurer, and appointed V. Kelly Randal as Secretary Treasurer. Wilfred R. Blum
will continue as a member of the Board of Directors.
F-24
<PAGE>
COMMERCIAL CONCEPTS, INC
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998, CONTINUED
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company has transactions with certain stockholders and officers who receive
compensation paid in the form of wages, royalties and consulting fees.
On May 5, 1999, 2,000,000 shares of restricted common stock were issued to a
Company officer valued at $.06 per share, for a total amount of $120,000,
recorded as a loan to the officer. The terms of the loan provide for repayment
in the form of future compensation. On August 9, 1999, 2,198,000 shares of
restricted common stock were issued to a second Company officer valued at $.06
per share, for a total amount of $131, 880, recorded as a loan to the officer.
The terms of the loan provide for repayment in the form of future compensation.
Also on August 9, 1999, 352,000 shares of restricted common stock were issued to
three shareholders valued at $.06 per share, for a total amount of $18,642,
recorded as loans to them. The terms of the loans also provide for repayment in
the form of future compensation. These receivable amounts are included as
officer and shareholders receivables in the accompanying balance sheet.
NOTE 9 - OPERATING LEASES
As of August 31, 1999 ,the Company leases office space under a five year
operating lease commencing March 1, 1999. The agreement provides for an annual
base rent of $27,720.
Net future minimum rental payments required under the operating lease for office
facilities are as follows:
Year ended February 28,: 2000 $27,720
2001 $27,720
2002 $27,720
2003 $27,720
2004 $27,720
NOTE 9 - LITIGATION
The Company was a defendant in litigation wherein the plaintiff sought
rescission and monetary damages in connection with the purchase of 50,000 shares
of Company common stock directly from a former officer of the Company. Without
authorization from the Board of Directors, the former officer made certain
promises and incurred obligations in connection with the stock sale, which the
Company subsequently determined it could not legally fulfill.
On December 21, 1999, this lawsuit was mutually settled and dismissed. All
parties have waived all claims, liabilities and demands. As a part of the
settlement, the Company has agreed to issue 360,000 shares of restricted common
stock to the plaintiff.
NOTE 10 - NON COMPLIANCE WITH NASD REPORTING REQUIREMENTS
Effective April 1999, the NASD enacted new rules requiring all OTC: BB listed
companies to be "fully reporting", as defined by regulations of the Securities
and Exchange Commission. Under the new reporting requirements, the Company was
delinquent in filing certain financial information and was "delisted" on October
20, 1999. Steps have been taken to cure the deficiency, including completion of
the audited financial statements for the year ended February 28, 1999. Upon
completion and filing of the prior year audited financials, current year interim
financial statements, and SEC Form 10, the Company expects the reporting
deficiency to be satisfied, and anticipates reinstatement with NASD.
F-25
ARTICLES OF INCORPORTION
OF
COMMERCIAL CONCEPTS, INC.
We, the undersigned, natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Utah Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I
CORPORATE NAME
The name of the Corporation is COMMERCIAL CONCEPTS, INC.
ARTICLE II
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE III
GENERAL PURPOSES
This Corporation is organized for the following purposes:
A. To purchase, sell and deal in products and technologies.
B. To acquire or merge into existing business.
C. To buy, sell, mortgage, exchange, lease, hold for investment, or
otherwise operate real and personal property of all kinds and
any interest therein.
D. For any other purposes allowed by law.
E. The provisions of this Article shall be construed as purposes
and powers and each as an independent purpose and power. The
enumeration of specific purposes and powers shall not be held to
limit or restrict in any manner the purposes and powers of the
Corporation, and the purposes and powers therein specified shall
<PAGE>
not be limited or restricted by reference to, or inference from,
the terms of any provision of this or any other article hereof.
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares the Corporation shall have authority to
issue is FIFTY MILLION (50,000,000) shares with a par value of ONE TENTH OF ONE
CENT ($0.001) per share. All stock of this Corporation shall be of the same
class which shall be designated common stock.
ARTICLE V
COMMENCMENT OF BUSINESS
The Corporation will not commence business until at least ONE THOUSAND
DOLLARS ($1,000) in cash or property has been received by it as consideration
for the issuance of its shares.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The post office address of the Corporation's initial registered office
is 933 Red Haven Drive, Sandy, UT 84070 and the name of its initial registered
agent at such address is Robin B. Crandall.
ARTICLE VII
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire any
securities of this Corporation.
2
<PAGE>
ARTICLE VIII
DIRECTORS
The number of directors constituting the initial Board of Directors of
the Corporation is three (3) and the names and addresses of the persons who are
to serve as directors until their successors are elected and shall qualify are:
Robin B. Crandall 933 Red Haven Drive
Sandy, Utah 84070
Jace N. Green 40 Edison Avenue
Murray, Utah 84107
Maurice E. Hall 6273 South 1300 East, A
Salt Lake City, Utah 84121
ARTICLE IX
INCORPORATORS
The names and addresses of the incorporators are:
Robin B. Crandall 933 Red Haven Drive
Sandy, Utah 84070
Jace N. Green 40 Edison Avenue
Murray, Utah 84107
Maurice E. Hall 6273 South 1300 East, A
Salt Lake City, Utah 84121
ARTICLE X
NON-ASSESSABILITY
Shares of the Corporation shall not be subject to assessment for
payment of the debts of the Corporation.
3
<PAGE>
ARTICLE XI
EXEMPTION FROM CORPORATE DEBTS
The private property of the Shareholders shall rot be subject to the
payment of any corporate debts to any extent whatsoever.
DATED this 29th day of February, 1984.
/s/ Robin B. Crandle
--------------------------------
Incorporator
/s/ Jace N. Green
--------------------------------
Incorporator
/s/ Maurice B. Hall
--------------------------------
Incorporator
STATE OF UTAH )
)
COUNTY OF Salt Lake )
On the 29th day of February 1984, personally appeared, before me ROBIN
B. CRANDALL, who being by me first duly sworn, declared that he is the person
who signed the foregoing document as an incorporator and that the statements
therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day
of February 1984.
/s/ Marjorie Jansen
--------------------------------
NOTARY PUBLIC
Residing at Bountiful, Utah
My Commission expires:
[NOTARY SEAL]
April 1, 1987
4
<PAGE>
STATE OF UTAH )
)
COUNTY OF Salt Lake )
On the 29th day of February 1984, personally appeared, before me JACE
N. GREEN, who being by me first duly sworn, declared that he is the person who
signed the foregoing document as an incorporator and that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day
of February 1984.
/s/ Marjorie Jansen
--------------------------------
NOTARY PUBLIC
Residing at Bountiful, Utah
My Commission expires:
[NOTARY SEAL]
April 1, 1987
5
<PAGE>
STATE OF UTAH )
)
COUNTY OF Salt Lake )
On the 29th day of February 1984, personally appeared, before me
MAURICE B. HALL, who being by me first duly sworn, declared that he is the
person who signed the foregoing document as an incorporator and that the
statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day
of February 1984.
/s/ Marjorie Jansen
--------------------------------
NOTARY PUBLIC
Residing at Bountiful, Utah
My Commission expires:
[NOTARY SEAL]
April 1, 1987
BYLAWS
OF
COMMERCIAL CONCEPTS, INC.
A Utah Corporation
<PAGE>
INDEX TO BYLAWS
OF
COMMERCIAL CONCEPTS, INC.
BYLAWS OF COMMERCIAL CONCEPTS, INC.------------------------------------------5
ARTICLE I: Offices-----------------------------------------------------------5
Section 1.01 Business Offices.--------------------------------------------5
Section 1.02 Principal Office.--------------------------------------------5
Section 1.03 Registered Office.-------------------------------------------5
ARTICLE II: Shareholders-----------------------------------------------------5
Section 2.01 Annual Meeting.----------------------------------------------5
Section 2.02 Special Meetings.--------------------------------------------5
Section 2.03 Place of Meetings.-------------------------------------------6
Section 2.04 Notice of Meeting.-------------------------------------------6
(a) Required Notice.----------------------------------------------------6
(b) Contents of Notice.-------------------------------------------------6
(c) Adjourned Meeting.--------------------------------------------------7
(d) Waiver of Notice.---------------------------------------------------7
Section 2.05 Fixing of Record Date.---------------------------------------7
Section 2.06 Shareholder List for Meetings.-------------------------------8
Section 2.07 Shareholder Quorum and Voting Requirements.------------------9
Section 2.08 Increasing Quorum or Voting Requirements.--------------------9
Section 2.09 Proxies.----------------------------------------------------10
Section 2.10 Voting of Shares.-------------------------------------------10
Section 2.11 Corporation's Acceptance of Votes.--------------------------10
Section 2.12 Action Without a Meeting.-----------------------------------12
Section 2.13 Meetings by Telecommunication.------------------------------13
Section 2.14 Voting Trusts and Agreements.-------------------------------13
Section 2.15 Voting for Directors.---------------------------------------13
Section 2.16 Maintenance of Records and Shareholder Inspection
Rights.----------------------------------------------------------------13
(a) Corporate Records.-------------------------------------------------13
(b) Inspection Rights of Records Required at Principal Office.---------13
(c) Conditional Inspection Rights.-------------------------------------14
Section 2.17 Financial Statements and Share Information.-----------------14
Section 2.18 Dissenters' Rights.-----------------------------------------15
Section 2.19 Shares Held by Nominees.------------------------------------15
ARTICLE III: Board of Directors---------------------------------------------15
Section 3.01 General Powers.---------------------------------------------15
Section 3.02 Number, Tenure and Qualifications.--------------------------15
Section 3.03 Resignation.------------------------------------------------16
Section 3.04 Removal.----------------------------------------------------16
Section 3.05 Vacancies.--------------------------------------------------16
Section 3.06 Regular Meeting.--------------------------------------------16
Section 3.07 Special Meetings.-------------------------------------------17
Section 3.08 Place of Meetings -- Meetings by Telephone.-----------------17
Section 3.09 Notice of Meetings.-----------------------------------------17
Section 3.10 Waiver of Notice.-------------------------------------------17
Section 3.11 Quorum and Manner of Acting.--------------------------------17
Section 3.12 Action Without a Meeting.-----------------------------------18
Section 3.13 Altering Quorum or Voting Requirements.---------------------18
Section 3.14 Compensation.-----------------------------------------------19
Section 3.15 Committees.-------------------------------------------------19
(a) Creation of Committees.--------------------------------------------19
2
<PAGE>
(b) Selection of Committee Members.------------------------------------19
(c) Required Procedures.-----------------------------------------------19
(d) Authority.---------------------------------------------------------20
(e) Impact on Duty of Directors.---------------------------------------20
Section 3.16 Standards of Conduct.---------------------------------------20
Section 3.17 Limitation of Liability.------------------------------------20
Section 3.18 Liability for Unlawful Distributions.-----------------------20
Section 3.19 Conflicting Interest Transactions.--------------------------21
ARTICLE IV: Officers--------------------------------------------------------21
Section 4.01 Number and Qualifications.----------------------------------21
Section 4.02 Appointment and Term of Office.-----------------------------21
Section 4.03 Removal and Resignation of Officers.------------------------22
Section 4.04 Authority and Duties.---------------------------------------22
(a) President.---------------------------------------------------------22
(b) Executive -vice-presidents.----------------------------------------22
(c) Secretary.---------------------------------------------------------23
(d) Treasurer.---------------------------------------------------------23
Section 4.05 Surety Bonds.-----------------------------------------------24
Section 4.06 Compensation.-----------------------------------------------24
ARTICLE V: Standards of Conduct for Officers and Directors------------------24
Section 5.01 Standards of Conduct.---------------------------------------24
Section 5.02 Reliance on Information and Reports.------------------------25
Section 5.03 Limitation on Liability.------------------------------------25
ARTICLE VI: Indemnification-------------------------------------------------25
Section 6.01 Indemnification of Directors.-------------------------------25
(a) Permitted Indemnification.-----------------------------------------25
(b) Limitation on Permitted Indemnification.---------------------------26
(c) Indemnification in Derivative Actions Limited.---------------------26
(d) Mandatory Indemnification.-----------------------------------------26
Section 6.02 Advance Expenses for Directors.-----------------------------26
Section 6.03 Indemnification of Officers, Employees, Fiduciaries,
and Agents.------------------------------------------------------------27
Section 6.04 Insurance.--------------------------------------------------27
Section 6.05 Scope of Indemnification.-----------------------------------27
Section 6.06 Other Rights and Remedies.----------------------------------28
Section 6.07 Severability.-----------------------------------------------28
ARTICLE VII: Stock----------------------------------------------------------28
Section 7.01 Issuance of Shares.-----------------------------------------28
Section 7.02 Certificates for Shares, Shares Without Certificates.-------28
(a) Use of Certificates.-----------------------------------------------28
(b) Content of Certificates.-------------------------------------------29
(c) Shares Without Certificates.---------------------------------------29
(d) Shareholder List.--------------------------------------------------29
(e) Transferring Certificate Shares.-----------------------------------30
(f) Registration of the Transfer of Shares.----------------------------30
Section 7.03 Restrictions on Transfer of Shares Permitted.---------------30
Section 7.04 Acquisition of Shares by the Corporation.-------------------30
ARTICLE VIII: Amendments to Bylaws------------------------------------------31
Section 8.01 Authority to Amend.-----------------------------------------31
Section 8.02 Bylaw Changing Quorum or Voting Requirement
for Shareholders.------------------------------------------------------31
Section 8.03 Bylaw Changing Quorum or Voting Requirement
for Directors.---------------------------------------------------------31
(a) Amendment.---------------------------------------------------------31
(b) Restriction on Amendment.------------------------------------------31
(c) Required Vote to Amend.--------------------------------------------31
ARTICLE IX: Miscellaneous---------------------------------------------------32
Section 9.01 Corporate Seal.---------------------------------------------32
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Section 9.02 Fiscal Year.------------------------------------------------32
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BYLAWS OF COMMERCIAL CONCEPTS, INC.
ARTICLE I: Offices
Section 1.01 Business Offices.
The Corporation may have such offices, either within or outside Utah,
as the Board of directors may from time to time determine or as the business of
the Corporation may from time to time require.
Section 1.02 Principal Office.
The principal office of the Corporation shall be located at any place
either within or outside Utah as may be designated in the most recent document
on file with the Utah Department of Commerce, Division of Corporations and
Commercial Code (the "Division") providing information regarding the principal
office of the Corporation. The Corporation shall maintain at its principal
office a copy of such corporate records as may be required by Section 1601 of
the Utah Revised Business Corporation Act ("the "Act") and Section 2.16 of these
bylaws.
Section 1.03 Registered Office.
The registered office of the Corporation required by Section 501 of the
Act to be maintained in Utah shall be the registered office as originally so
designated in the Corporation's articles of incorporation or subsequently
designated as the Corporation's registered office in the most recent document on
file with the Division providing such information. The Corporation shall
maintain a registered agent at the registered office, as required by Section 501
of the Act. The registered office and registered agent may be changed from time
to time as provided in Sections 502 and 503 of the Act.
ARTICLE II: Shareholders
Section 2.01 Annual Meeting.
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the second
Monday of July in each year at 10:00 a.m. However, if the day fixed for the
annual meeting is a legal holiday in Utah, then the meeting shall be held at the
same time and place on the next succeeding business day. At the meeting,
directors shall be elected and any other proper business may be transacted. If
the election of directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as may be convenient. Failure to hold an annual meeting as
required by these bylaws shall not affect the validity of any corporate action
or work a forfeiture or dissolution of the Corporation. (Section 701 of the
Act).
Section 2.02 Special Meetings.
Special meetings of the shareholders may be called at any time by the
Board of Directors, by the Chairman of the Board, by the President of the
Corporation, by any two directors of the Corporation, or by such other officers
or persons as may be authorized by these
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Bylaws to call a special meeting, or by the holders of shares representing at
least ten percent (10%) of all of the votes entitled to be cast on any issue
proposed to be considered at the meeting, all in accordance with Section 702 of
the Act.
Section 2.03 Place of Meetings.
Each annual or special meeting of the shareholders shall be held at
such place, either within or outside Utah, as may be designated by the Board of
Directors. In the absence of any such designation, meetings shall be held at the
principal office of the Corporation. (Sections 701 and 702 of the Act)
Section 2.04 Notice of Meeting.
(a) Required Notice.
The Corporation shall give notice to shareholders of the date, time,
and place of each annual and special meeting of shareholders no fewer
than ten (10) or more than sixty (60) days before the meeting date, in
accordance with the requirements of Sections 103 and 705 of the Act.
Unless otherwise required by law or the articles of incorporation, the
Corporation is required to give the notice only to shareholders
entitled to vote at the meeting. The notice requirement will be excused
under certain circumstances with respect to shareholders whose
whereabouts are unknown, as provided in Section 705(5) of the Act.
If the proposed corporate action creates dissenters' rights, the notice
must be sent to all shareholders of the Corporation as of the applicable record
date, whether or not they are entitled to vote at the meeting (Section 1320(l)
of the Act).
(b) Contents of Notice.
The notice of each special meeting must include a description of the
purpose or purposes for which the meeting is called (see Section 702(4)
of the Act). Except as provided in this Section 2.04(b), or as
otherwise required by the Act, other applicable law, or the articles of
incorporation, notice of an annual meeting need not include a
description of the purpose or purposes for which the meeting is called.
If a purpose of any shareholder meeting is to consider:
(i.) a proposed amendment to the articles of incorporation (Section
1003(4) of the Act);
(ii.) a plan of merger or share exchange (Section 1 103 (4) of the
Act);
(iii.) the sale, lease, exchange or other disposition of all, or
substantially all of the Corporation's property (Section
1202(5) of the Act);
(iv.) the dissolution of the Corporation (Section 1402(4) of the
Act); or
(v.) the removal of a director (Section 808(4) of the Act),
the notice must so state and be accompanied by a copy or summary of the
transaction documents, as set forth in the above-referenced sections of
the Act.
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If the proposed corporate action creates dissenters' rights, the notice
must state that shareholders are, or may be, entitled to assert dissenters'
rights, and must be accompanied by a copy of Part 13 of the Act (see Section
1320(l) of the Act).
(c) Adjourned Meeting.
If any annual or special meeting of shareholders is adjourned to a
different date, time or place, then subject to the requirements of the
following sentence notice need not be given of the new date, time and
place if the new date, time and place are announced at the meeting
before adjournment. If the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date for the adjourned
meeting is or must be fixed under Section 707 of the Act and Section
2.05 of these bylaws, notice of the adjourned meeting must be given
pursuant to the requirements of paragraph 2.04(a) of these bylaws to
shareholders of record entitled to vote at the meeting, as provided in
Section 705(4)(b) of the Act.
(d) Waiver of Notice.
A shareholder may waive notice of any meeting (or any other notice
required by the Act, 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 as the date and time when any action will occur),
for inclusion in the minutes or filing with the Corporation records. A
shareholder's attendance at a meeting:
(i.) 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 defective notice;
and
(ii.) 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.
(Section 706 of the Act).
Section 2.05 Fixing of Record Date.
For the purpose of determining shareholders of any voting group
entitled to: (i) notice of or to vote at any meeting of shareholders or any
adjournment thereof, (ii) take action without a meeting- (iii) demand a special
meeting- (iv) receive payment of any distribution or share dividend; or (v) take
any other action, the board of directors may fix in advance a date as the record
date (as defined in Section 102(28) of the Act) for one or more voting groups.
As provided in Section 707(3) of the Act, a record date fixed pursuant to such
section may 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 otherwise fixed by the board as provided herein, then the record date
for the purposes set forth below shall be the close of business on the dates
indicated:
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(i.) With respect to a determination of shareholders entitled to
notice of and to vote at an annual or special meeting of
shareholders, the day before the first notice is delivered to
shareholders (see Section 707(2) of the Act),
(ii.) With respect to a determination of shareholders entitled to
demand a special meeting of shareholders pursuant to Section
702(l)(b) of the Act, the later of (i) the earliest date of
any of the demands pursuant to which the meeting is called,
and (ii) the date that is sixty days prior to the date the
first of the written demands pursuant to which the meeting is
called is received by the Corporation (see Section 702(2) of
the Act);
(iii.) With respect to a determination of shareholders entitled to a
share dividend, the date the board authorizes the share
dividend (see Section 623(3) of the Act);
(iv.) With respect to a determination of shareholders entitled to
take action without a meeting (pursuant to Section 2.12 of
these bylaws and Section 704 of the Act) or entitled to be
given notice of an action so taken, the date the first
shareholder delivers to the Corporation a writing upon which
the action is taken (see Section 704(6) of the Act); and
(v.) With respect to a determination of shareholders entitled to a
distribution (other than one involving a purchase or
reacquisition of shares for which no record date is
necessary), the date the board of directors authorizes the
distribution (see Section 640(2) of the Act).
A determination of shareholders entitled to notice of or to vote at any
meeting of shareholders is effective for any adjournment of the meeting 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 (see Section 707(4) of the Act).
Section 2.06 Shareholder List for Meetings.
The officer or agent having charge of the stock transfer books for
shares of the Corporation shall prepare a list of the names of all shareholders
entitled to be given notice of, and to vote at, each meeting of shareholders, in
compliance with the requirements of Section 720 of the Act. The list must be
arranged by voting group and within each voting group by class or series of
shares. The list must be in alphabetical order within each class or series of
shares and must show the address of, and the number of shares held by, each
shareholder. The shareholder list must be available for inspection by any
shareholder, beginning on the earlier of:
(i) ten days before the meeting for which the list was prepared,
or
(ii) two business days after notice of the meeting is given, and
continuing through the meeting and any adjournments thereof.
The list must 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. A shareholder or a shareholder's agent or attorney is entitled on written
demand to the Corporation, and subject to the provisions of Sections 720, 602
and 1603 of the Act, to inspect and copy the list during regular business
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hours, during the period it is available for inspection. The list is to be
available at the meeting for which it was prepared, and any shareholder or any
shareholder's agent or attorney is entitled to inspect the list at any time
during the meeting for any purpose germane to the meeting. The shareholder list
is to be maintained in written form or in another form capable of conversion
into written form within a reasonable time (see Section 1601(4) of the Act).
Section 2.07 Shareholder Quorum and Voting Requirements.
If the articles of incorporation or the Act provides for voting by a
single voting group on a matter, action on that matter is taken when voted upon
by that voting group.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of such shares exists with respect to that
matter. Unless the articles of incorporation, a bylaw adopted pursuant to
Section 2.08 hereof, or the Act provides otherwise, a majority of the votes
entitled to be cast on the matter by the voting group constitutes a quorum of
that group for action on that matter.
If the articles of incorporation or the Act provides 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. One voting group
may vote on a matter even though another voting group entitled to vote on the
matter has not voted.
Once a share is represented for any purpose at a meeting, including the
purpose of determining that a quorum exists, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of the
meeting, unless a new record date is or must be set for the adjourned meeting.
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 within the voting group opposing
the action, unless the articles of incorporation, a bylaw adopted pursuant to
Section 2.08 hereof, or the Act requires a greater number of affirmative votes.
(See Sections 725 and 726 of the Act). Those matters as to which the Act
provides for a special voting requirement, typically requiring the vote of a
majority of all votes entitled to be cast, or a majority of all voting shares
within each voting group which is entitled to vote separately, include certain
amendments to the articles of incorporation, mergers, sales of substantially all
corporate assets, and dissolution of the Corporation.
Section 2.08 Increasing Quorum or Voting Requirements.
As specified in Section 727 of the Act, 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 the Act. An amendment to
the articles of incorporation that changes or deletes a greater quorum or voting
requirement 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. Pursuant to Section 1021 of the Act, if authorized
by the articles of incorporation, the shareholders may adopt, amend, or repeal a
bylaw that fixes a greater quorum or voting requirement for shareholders, or
voting groups of shareholders, than is
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required by the Act. Any such action is subject to the provisions of Part 7 of
the Act. A bylaw that fixes a greater quorum or voting requirement for
shareholders as set forth in the preceding sentence may not be adopted, amended,
or repealed by the board of directors.
Section 2.09 Proxies.
At all meetings of shareholders, a shareholder may vote in person or by
proxy. A shareholder may appoint a proxy by signing an appointment form, either
personally or by the shareholder's attorney-in fact, or by any of the other
means set forth in Section 722 of the Act. A proxy appointment is valid for
eleven months unless a longer period is expressly provided in the appointment
form. The effectiveness and revocability of proxy appointments are governed by
Section 722 of the Act.
Section 2.10 Voting of Shares.
Unless otherwise provided in the articles of incorporation, in Section
721 of the Act, or other applicable law, each outstanding share, regardless of
class, is entitled to one vote, and each fractional share is entitled to a
corresponding fractional vote, on each matter voted on at a shareholders'
meeting. Only shares are entitled to vote.
Except as otherwise provided by specific court order as contemplated by
Section 721(2) of the Act, shares of this corporation are not entitled to be
voted or to be counted in determining the total number of outstanding shares
eligible to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and this corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation. The prior sentence shall not limit the power of the
Corporation to vote any shares, including its own shares, held by it in a
fiduciary capacity. Redeemable shares are not entitled to be voted after notice
of redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
Section 2.11 Corporation's Acceptance of Votes.
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, as provided in Section 724 of the Act.
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:
(i.) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity,
(ii.) 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,
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(iii.) 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;
(iv.) the name signed purports to be that of a pledgee, beneficial
owner, or attorney-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;
(v.) two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at
least one of the cotenants or fiduciaries and the person
signing appears to be acting on behalf of all cotenants or
fiduciaries; or
(vi.) the acceptance of the vote, consent, waiver, proxy
appointment, or proxy appointment revocation is otherwise
proper under rules established by the Corporation that are not
inconsistent with the provisions of Section 724 of the Act.
If shares are registered in the names of two or more persons, whether
fiduciaries, members of a partnership, cotenants, 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 proxyholders, have
the same fiduciary relationship respecting the same shares, then 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 effects set
forth in Section 724(3) of the Act.
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.
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 Section 724 of the Act are not
liable in damages to the shareholder for the consequences of the acceptance or
rejection.
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Corporate action based on the acceptance or rejection of a vote,
consent, waiver, proxy appointment, or proxy appointment revocation under this
section and Section 724 of the Act is valid unless a court of competent
jurisdiction determines otherwise.
Section 2.12 Action Without a Meeting.
Unless otherwise provided in the articles of incorporation, and subject
to the provisions of Section 704 of the Act, any action required or permitted to
be taken 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 no
less than the minimum number of votes that would be necessary to authorize or
take the action at a meeting at which all shares entitled to vote thereon were
present and voted. 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 the approval. Such notice shall meet the requirements of, and be
delivered to all shareholders identified in, Section 704(2) of the Act.
Any shareholder giving a written consent, or the shareholder's
proxyholder, personal representative or transferee may revoke a consent by a
signed writing describing the action and stating that the shareholder's prior
consent is revoked, if the writing is received by the Corporation prior to the
effectiveness of the action, as provided in Section 704(3) of the Act.
An action taken by written consent of the shareholders as provided
herein is not effective unless all written consents on which the Corporation
relies for the taking of the action are received by the Corporation within a
sixty day period. An action so taken is effective as of the date the last
written consent necessary to effect the action is received by the Corporation,
unless all of the written consents necessary to effect the action specify a
later date as the effective date of the action, in which case the later date
shall be the effective date of the action.
Unless otherwise provided in these bylaws, the written consents may be
received by the Corporation by electronically transmitted facsimile, e-mail or
other form of communication providing the Corporation with a complete copy
thereof, including a copy of the signature thereto.
Notwithstanding the other provisions of this bylaw, directors may not
be elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors.
As set forth in Section 2.05(d) above, if not otherwise determined as
permitted by the Act and these bylaws, the record date for determining
shareholders entitled to take action without a meeting or entitled to be given
notice of any action so taken is the date the first shareholder delivers to the
Corporation a writing upon which the action is taken.
An action taken by written consent of the shareholders as provided
herein has the same effect as action taken at a meeting of shareholders, and may
be so described in any document.
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Section 2.13 Meetings by Telecommunication.
As permitted by Section 708 of the Act, unless otherwise provided in
these bylaws, any or all of the shareholders may participate in an annual or
special meeting of shareholders by, or the meeting may be conducted through the
use of, any means of communication by which all persons participating in the
meeting can hear each other during the meeting. A shareholder participating in a
meeting by this means is considered to be present in person at the meeting.
Section 2.14 Voting Trusts and Agreements.
Voting trusts and agreements may be entered into among the shareholders
in compliance with the requirements of Sections 730, 731 and 732 of the Act.
Section 2.15 Voting for Directors.
Unless otherwise provided in the articles of incorporation or the Act,
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, in accordance
with the requirements and procedures set forth in Section 728 of the Act.
Cumulative voting is permitted only if specifically provided in the articles of
incorporation.
Section 2.16 Maintenance of Records and Shareholder Inspection Rights.
(a) Corporate Records.
As required by Section 1601 of the Act, the Corporation shall keep as
permanent records minutes of all meetings of its shareholders and board
of directors, a record of all actions taken by the shareholders or
board of directors without a meeting, a record of all actions taken on
behalf of the Corporation by a committee of the board of directors in
place of the board of directors, and a record of all waivers of notices
of meetings of shareholders, meetings of the board of directors, or any
meetings of committees of the board of directors. The Corporation shall
also maintain appropriate accounting and shareholder records as
required by the statute. The Corporation shall keep at its principal
office those corporate records and documents identified in Section
1601(5) of the Act and listed in the following paragraph.
(b) Inspection Rights of Records Required at Principal Office.
Pursuant to Section 1602(l) of the Act, a shareholder or director of
the Corporation (or such person's agent or attorney) who gives the
Corporation written notice of the demand at least five business days
before the proposed inspection date, has the right to inspect and copy,
during regular business hours, any of the following records, all of
which the Corporation is required to keep at its principal office:
(i) its articles of incorporation as then in effect;
(ii) its bylaws as then in effect;
(iii) the minutes of all shareholders' meetings, and records of all
actions taken by shareholders without a meeting, for the past
three years;
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(iv) all written communications within the past three years to
shareholders as a group or to the holders of any class or
series of shares as a group;
(v) a list of the names and addresses of its current officers and
directors;
(vi) its most recent annual report delivered to the Division; and
(vii) all financial statements prepared for periods ending during
the last three years that a shareholder could request under
Section 1605 of the Act.
(c) Conditional Inspection Rights.
In addition to the inspection rights set forth in paragraph (b) above,
as provided in Section 1602(2) of the Act, a shareholder or director of the
Corporation (or such person's agent or attorney) who gives the Corporation a
written demand in good faith and for a proper purpose at least five business
days before the requested inspection date, and describes in the demand with
reasonable particularity the records proposed to be inspected and the purpose of
the inspection, is entitled to inspect and copy, during regular business hours
at a reasonable location specified by the Corporation, any of the following
records of the Corporation:
(i) excerpts from minutes of meetings of, and from actions taken
by, the shareholders, the board of directors, or any
committees of the board of directors, to the extent not
subject to inspection under paragraph (b) of this Section
2.16;
(ii) accounting records of the Corporation; and
(iii) the record of shareholders (compiled no earlier than the date
of the demand for inspection).
For the purposes of paragraph (c), a proper purpose means a purpose
reasonably related to the demanding party's interest as a shareholder or
director. A party may not use any information obtained through the inspection or
copying of records permitted by this paragraph (c) for any purposes other than
those set forth in a proper demand as described above, and the officers of the
Corporation are authorized to take appropriate steps to ensure compliance with
these limitations.
Section 2.17 Financial Statements and Share Information.
Upon the written request of any shareholder, the Corporation shall
transmit to the requesting shareholder:
(i) its most recent annual or quarterly financial statements
showing in reasonable detail its assets and liabilities and
the results of its operations, as required by Section 1605 of
the Act; and
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(ii) the information specified by Section 625(3) of the Act,
regarding the designations, preferences, limitations, and
relative rights applicable to each class and series of shares
of the Corporation, and the authority of the board of
directors to determine variations for any existing or future
class or series, as required by Section 1606 of the Act.
Section 2.18 Dissenters' Rights.
Each shareholder of the Corporation shall have the right to dissent
from, and obtain payment of the fair value of shares held by such shareholder in
the event of, any of the corporate actions identified in Section 1302 of the Act
or otherwise designated in the articles of incorporation, these bylaws, or in a
resolution of the board of directors.
Section 2.19 Shares Held by Nominees.
As provided in Section 723 of the Act, the Board of Directors is
authorized to establish for the Corporation from time to time such procedures as
the directors may determine to be appropriate, by which the beneficial owner of
shares that are registered in a nominee is recognized by the Corporation as a
shareholder.
ARTICLE III: Board of Directors
Section 3.01 General Powers.
As provided in Section 801 of the Act, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the board of directors,
subject to any limitation set forth in the articles of incorporation or in a
shareholder agreement permitted by Section 732 of the Act.
Section 3.02 Number, Tenure and Qualifications.
Unless otherwise specifically provided in the articles of
incorporation, and subject to the provisions of Section 803 of the Act, the
number of directors of the Corporation shall be as fixed from time to time by
resolution of the board of directors or shareholders, but in no instance shall
there be fewer directors than the minimum number required by Section 803 of the
Act. At the time of adoption of these bylaws, the articles of incorporation do
include provisions relating to the size and composition of the Company's Board
of directors, and such provisions supersede any inconsistent provisions in these
bylaws. As provided in the articles of incorporation, and subject to the
limitations set forth therein, the Corporation's board of directors consisted of
three (3) members when incorporated, currently consists of four (4) members and
may be increased up to a maximum of up to seven (7) members.
Each director shall hold office until the next annual meeting of
shareholders (unless the articles of incorporation provide for staggering the
terms of directors as permitted by Section 806 of the Act) or until removed.
However, a director whose term expires shall continue to serve until such
director's successor shall have been elected and qualified or until there is a
decrease in the authorized number of directors. No decrease in the authorized
number of directors shall have the effect of shortening the term of any
incumbent director. Unless
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required by the articles of incorporation, directors do not need to be residents
of Utah or shareholders of the Corporation.
Section 3.03 Resignation.
Any director may resign at any time by giving a written notice of
resignation to the Corporation. A director's resignation is effective when the
notice is received by the Corporation, or on such later date as may be specified
in the notice of resignation. (Section 807 of the Act).
Section 3.04 Removal.
The shareholders may remove one or more directors at a meeting called
for that purpose, as contemplated by Section 808 of the Act, if the meeting
notice states 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 be removed only for 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 the director. If the articles of incorporation
provide for cumulative voting for the election of directors, a director may not
be removed if a number of votes sufficient to elect the director under such
cumulative voting is voted against removal. If cumulative voting is not in
effect, a director may be removed only if the number of votes cast to remove the
director exceeds the number of votes cast against removal.
Section 3.05 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 vacancy may be filled by the shareholders or the
board of directors (as provided in Section 810 of the Act).
If the vacant office was held by a director elected by a voting group
of shareholders, only the holders of the 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 or otherwise) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
The terms of directors elected to fill vacancies generally expire at
the next annual shareholders' meeting. If a new director is elected to fill a
vacancy in a position having a term extending beyond the date of the next annual
meeting of shareholders, the term of such new director is governed by Section
805(4) of the Act.
Section 3.06 Regular Meeting.
Regular meetings of the board of directors may be held without notice
of the date, time, place or purposes of the meetings, if the times of such
meetings are fixed by resolution of the board of directors. (Section 820 of the
Act)
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Section 3.07 Special Meetings.
Special meetings of the board of directors may be called by or at the
request of the president or any two directors. The person or persons authorized
to call special meetings of the board of directors may fix the time and place of
the meetings so called. (Section 820 of the Act)
Section 3.08 Place of Meetings -- Meetings by Telephone.
The board of directors may hold regular or special meetings in or out
of the State of Utah. Unless the articles of incorporation or bylaws provide
otherwise, the board of directors may permit any or all directors to 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 hear each
other during the meeting (Section 820(2) of the Act).
Section 3.09 Notice of Meetings.
Unless the articles of incorporation, bylaws, or the Act denote
otherwise, regular meetings of the board may be held without notice of the date,
time, place, purpose or purposes of the meeting. Unless the articles of
incorporation or bylaws provide for a longer or shorter period, special meetings
of the board of directors must be preceded by at two days' notice of the of the
date, time, and place of the meeting. The notice need not describe the purpose
of the special meeting unless required by the articles of incorporation, bylaws,
or the Act. (Section 822 of the Act)
The giving of notice of any meeting, shall be governed by the rules set
forth in Section 103 of the Act.
Section 3.10 Waiver of Notice.
Any director may waive notice of any meeting before or after the date
of the meeting, as provided in Section 823 of the Act. Except as provided in the
next sentence, the waiver must be in writing, signed by the director entitled to
the notice, and delivered to the Corporation for filing with the corporate
records (but delivery and filing are not conditions to its effectiveness). A
director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting, or promptly upon the director's arrival, objects to holding the
meeting or transacting business at the meeting because of lack of notice or
defective notice, and does not thereafter vote for or assent to action taken at
the meeting.
Section 3.11 Quorum and Manner of Acting.
As set forth in Section 824 of the Act, unless the articles of
incorporation or these bylaws establish a different quorum requirement, a quorum
of the board of directors consists of a majority of the number of directors
fixed or prescribed in accordance with these bylaws, except that if a
variable-range board is permitted by these bylaws and no resolution prescribing
the exact number within the permitted range is in effect, then a quorum consists
of a majority of the number of directors in office immediately before the
meeting. The articles of incorporation or bylaws may authorize a quorum of the
board of directors to consist of no fewer than one-third of the fixed or
prescribed number of directors. Any adjustment of the then applicable
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quorum requirement is subject to the provisions of Section 1022 of the Act and
Section 3.13 of these bylaws.
The affirmative vote of a majority of directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the board
of directors, unless the articles of incorporation, bylaws, or the Act require
the vote of a greater vote of directors. Any action to change the percentage of
directors needed to take action is subject to the provisions of Section 1022 of
the Act and Section 3.13 of these bylaws.
As set forth in Section 824(4) of the Act, a director who is present at
a meeting of the board of directors when corporate action is taken is considered
to have assented to the action taken at the meeting unless:
(i) the director objects at the beginning of the meeting (or
promptly upon arrival) to holding the meeting or transacting
business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting;
(ii) the director contemporaneously requests that such director's
dissent or abstention as to any specific action be entered
into the minutes of the meeting; or
(iii) the director causes written notice of a dissent or abstention
as to any specific action to be received by the presiding
officer of the meeting before adjournment of the meeting or by
the Corporation promptly after adjournment of the meeting. The
right of dissent or abstention as to a specific action is not
available to a director who votes in favor of the action
taken.
Section 3.12 Action Without a Meeting.
Unless the articles of incorporation, these bylaws or the Act provide
otherwise, 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 in writing to the action as permitted by Section 821 of the Act. Action
is considered to have been taken by such written consents when the last director
signs a writing describing the action taken, unless prior to that time any
director has revoked a consent by a writing signed by the director and received
by an authorized officer of the Corporation. An action so taken is effective at
the time it is taken, unless the board of directors establishes a different
effective date. An action taken by written consent of the directors as described
in this section has the same effect as action taken at a meeting of directors
and may be described as such in any document.
Section 3.13 Altering Quorum or Voting Requirements.
As provided in Section 1022 of the Act, a bylaw that fixes a greater
quorum or voting requirement for the board of directors than is required by the
Act may be amended or repealed:
(i) if originally adopted by the shareholders, only by the
shareholders, unless the bylaw specifically provided that it
could be amended by a vote of either the shareholders or the
board of directors; or
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(ii) if originally adopted by the board of directors, by the
shareholders or, unless otherwise provided in the articles of
incorporation or bylaws, by the board of directors.
Action by the board of directors to amend or repeal a bylaw that
changes the quorum or voting requirement for the board of directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect or proposed to be
adopted, whichever is greater.
Section 3.14 Compensation.
Unless otherwise provided in the articles of incorporation or these
bylaws, the board of directors may fix the compensation of directors, as
permitted by Section 8.11 of the Act. Pursuant to this authority, the directors
may, by resolution, provide for directors to be paid their 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 capacity and receiving compensation therefor.
Section 3.15 Committees.
(a) Creation of Committees.
Unless the articles of incorporation or these bylaws provide otherwise,
a 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 serve at the pleasure of the board of
directors (Section 825 of the Act).
(b) Selection of Committee Members.
The creation of a committee and appointment of members to it must be
approved by the greater of:
(i) a majority of all the directors in office when the action is
taken; or
(ii) the number of directors required by the articles of
incorporation or bylaws to take action under Section 824 of
the Act and Section 3.11 (including paragraph 3.11 (b)) of
these bylaws.
(c) Required Procedures.
Sections 820 and 824 of the Act, and Sections 3.06 through 3.11 of
these bylaws (but not the special voting and quorum requirements
established by paragraph 3.11 (b) of these bylaws), which govern
meetings, action without meeting, notice, waiver of notice, and quorum
and voting requirements of the board of directors, apply to committees
and their members as well. Any resolutions adopted by the board of
directors in connection with the creation of any committee may
establish additional quorum and voting requirements applicable to such
committees, including provisions to ensure
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representation of each of the Corporation's investor groups at each
meeting of such committees.
(d) Authority.
Unless limited by the articles of incorporation or these bylaws, each
committee may exercise those aspects of the authority of the board of
directors (as set forth in Section 801 of the Act and Section 3.01 of
these bylaws) which the board of directors confers upon such committee
in the resolution creating the committee.
(e) Impact on Duty of Directors.
The creation of, delegation of authority to, or action by a committee
does not alone constitute compliance by a director with the standards
of conduct described in Section 840 of the Act and referenced in
Section 3.16 of these bylaws.
Section 3.16 Standards of Conduct.
Each director is to discharge such director's duties as a director,
including duties as a member of a committee, in compliance with the standards of
conduct set forth in Section 840 of the Act and described in Article V of these
bylaws.
Section 3.17 Limitation of Liability.
If not already so provided in the articles of incorporation of this
Corporation, the Corporation, as provided in Section 841 of the Act, may
eliminate or limit the liability of directors to the Corporation or to its
shareholders for monetary damages for any action taken or any failure to take
action as a director, by an amendment to its articles of incorporation, or by
the adoption of a bylaw or resolution approved by the same percentage of
shareholders as would be required to approve an amendment to the articles of
incorporation to include such provision. No such provision may eliminate or
limit the liability of a director for:
(i) the amount of a financial benefit received by a director to
which the director is not entitled;
(ii) an intentional infliction of harm on the Corporation or the
shareholders;
(iii) an unlawful distribution in violation of the standards set
forth in Section 824 of the Act as referenced in Section 3.18
of these bylaws;
(iv) an intentional violation of criminal law; or
(v) liability for any act or omission occurring prior to the date
such a provision becomes effective.
Section 3.18 Liability for Unlawful Distributions.
A director who votes for or assents to a distribution made in violation
of the requirements of Section 640 of the Act or the articles of incorporation,
and who does not discharge such duties in compliance with the standards of
conduct set forth in Section 840 of
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the Act and referenced in Sections 3.16 and 5.01 of these bylaws, is personally
liable to the Corporation for the amount by which the distribution exceeds the
amount that could have been properly distributed, as provided in Section 842 of
the Act.
Section 3.19 Conflicting Interest Transactions.
Transactions in which a director has a conflicting interest will be
handled in accordance with Sections 850 to 853 of the Act. In accordance with
such sections, each director's conflicting interest transaction as defined
therein, which has not otherwise been established to be fair to the Corporation,
is to be presented to the shareholders for approval in accordance with Section
853 of the Act, or approved by the directors in compliance with the requirements
of Section 822 of the Act.
Directors may take action with respect to a director's conflicting
interest transaction by the affirmative vote of a majority of those "qualified
directors" (defined in Section 850 of the Act as essentially those directors
without conflicting interests with respect to the transaction) on the board of
directors or on a duly empowered and constituted committee of the board who
voted on the transaction after receipt of the required disclosures (as defined
in Sections 850 and 852(2) of the Act). For purposes of such action, a majority
of the qualified directors on the board or on the committee, as the case may be,
constitutes a quorum. Such action is not affected by the presence or vote of a
director who is not a qualified director.
ARTICLE IV: Officers
Section 4.01 Number and Qualifications.
The officers of the Corporation shall be a president, a secretary, a
treasurer, each of whom shall be appointed by the board of directors. The
Corporation may also have such other officers and assistant officers as the
board of directors in its discretion may determine, by resolution, to be
appropriate, including a chairman of the board, one or more
executive-vice-presidents, a controller, assistant secretaries and assistant
treasurers. All such officers shall be appointed by the board of directors,
except that if specifically authorized by the board of directors, an officer may
appoint one or more officers or assistant officers (see Section 830 of the Act).
The same individual may simultaneously hold more than one office in the
Corporation.
Section 4.02 Appointment and Term of Office.
The officers of the Corporation shall be appointed by the board of
directors (or, to the extent permitted by Section 4.01 above, by an officer
specifically authorized by the board to make such appointments), for such terms
as may be determined by the board of directors. Neither the appointment of an
officer nor the designation of a specified term creates or grants to the officer
any contract rights, and the board can remove the officer at any time prior to
the termination of any term for which the officer may have been appointed. If no
other term is specified, officers shall hold office until they resign, die, or
until they are removed or replaced in the manner provided in Section 4.03 below,
or Section 832 of the Act.
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Section 4.03 Removal and Resignation of Officers.
Any officer or agent of the Corporation may be removed or replaced by
the board of directors at any time with or without cause, as permitted by
Section 832 of the Act. The Chief Financial Officer may also be removed by the
Chief Executive Officer, or Co-Chairmen of the Board of Directors. The election
of a replacement officer shall constitute the removal of the person previously
holding such office. An officer may resign at any time by giving written notice
of the resignation to the Corporation. Resignations shall become effective as
provided in Section 832 of the Act. An officer's resignation or removal does not
affect the contract rights of the parties, if any (See Section 833 of the Act).
Section 4.04 Authority and Duties.
The officers of the Corporation shall have the authority and perform
the duties specified below and as may be additionally specified by the
president, the board of directors or these bylaws (and in all cases where the
duties of any officer are not prescribed by the bylaws or by the board of
directors, such officer shall follow the orders and instructions of the
president), except that in any event each officer shall exercise such powers and
perform such duties as may be required by law:
(a) President.
The president shall, subject to the direction and supervision of the
board of directors,
(i) be the chief executive officer of the Corporation and have
general and active control of its affairs and business and
general supervision of its officers, agents and employees;
(ii) unless there is a chairman of the board, preside at all
meetings of the shareholders and the board of directors;
(iii) see that all orders and resolutions of the board of directors
are carried into effect; and
(iv) perform all other duties incident to the office of president
and as from time to time may be assigned to the president by
the board of directors. The president may sign, with the
secretary or any other proper officer of the Corporation
authorized to take such action, certificates for shares of the
Corporation. The president may also sign, subject to such
restrictions and limitations as may be imposed from time to
time by the board of directors, deeds, mortgages, bonds,
contracts or other instruments which have been duly approved
for execution.
(b) Executive -vice-presidents.
The executive-executive-vice-president, if any (or if there is more
than one then each executive-executive-vice-president), shall assist
the president and shall perform such duties as may be assigned by the
president or by the board of directors. The executive-vice-president,
if there is one (or if there is more than one then the
executive-vice-president designated by the board of directors, or if
there be no such designation then the executive-vice-presidents in
order of their election), shall, at the request of the president, or in
the event of the president's absence or inability or refusal to act,
perform
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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.
Any executive-vice-president may sign, with the secretary or an
assistant secretary, certificates for shares of the Corporation the
issuance of which have been authorized by resolution of the board of
directors. Executive-vice-presidents shall perform such other duties as
from time to time may be assigned to them by the president or by the
board of directors. Vice-presidents, if any, shall have such powers and
perform such duties as may be assigned to them by the president or by
the board of directors.
(c) Secretary.
The secretary shall:
(i.) have responsibility for the preparation and maintenance of
minutes of the proceedings of the shareholders' and of the
board of directors' meetings;
(ii.) have responsibility for the preparation and maintenance of the
other records and information required to be kept by the
Corporation under Section 1601 of the Act and Section 2.17 of
these bylaws;
(iii.) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by the Act or other
applicable law;
(iv.) be custodian of the corporate records and of any seal of the
Corporation;
(v.) when requested or required, authenticate any records of the
Corporation;
(vi.) keep a register of the post office address of each shareholder
which shall be furnished to the secretary by such shareholder;
(vii.) sign, with the president, or an executive-vice-president,
certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the board of
directors;
(viii.) have general charge of the stock transfer books of the
Corporation, unless the Corporation has a transfer agent; and
(ix.) in general perform all duties incident to the office of
secretary, including those identified in the Act, and such
other duties as from time to time may be assigned to the
secretary by the president or the board of directors.
Assistant secretaries, if any, shall have the same duties and
powers, subject to supervision by the secretary.
(d) Treasurer.
The treasurer shall:
(i.) be the principal financial officer of the Corporation and have
responsibility for the care and custody of all its funds,
securities, evidences of indebtedness and other personal
property and deposit and handle the same in accordance with
instructions of the board of directors;
(ii.) receive and give receipts and acquittances for moneys paid in
on account of the Corporation, and pay out of funds on hand
for all bills, payrolls and other just debts of the
Corporation of whatever nature upon maturity;
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(iii.) unless there is a controller, be the principal accounting
officer of the Corporation and as such prescribe and maintain
the methods and systems of accounting to be followed, keep
complete books and records of account, prepare and file all
local, state and federal tax returns, prescribe and maintain
an adequate system of internal audit and prepare and furnish
to the president and the board of directors statements of
account showing the financial position of the Corporation and
the results of its operations;
(iv.) upon request of the board, make such reports to it as may be
required at any time; and
(v.) perform all other duties incident to the office of treasurer
and such other duties as from time to time may be assigned by
the board of directors or the president. Assistant treasurers,
if any, shall have the same powers and duties, subject to
supervision by the treasurer.
Section 4.05 Surety Bonds.
The board of directors may require any officer or agent of the
Corporation to provide to the Corporation a bond, in such sums and with such
sureties as may be satisfactory to the board, conditioned upon the faithful
performance of such individual's duties and for the restoration to the
Corporation of all books, papers, vouchers, money, securities and other property
of whatever kind in such officer's possession or under such officer's control
belonging to the Corporation.
Section 4.06 Compensation.
Officers shall receive such compensation for their services
as may be authorized or ratified by the board of directors (by a vote meeting
the requirements of paragraph 3.11(b) above) and no officer shall be prevented
from receiving compensation by reason of the fact that such officer is also a
director of the Corporation. Appointment as an officer shall not of itself
create a contract or other right to compensation for services performed as such
officer.
ARTICLE V: Standards of Conduct for Officers and Directors
Section 5.01 Standards of Conduct.
As provided in Section 840 of the Act, each director is required to
discharge his or her duties as a director, including duties as a member of a
committee, and each officer with discretionary authority is required to
discharge his or her duties under that authority, in a manner consistent with
the following standards of conduct:
(i) in good faith;
(ii) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and
(iii) in a manner the director or officer reasonably believes is in
the best interests of the Corporation.
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Section 5.02 Reliance on Information and Reports.
In discharging his or her duties, a director or officer is entitled to
rely on information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by:
(i) one or more officers or employees of the Corporation whom the
director or officer reasonably believes to be reliable and
competent in the matters presented;
(ii) legal counsel, public accountants, or other persons as to
matters the director or officer reasonably believes are within
the person's professional or expert competence; or
(iii) in the case of a director, a committee of the board of
directors of which such director is not a member, if the
director reasonably believes the committee merits confidence.
A director or officer is not acting in good faith in relying on any
such information, opinions, reports or statements if such director or officer
has knowledge concerning the matter in question that makes reliance otherwise
permitted as set forth above unwarranted.
Section 5.03 Limitation on Liability.
A director or officer is not liable for any action taken, or any
failure to take any action as an officer or director, as the case may be, if the
duties of the office have been performed in compliance with the provisions of
this Article 5, and Section 840 of the Act.
ARTICLE VI: Indemnification
Section 6.01 Indemnification of Directors.
(a) Permitted Indemnification.
Pursuant to Section 902 of the Act, unless otherwise provided in the
articles of incorporation as permitted by Section 909 of the Act, the
Corporation may indemnify any individual made a party to a proceeding
because such individual is or was a director of the Corporation,
against liability incurred in the proceeding if the Corporation has
authorized the payment in accordance with Section 906 of the Act and a
determination has been made in accordance with the procedures set forth
in Section 906(2) of the Act that the director has met the applicable
standards of conduct as set forth below and in Section 902 of the Act:
(i) the individual's conduct was in good faith; and
(ii) the individual reasonably believed that his or her conduct was
in, or not opposed to, the Corporation's best interests, and
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(iii) in the case of any criminal proceeding, the individual had no
reasonable cause to believe his or her conduct was unlawful.
(b) Limitation on Permitted Indemnification.
As provided in Section 902(4) of the Act, the Corporation shall not
indemnify a director under Section 6.01(a) above:
(i) in connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the
Corporation; or
(ii) in connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in the director's official capacity, in which
proceeding the director was adjudged liable on the basis that
the director derived an improper personal benefit.
(c) Indemnification in Derivative Actions Limited.
Indemnification permitted under Section 6.01(a) and Section 902 of the
Act in connection with a proceeding by or in the right of the
Corporation is limited to reasonable expenses incurred in connection
with the proceeding.
(d) Mandatory Indemnification.
As set forth in Section 903 of the Act, unless limited by its articles
of incorporation, a corporation shall indemnify a director who was
successful, on the merits or otherwise, in the defense of any
proceeding, or in the defense of any claim, issue, or matter in the
proceeding, to which the director was a party because the director is
or was a director of the Corporation, against reasonable expenses
incurred by the director in connection with the proceeding or claim
with respect to which the director has been successful.
Section 6.02 Advance Expenses for Directors.
Pursuant to the provisions of Section 904 of the Act, if a
determination is made, following the procedures of Section 906(b) of the Act,
that a director has met the following requirements; and if an authorization of
payment is made, following the procedures and standards set forth in Section 906
of the Act, then unless otherwise provided in the articles of incorporation, the
Corporation may 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
(i) the director furnishes the Corporation a written affirmation
of the director's good faith belief that the director has met
the applicable standard of conduct described in Section 5.01
of these bylaws and Section 902 of the Act
(ii) the director furnishes to the Corporation a written
undertaking, executed personally or on such director's behalf,
to repay the advance if it is ultimately determined that the
director did not meet the standard of conduct; and
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(iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification
under Sections 901 through 909 of the Act.
Section 6.03 Indemnification of Officers. Employees. Fiduciaries. and Agents.
Unless otherwise provided in the articles of incorporation, and
pursuant to Section 907 of the Act:
(i) an officer of the Corporation is entitled to mandatory
indemnification under Section 903 of the Act, and is entitled
to apply for court-ordered indemnification under Section 905
of the Act, in each case to the same extent as a director;
(ii) the Corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the Corporation to
the same extent as to a director, and
(iii) the Corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director
to a greater extent, if not inconsistent with public policy,
and if provided for by its articles of incorporation, these
bylaws, action of the board of directors, or contract.
Section 6.04 Insurance.
As provided in Section 908 of the Act, the Corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary, or agent of the Corporation, or who, while serving
as a director, officer, employee, fiduciary, or agent of the Corporation, is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee, fiduciary, or agent of another foreign or domestic
corporation or other person, or of an employee benefit plan, against 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 power to indemnify such person against
the same liability under Article VI of these bylaws or Sections 902, 903 or 907
of the Act. Insurance may be procured from any insurance company designated by
the board of directors, whether the insurance company is formed under the laws
of this state or any other jurisdiction, including any insurance company in
which the Corporation has an equity or any other interest through stock
ownership or otherwise.
Section 6.05 Scope of Indemnification.
The indemnification and advancement of expenses authorized by this
Article VI is intended to permit the Corporation to indemnify to the fullest
extent permitted by the laws of the State of Utah any and all persons whom it
shall have power to indemnify under such laws from and against any and all of
the expenses, disabilities, or other matters referred to in or covered by such
laws. Any indemnification or advancement of expenses hereunder, unless otherwise
provided when the indemnification or advancement of expenses is authorized or
ratified, is intended to be applicable to acts or omissions that occurred prior
to the adoption of this Article, shall continue as to any party during the
period such party serves in any one or more of the capacities covered by this
Article, shall continue thereafter so long as the party may
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be subject to any possible proceeding by reason of the fact that such party
served in any one or more of the capacities covered by this Article, and shall
inure to the benefit of the estate and personal representatives of such person.
Any repeal or modification of this Article or of any Section or provision hereof
shall not affect any right or obligations then existing. All rights to
indemnification under this Article shall be deemed to be provided by a contract
between the Corporation and each party covered hereby.
Section 6.06 Other Rights and Remedies.
The rights to indemnification and advancement of expenses provided in
this Article VI shall be in addition to any other rights which a party may have
or hereafter acquire under any applicable law, contract, order, or otherwise.
Section 6.07 Severability.
If any provision of this Article shall be held to be invalid, illegal
unenforceable for any reason, the remaining provisions of this Article shall not
be affected or impaired thereby, but shall, to the fullest extent possible, be
construed so as to give effect to the intent of this Article that each party
covered hereby is entitled to the fullest protection permitted by law.
ARTICLE VII: Stock
Section 7.01 Issuance of Shares.
Except to the extent any such powers may be reserved to the
shareholders by the articles of incorporation, as provided in section 621 of the
Act 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. The terms and conditions of any tangible or intangible property or
benefit to be provided in the future to the Corporation, including contracts or
arrangements for services to be performed, are to be set forth in writing.
Before the Corporation issues shares, the board of directors must
determine that the consideration received or to be received for the shares to be
issued is adequate.
The board of directors may authorize a committee of the board of
directors, or an officer of the Corporation, to authorize or approve the
issuance or sale, or contract for sale of shares, within limits specifically
prescribed by the board of directors.
Section 7.02 Certificates for Shares, Shares Without Certificates.
(a) Use of Certificates.
As provided in Section 625 of the Act, shares of the Corporation may,
but need not be, represented by certificates. Unless the Act or another
applicable statute expressly provides otherwise, the rights and
obligations of shareholders are not affected by whether or not their
shares are represented by certificates.
28
<PAGE>
(b) Content of Certificates.
Certificates representing shares of the Corporation must, at a minimum,
state on their face:
(i) the name of the Corporation, and that it is organized under
the laws of Utah;
(ii) the name of the person to whom the certificate is issued; and
(iii) the number and class of shares and the designation of the
series, if any, the certificate represents.
If the Corporation is authorized to issue different classes of shares
or different series within a class, the designations, preferences,
limitations, and relative rights applicable to each class, the
variations in preferences, limitations, and relative rights determined
for each series, and the authority of the board of directors to
determine variations for any existing or future class or 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 such information on request in
writing and without charge.
Each share certificate must be signed (either manually or by facsimile)
by the president or an executive-vice-president and by the secretary or
an assistant secretary, or by any two other officers as may be
designated in these bylaws or by the board of directors. Each
certificate for shares is to be consecutively numbered or otherwise
identified.
(c) Shares Without Certificates.
As provided in Section 626 of the Act, unless the articles of
incorporation or these bylaws provide otherwise, the board of directors
may authorize the issuance of some or all of the shares of any or all of
its classes or series without certificates. Such an authorization will
not affect shares already represented by certificates until they are
surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of shares
without certificates, the Corporation shall send the shareholder a
written statement of the information required on certificates by
Subsections 625(2) and (3) of the Act, as summarized in Section 7.02(b)
above.
(d) Shareholder List.
The Corporation shall maintain a record of the names and addresses of
the persons to whom shares are issued, in a form meeting the
requirements of Section 1601(3) of the Act.
29
<PAGE>
(e) Transferring Certificate 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 case 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.
(f) 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 on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
Section 7.03 Restrictions on Transfer of Shares Permitted.
As contemplated by Section 627 of the Act, the articles of
incorporation, these bylaws, an agreement among shareholders, or and agreement
between one or more shareholders and the Corporation may impose restrictions on
the transfer or registration of transfer of shares of the Corporation. 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 the restriction or otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized for any of the purposes set forth in Section 627(3) of the Act. 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 Section 7.02(c) of these bylaws with regard to shares issued without
certificates. Unless so noted, a restriction is not enforceable against a person
without knowledge of the restriction.
Section 7.04 Acquisition of Shares by the Corporation.
Subject to the limitations on distributions set forth in Section 640 of
the Act and any other restrictions imposed by applicable law, the Corporation
may acquire its own shares, as authorized by Section 631 of the Act, and shares
so acquired constitute authorized but unissued shares.
If the articles of incorporation prohibit the reissuance of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired by the Corporation, effective upon amendment of the articles of
incorporation, which amendment may be adopted by the board of directors without
shareholder action, as provided in Sections 632(b) and 1002 of the Act. Articles
of amendment affecting such an amendment must meet the requirements of Section
631(3) of the Act.
30
<PAGE>
ARTICLE VIII: Amendments to Bylaws
Section 8.01 Authority to Amend.
As provided in Section 1020 of the Act, and subject to the provisions
of Sections 2.08 and 3.11(b) of these bylaws, the Corporation's board of
directors may amend these bylaws at any time, except to the extent that the
articles of incorporation, these bylaws, or the Act reserve such power
exclusively to the shareholders, in whole or part. The directors may not adopt,
amend or repeal a bylaw that fixes a greater quorum or voting requirement for
shareholders. Any such bylaw may be adopted, amended or repealed only by the
shareholders as provided in Section 8.02 below.
The Corporation's shareholders may amend these bylaws at anytime,
subject to any limitations set forth in the Act, the Articles of Incorporation
or these bylaws.
Section 8.02 Bylaw Changing Quorum or Voting Requirement for Shareholders.
If and to the extent authorized by the articles of incorporation, the
shareholders may adopt, amend, or repeal a bylaw that fixes a greater quorum or
voting requirement for shareholders, or voting groups of shareholders, than is
required by the Act. Such action is subject to the provisions of Part 7 of the
Act and Section 2.08 of these bylaws.
Section 8.03 Bylaw Changing Quorum or Voting Requirement for Directors.
(a) Amendment.
A bylaw that fixes a greater quorum or voting requirements for the
board of directors than is required by the Act may be amended or repealed as
permitted by Section 1022 of the Act and Section 3.13 of these bylaws:
(i) if originally adopted by the shareholders, only by the
shareholders, unless otherwise permitted as contemplated by
Subsection (b) below; or
(ii) if originally adopted by the board of directors, by the
shareholders or unless otherwise provided in the articles of
incorporation or these bylaws, by the board of directors.
(b) Restriction on Amendment.
A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the board of directors may provide that it may
be amended or repealed only by a specified vote of either the shareholders or
the board of directors.
(c) Required Vote to Amend.
Action by the board of directors under Subsection (a)(ii) above to
amend or repeal a bylaw that changes the quorum or voting requirement for the
board of directors must meet the same quorum requirement and be adopted by the
same vote required to take action under the quorum and voting requirement then
in effect or proposed to be adopted, whichever is greater.
31
<PAGE>
ARTICLE IX: Miscellaneous
Section 9.01 Corporate Seal.
The board of directors may provide for a corporate seal, to be in such a form as
the directors may determine to be appropriate, and any officer of the
Corporation may, when and as required or as determined to be appropriate, affix
or impress the seal, or a facsimile thereof, to or on any instrument or document
of the Corporation.
Section 9.02 Fiscal Year.
The fiscal year end of the Corporation shall be February 28.
32
LEASE AGREEMENT LEASE#: 210324-01
LESSEE
Commercial Concepts, Inc.
Billing Address - 324 South 400 West Suite B
Salt Lake City UT 84101
County: Salt Lake
VENDOR/SUPPLIER
Visual Technology
47 Bearcat Drive
Salt Lake City UT 84115
EQUIPMENT DESCRIPTION.
Attach separate Addendum if needed.
Quantity Type, Make, Model & Serial Number
SEE ATTACHED EQUIPMENT LIST
EQUIPMENT LOCATION. Complete only if equipment will not be located at Lessee's
address above.
Address SAME AS ABOVE
County:
SCHEDULE OF LEASE PAYMENTS
<TABLE>
<CAPTION>
Lease Term Number of Amount of Each Lease Payment Number of Administrative Security Initial Amount
(Months) Payments Prepayment Fee Deposit Due
Rental Tax Total Payment
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 60 $143.70 $9.12 $152.82 2 $145.00 $0.00 $450.64
</TABLE>
Payment Due Date Interim Rent will be billed and calculated as
follows: (Monthly Rental Payment divided by 30 days = Daily
Rate) x (# of Days Between)
1st 15th 11-15-99 (Acceptance Date And First Payment Date) = Total Interim
Rental
THIS LEASE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED HEREON AND ON THE
FOLLOWING PAGES, ALL OF WHICH ARE MADE A PART HEREOF AND WHICH LESSEE
ACKNOWLEDGES HAVING READ. PLEASE READ CAREFULLY BEFORE SIGNING. THIS LEASE
AGREEMENT, WHICH CONSISTS OF 4 PAGES, IS NOT BINDING UNTIL ACCEPTED BY LESSOR
<PAGE>
THIS IS A NON-CANCELABLE LEASE FOR THE TERM INDICATED
Lessor, hereby Leases to the Lessee, and Lessee hereby hires and takes from
Lessor all property described in this agreement or hereafter and made a part
hereof
1. ENTIRE AGREEMENT. This Lease constitutes the entire agreement between Lessor
and Lessee. No oral agreement, guaranty, promise, condition, representation or
warranty shall be binding on Lessor. All prior conversations, agreements or
representations related hereto and/or to said equipment are integrated herein.
No modification hereof shall be binding unless in writing and signed by Lessor.
2. REPRESENTATIONS. Lessee acknowledges that no salesman or agent of the
supplier of the equipment is authorized to waive or alter any term or condition
of this Lease and no representation as to the equipment or any matter by the
supplier shall in any way effect the Lessee's duty to pay the Lease payments and
perform its other obligations as set forth in this Lease.
3. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent
of both parties to this Lease that it qualify as a statutory finance Lease under
Article 2A of the Uniform Commercial Code. Lessee acknowledges and agrees that
Lessee has selected both: (1) the equipment; and (2) the supplier from whom
Lessor is to purchase the equipment. Lessee acknowledges that Lessor has not
participated in any way in Lessee's selection of the equipment or of the
supplier, and Lessor has not selected, manufactured, or supplied the equipment.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE
LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND THAT
LESSEE SHOULD CONTACT THE EQUIPMENT SUPPLIER FOR A DESCRIPTION OF ANY SUCH
RIGHTS.
4. ASSIGNMENT BY LESSEE PROHIBITED WITHOUT LESSOR'S PRIOR WRITTEN CONSENT.
LESSEE SHALL NOT ASSIGN THIS LEASE OR ANY INTEREST THEREIN, OR SUBLEASE THE,
EQUIPMENT, OR PLEDGE OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE
EQUIPMENT COVERED HEREBY.
5. APPLICABLE LAW AND VENUE. ALL MATTERS INVOLVING THE CONSTRUCTION, VALIDITY,
PERFORMANCE, OR ENFORCEMENT OF THIS LEASE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF WASHINGTON. LESSEE CONSENTS TO THE PERSONAL JURISDICTION OF THE COURTS
OF THE STATE OF WASHINGTON AND AGREES THAT AT LESSOR'S SOLE OPTION, JURISDICTION
AND VENUE (LOCATION) FOR ANY DISPUTE, SUIT OR ACTION ARISING UNDER OR IN
RELATION TO THE LEASE, AND ALL DOCUMENTS EXECUTED IN CONNECTION THEREWITH, SHALL
BE IN PIERCE COUNTY, STATE OF WASHINGTON. LESSOR SHALL HAVE THE OPTION OF
COMMENCING AN ACTION IN ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
AND PARTIES TO THE TRANSACTION.
FPLA 02/99 CONTINUED ON FOLLOWING PAGES Page 1 of 4 Page Lease Agreement
<PAGE>
6. NO WARRANTY. Lessee has selected equipment and the supplier thereof Lessor,
not being the manufacturer of the equipment, nor manufacturer's agent, MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS FOR A
PARTICULAR USE OR OTHERWISE, QUALITY, DESIGN, CONDITION. CAPACITY, SUITABILITY,
MERCHANT ABILITY OR PERFORMANCE OF THE EQUIPMENT OR OF THE MATERIAL OR
WORKMANSHIP THEREOF, IT BEING AGREED THAT THE EQUIPMENT IS LEASED "AS IS" AND
THAT ALL SUCH RISKS, AS BETWEEN THE LESSOR AND THE LESSEE, ARE TO BE BORNE BY
THE LESSEE AT ITS SOLE RISK AND EXPENSE. Lessee accordingly agrees not to assert
any claim whatsoever against the Lessor based thereon. In addition, Lessee
waives any and all rights and remedies conferred by UCC 2A-508 through 2A-522,
including, but not limited to, the Lessee's right to (a) cancel or repudiate the
lease; (b) reject or revoke acceptance of the Leased property; (c) deduct from
rental payments all or any part of any claimed damages resulting from the
Lessor's default under the Lease; (d) recover from the Lessor any general,
special, incidental, or consequential damages, for any reason whatsoever. Lessee
further waives any and all rights, now or hereafter conferred by statute or
otherwise, that may require the Lessor to sell, re-lease, or otherwise use or
dispose of the Leased property in utilization of the Lessor's damages or that
may otherwise limit or modify any of the Lessor's rights or remedies hereunder.
7. TERM. The initial term of this lease is set forth on the first page of this
lease agreement. The term begins upon which of the following dates is earlier:
(a) the date Lessee requests Lessor to male payment to the Supplier; or
(b) the Acceptance Date as indicated on the Inspection/Verification Certificate.
8. LEASE PAYMENT-SECURITY DEPOSIT. The lease payments for the equipment leased
shall be in the amount designated in the schedule of payments and shall commence
on the indicated payment due date immediately following the equipment acceptance
date. Lessee shall pay Lessor said lease payments on or before the due date and
at the office of Lessor or to such other person or place as Lessor may designate
in writing. Lessee agrees to pay pro rata rental (based on the monthly lease
payments) for the period from the Acceptance Date, indicated on the
Inspection/Verification Certificate, to the due date of the first payment. Said
pro rata rental shall be in addition to the first payment and shall be made
simultaneously with the first payment. Prepayments are credited with one payment
being applied to the first month's rental and any other prepayment(s) are
applied to the last month(s) rental(s). The security deposit as designated in
the Lease shall remain as security for performance of the terms and conditions
of the Lease and shall remain with the Lessor until termination of the Lease,
absent breach of any terms of the Lease b), Lessee unless otherwise agreed to in
writing by both parties.
9. LATE CHARGES AND COLLECTION CHARGES. A late charge of l0% of the total
monthly lease payment or $10, whichever is greater, will be assessed, when a
payment is not received within l0 days of the due date. An additional late
charge will be assessed for each month a payment remains unpaid. If Lessee's
delinquency requires additional collection efforts, a charge will be assessed in
accordance with Lessees collection charge schedule.
10. LOCATION AND USE OF EQUIPMENT. Lessee shall keep the equipment at the
location designated in the Lease, unless Lessor in writing permits its removal.
Said equipment shall be used solely in the conduct of Lessee's business and
Lessee warrants that property leased is for commercial or business purposes and
not for consumer, personal, home or family purposes.
11. ARBITRATION. Any controvers or claim arising out of this lease or the breach
thereof may at the option of the Lessor be settled by arbitration in accordance
with the LAWS OF THE STATE OF WASHINGTON and judgment upon the award rendered by
the arbiter(s) may be entered in any court having jurisdiction thereof
Arbitration shall be held in the City of Tacoma, State of Washington.
12. SURRENDER OF EQUIPMENT. At the expiration of this lease, or upon demand by
Lessor pursuant to Paragraph l9 of this lease, Lessee at its expense shall
return the equipment in proper working order, condition and repair by delivering
it packed and ready for shipment to such place or on board such carrier as
Lessor may specify. WARNING: FAILURE TO PROMPTLY RETURN THE LEASED PROPERTY MAY
RESULT IN CRIMINAL PROSECUTION AND/OR ADDITIONAL RENTAL CHARGES, ON A MONTH TO
MONTH BASIS, UNTIL THE EQUIPMENT IS RECOVERED BY THE LESSOR.
13. NOTICES. Services of all notices under this agreement shall be sufficient if
given personally or mailed to Lessor at 3901 Plaza, 3901 S. Fife St., P.O. Box I
1 309, Tacoma, Washington, 98411-0309, or to Lessee at Lessee's last known
address or at such other address as a party may provide in writing from time to
time. Any such notice mailed to such address shall be effective when deposited
in the United States mail duly addressed and postage prepaid.
14. LIABILITY AND INDEMNITY-LOSS AND DAMAGE. Lessee shall indemnify and hold
Lessor harmless from any and all injury to or loss of the equipment from
whatever cause, and from all liability arising out of the manufacture,
selection, operation, use, maintenance, or delivery thereof, including
attorney's fees. In the event of loss or damage of any kind whatsoever to the
equipment, or to any part thereof, Lessee, at the option of the Lessor, shall
(a) Replace the same in good condition, repair and working order; or (b) Replace
the same with like property of the same or greater value: provided, however, at
Lessee's option, the remaining obligation of the lease can be satisfied by the
payment of the remaining unpaid lease payments and the estimated value of the
equipment at the expiration of the lease, and other amounts due under the lease,
less the net amount of the recovery, if any, actually received by the Lessor
from insurance or otherwise for such loss or damage. Lessor shall not be
obligated to undertake by litigation or otherwise the collection of any claim
against any person for loss or damage of the equipment. Except as expressly
provided in this paragraph, total or partial destruction of any equipment or
total or partial loss of use or possession thereof to Lessee shall not release
or relieve Lessee from the duty to pay the lease payments herein provided.
15. INSURANCE. Lessee, at its own expense, shall keep said equipment insured for
the full term of this lease and any renewals or extensions thereof, for the full
insurable value thereof against all risks of loss or damage, and against such
other risks in such amounts as Lessor may specify, including liability
insurance, with limits not less than $500,000 (bodily injury and property
damage) combined single limit. Provided, however, in those instances where
Lessee is leasing equipment defined by Lessor as "mobile equipment," Lessee
shall procure and maintain, for the full lease term, all risk physical damage
insurance as opposed to insurance against fire and theft, with extended or
combined coverage. All insurance policies must provide that no cancellation
shall be effective without thirty (30) days' prior written notice to Lessor.
Lessee shall deliver to Lessor the policies or evidence of insurance with a
standard form of endorsement attached thereto showing Lessor to be named as an
additional insured, together with receipts for the premiums thereunder. Lessee
shall, at the request of Lessor, name as Loss Payee such party who may have a
security interest in the equipment.
16. LESSEE'S FAILURE TO PAY TAXES, INSURANCE, ETC. Should Lessee fail to make
any payment or do any act as herein provided, then Lessor shall have the right,
but not the obligation, without notice to or demand upon Lessee, and without
releasing Lessee from any obligation hereunder, to make or do the same and to
pay, purchase, contest, or compromise any encumbrance, charge or lien which in
the judgment of lessor appears to affect the equipment, and in exercising such
rights, liability and expend whatever amounts in its absolute discretion it may
deem necessary therefore. Should Lessee fail to provide Lessor the policies or
evidence of insurance described herein, Lessee shall be assessed as to Lessor's
purchase of insurance and also agrees that a charge therefore will be paid by
the Lessee. All sums so incurred or expended by Lessor shall be without demand
immediately due and payable by Lessee and shall bear interest at eighteen
Percent per annum if not prohibited by law, otherwise at the highest legal
contract rate. 16. OWNERSHIP. The equipment is and shall be at all times the
sole and exclusive property of Lessor. This lease and the equipment described
here in may be subject to a preexisting security agreement in favor of a bank,
or another financial institution.
17. AUTHORITY TO SIGN. If Lessee is a partnership or corporation, the person
signing the Lease on behalf of such partnership or corporation hereby warrants
that (s)he has full authority from the partnership or corporation to sign this
lease and obligate the partnership or corporation.
FPLA 02J99 CONTINUED ON FOLLOWING PAGES Page 2 of 4 Page Lease Agreement
2
<PAGE>
19. DEFAULT-REMEDIES.
a) An event of default shall occur if.
(1) Lessee fails to pay any Lease installment and such failure
continues for a period of ten (10) days-,
(2) Lessee shall fail to perform or observe any covenant,
condition or obligation to be performed or observed by it
hereunder and such failure continues uncured for fifteen (15)
days;
(3) Lessee becomes insolvent or makes an assignment for the
benefit of creditors;
(4) Lessee applies for or consents to the appointment of a
receiver, trustee or liquidator of Lessee, or of all or a
substantial part of the assets of Lessee, or if such receiver,
trustee or liquidator is appointed without the application or
consent of Lessee, or to the extent permitted by law, if a
petition is filed by or against the lessee under the
bankruptcy act, or any amendment thereto (including without
limitation a petition for reorganization, arrangement or
extension) or under any other insolvency law or laws providing
for relief of debtors,
(5) Lessee attempts to remove, sell, transfer, encumber, part with
possession or sublet the equipment or any item thereof. Lessee
agrees it will not replace or substitute the equipment
described herein for any reason whatsoever without first
obtaining Lessor's consent. Failure to obtain Lessor's consent
will constitute a default on part of the Lessee. Further, the
term "equipment" shall include any and all replacement or
substituted equipment, whether or not such replacement or
substitution occurred with lessor's consent.
b) Upon the occurrence of an event of default, Lessor shall have the right to
exercise any one or more of the following remedies:
(1) To declare the entire unpaid lease payments and other sums payable
by Lessee hereunder to be immediately due and payable:
(2) Cause Lessee, at Lessee's expense, promptly to return any or all of
the equipment to Lessor, all without demand or legal process, and
to allow Lessor to enter into the premises where the equipment may
be found and take possession of or remove the same, whereupon all
rights of the Lessee in the equipment shall terminate absolutely
and
(i) Retain the equipment and all lease payments made hereunder, or
(ii) Retain all prior lease payments and sell the equipment at
public or private sale, with or without notice to Lessee. The
sale price, less 10% for selling costs, will be
credited against the remaining unpaid lease payments, unpaid late charges,
estimated value of equipment at the expiration of the lease, charges for
retaking, storage, repairing and reselling the equipment, reasonable attorney's
fees incurred by the Lessor and other amounts due under the lease. The Lessee
shall remain liable for the deficiency and any surplus remaining after such
application of proceeds of sale shall be paid to the Lessee, or to whosoever may
be lawfully entitled to receive the same; or
(iii) Retain the equipment and all prior payments, with the Lessee
remaining liable for the unpaid lease payments, unpaid late
charges, charges for retaking and restoring equipment to
proper order and working condition, reasonable attorney's fees
incurred by Lessor, together with other amounts due under the
Lease; or
(iv) Lease the equipment, or any portion thereof, for such period,
rental, and to such persons as Lessor shall select, and credit
Lessee with an amount equal to Lessor's capital cost of this
new lease, less ten percent (10%) after declaring all costs
and expenses incurred in connection with the recovery, repair,
storage and leasing of the equipment in payment of the lease
and other obligations due from Lessee to Lessor hereunder,
Lessee remaining responsible for any deficiency. It is agreed
that the amounts to be retained by the Lessor and the balance
to be paid by the Lessee under this paragraph (2) shall not be
a penalty but shall be as and for liquidated damages for the
breech of this lease and as reasonable return for the use of
the equipment and for the depreciation thereof.
(3) Lessor may pursue any other remedy at law or in equity.
(4) No remedy hereon conferred upon or reserved to Lessor is intended
to be exclusive of any other remedy herein or by law provided, but
shall be cumulative and in addition to every other remedy available
to lessor.
20. ATTORNEY'S FEES AND EXPENSE. In the event the Lessor is required to retain
an attorney to assist in the enforcement of its rights under this lease
agreement, it shall be entitled to a reasonable attorney's fee, in addition to
costs and necessary disbursements, whether or not suit becomes necessary.
21. MAINTENANCE AND REPAIR. Lessor shall not be obligated to install, erect,
test, adjust, service or make repairs or replacements to the equipment. Lessee
shall not incur for Lessor's account or liability any expense therefore without
Lessor's prior written consent. Lessee shall bear the expense of all necessary
repairs, maintenance, operation, and replacements required to be made to
maintain the equipment in proper working condition, reasonable wear and tear
excepted.
22. OPERATION OF EQUIPMENT. Lessee shall cause the equipment to be operated by
competent employees only, and shall pay all expenses of operation. Lessee shall
comply with all laws and regulations relating to ownership, possession,
operation, use and maintenance of the equipment. Lessee shall hold Lessor
harmless from any and all actual or asserted violations of the aforesaid
covenant.
23. TAXES. Lessee shall pay and discharge all sales, use, property and other tax
or taxes now or hereafter imposed by any state, federal or local government upon
the equipment based upon the ownership, leasing, renting, sale, possession or
use thereof, whether the same be assessed to Lessor or Lessee, together with any
penalties or interest in connection therewith, and will, from time to time, on
request of Lessor, submit written evidence of the payment of all the
governmental obligations mentioned in this paragraph. The Lessor will, on any
property tax returns required to be filed by it, include the property covered by
this lease or any substitution or additions thereto as property in the
possession of Lessee for purposes of tax assessments.
24. LESSOR'S ASSIGNMENT. Lessor may assign the lease payments reserved herein or
all or any of Lessor's other rights hereunder. After such assignment, Lessee
waives any right Lessee may have to claim or assert any defenses, setoffs or
counterclaims against assignee of the Lessor. Lessee will settle all claims
arising out of alleged breach of warranties, defenses, setoffs and counterclaims
it may have against Lessor directly with Lessor and not set up any such against
Lessor's assignee. An assignee of lessor shall not be obligated to perform any
of Lessor's obligations under this lease. Lessee, on receiving notice of any
such assignment, shall abide thereby and make payment as may therein be
directed. Following such assignment, solely for the purpose of determining
assignee's rights hereunder, the term Lessor shall be deemed to include or refer
to Lessor's assignee. Lessee acknowledges that the equipment may be subject to a
security interest which is prior to Lessors interest in the equipment.
25. PERSONAL PROPERTY. The equipment is, and shall at all times be and remain
personal property, notwithstanding that the equipment or any part thereof may
now be, or hereafter become, in any manner affixed or attached to, or imbedded
in, or permanently resting upon, real property or any building thereon, or
attached in any manner to what is permanent as by means of cement, plaster,
nails, bolts, screws or otherwise. Lessee shall obtain the necessary permission
from the owner of any real property where the equipment is to be affixed to the
realty or be deemed a fixture in order that said leased property shall at all
times be severable and removable therefrom by the Lessor, free of any right,
title, claim or interest of the property owner and of the Lessee except as
herein provided. The equipment shall at all times remain the property of lessor.
26. LESSOR'S ENCUMBRANCE. In the event Lessor defaults in the payment of any
surn to be paid pursuant to any conditional sales contract, chattel mortgage or
purchase money security agreement, Lessee may pay the lease payment to the
holder of said encumbrance after notice of default, and to the extent thereof
such payment shall constitute payment of the lease payment to Lessor.
27. FINANCIAL STATEMENTS. The Lessor may require from time to time, and Lessee
agrees to furnish, statements setting forth the current financial condition and
operations of Lessee.
28. MISCELLANEOUS. Lessee will not change or remove any insignia or lettering on
the equipment and shall conspicuously identify each item of the leased equipment
by suitable lettering thereto to indicate Lessor's ownership. All transportation
charges shall be born by Lessee. Lessee waives all rights under all exemption
laws. Lessee admits the receipt of a true copy of this lease. This lease is
irrevocable for the full term hereof and for the aggregate lease payments herein
reserved, and the lease payments shall not abate by reason of termination of
Lessee's right of possession and/or the taking of possession by Lessor or for
any other reason. Delinquent lease installments and other sums due under " lease
shall bear interest at eighteen percent (I 81/o) per annum if not prohibited by
law, otherwise at the highest lawful contract rate. Lessee gives Lessor
permission to give credit reporting agencies, creditors and potential creditors
information relating to any credit Lessor may grant Lessee. Lessor, at its
option, may utilize this lease as a UCC financial statement for filing purposes.
Lessee grants to Lessor a specific power of attorney for Lessor to use to sign
and file on Lessee's behalf any document Lessor deems necessary to perfect or
protect Lessor's interest in the equipment or persuant to the Uniform Commercial
Code. If Lessor is required by law to discount any unpaid lease payment or other
sums payable by Lessee hereunder, then the parties hereto agree that the
discount rate used shall be five percent (5%) annually. If any provision of this
Lease is held to be contrary to law, such provision shall be disregarded and the
remainder of this agreement shall be enforceable according to its terms.
FPLA 02/99 CONTINUED ON FOLLOWING PAGES Page 3 of 4 Page Lease Agreement
<PAGE>
GUARANTEE
LSE#210324-01
To induce Lessor to enter into a Lease with Commercial Concepts, Inc.
("Lessee"), the undersigned Guarantor unconditionally guarantees to
Lessor the prompt payment when due of all Lessee's obligations to
Lessor under the lease. Lessor shall not be required to proceed against
the Lessee or the equipment or enforce any other remedy before
proceeding against the undersigned The undersigned waives notice of
acceptance hereof and all other notices or demand of any kind to which
the undersigned may be entitled. The undersigned consents to any
extensions or modifications granted to Lessee and the release and/or
compromise of any obligations of Lessee or any other obligors and
guarantors without notice and without in any way releasing the
undersigned from his or her obligations hereunder. Guarantor waives any
right to require Lessor to apply payments in a certain manner and
acknowledges that Lessor may apply payments received in the fashion
most advantageous to the Lessor. Furthermore, Guarantor waves any and
all claims against the Lessee, by litigation or otherwise, until such
time as Lessee's obligations to Lessor are fully and finally satisfied.
This is a continuing guarantee and shall not be discharged, impaired or
affected by death of the undersigned or the existence or nonexistence
of the Lessee as a legal entity. This continuing Guarantee shall bind
the heirs, administrators, representatives, successors, and assigns of
undersigned and may be enforced by or for the benefit of any assignee
or successor of Lessor.
The provisions of this Lease Guarantee shall extend to and apply to all
the obligations of the Lessee under all lease agreements executed by
Lessee for the benefit of Lessor, whether executed before or after the
date of this guarantee, and whether set forth in separate lease
agreements, schedules, applications, orders or collateral documents
(all of which shall be referred to herein, both individually and
collectively, as the 'Lease Agreement'). The execution of this Lease
Guarantee shall not extinguish, release or waive any obligations,
promises, or guarantees contained in any Lease Guarantee previously
executed by Guarantor for the benefit of the Lessor. The undersigned
agrees to pay a reasonable attorney's fee, and all other costs and
expenses incurred by the Lessor or its successors or assigns in the
enforcement of the Guarantee, whether or not a lawsuit is started.
If Guarantor resides in a Community Property state, any married person
signing this Lease Guarantee warrants that he or she has the authority
to bind and obligate his or her marital community and that by signing,
his or her marital community is obligated hereunder. Further, by
signing this Guarantee it is agreed that recourse may be against both
his or her separate property and the property of his or her marital
inmunity on account of all of his or her obligations hereunder.
Law Which Applies
THIS AGREEMENT IS GOVERNED BY WASHINGTON LAW. GUARANTOR CONSENTS TO THE
PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF WASHINGTON AND
AGREES NOT TO CLAIM THAT PIERCE COUNTY, WASHINGTON IS AN INCONVENIENT
PLACE FOR TRIAL. AT LESSOR'S SOLE OPTION, JURISDICTION AND VENUE
(LOCATION) FOR ANY DISPUTE, SUIT OR ACTION ARISING UNDER OR IN RELATION
TO THIS AGREEMENT, AND ALL DOCUMENTS EXECUTED IN CONNECTION THEREWITH,
SHALL BE IN PIERCE COUNTY, STATE OF WASHINGTON. GUARANTOR WAIVES THE
RIGHT OF JURY TRIAL. LESSOR SHALL HAVE THE OPTION OF COMMENCING AN
ACTION IN ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND
PARTIES TO THE TRANSACTION.
Whole Agreement
This guarantee contains the entire understanding between Lessor and
Guarantor.
(No Title) /s/ George E. Richards (No Title)
Date 11/02/99 Date
Home Phone
(No Title) (No Title)
Date Date
Home Phone Home Phone
DELIVERY AND ACCEPTANCE AUTHORIZATION
Lessee's signature authorizes Lessor to verify by phone with a
representative of Lessee the date the Equipment was accepted by the
Lessee-, the Equipment description, including the serial numbers; the
schedule of lease payments; that all necessary installation has been
completed; that the Equipment has been examined by Lessee and is in
good operating order and condition and is in all respects satisfactory
to Lessee and that Equipment is accepted by Lessee for all purposes
under the Lease. This information will be recorded on an Inspection
Verification Certificate, a copy of which will be forwarded to Lessee
upon completion by Lessor. Lessee hereby authorizes Lessor to either
insert or correct the Lessor and/or Vendor name(s), Equipment
description, Equipment location and schedule of Lease payments. Lessee
hereby authorizes Lessor to mail the payment to the Vendor upon
completion of the Inspection Verification Certificate.
LESSEE Commercial Concepts, Inc.
/s/ George E. Richards 11/2/99
President & Individually Date
FPGO016-02/98 Page 4 of 4 Page Lease Agreement
<PAGE>
ADDENDUM TO LEASE
PURCHASE AND JURISDICTION AGREEMENT
Lease No.: -210324-01
Lease Date: 11-10-99
1. PURCHASE AGREEMENT
Upon termination of the above referenced lease, and provided Lessee is not in
default under the terms of the lease:
Lessor agrees to sell, and Lessee hereby agrees to purchase the
equipment described in the above referenced lease for a purchase price
of $1.00 plus any applicable taxes and other sums due under the lease.
Lessor and Lessee agree to this modification to paragraph 17 of the
Lease Agreement and further agree to treat the lease as a financial
transaction.
2. JURISDICTION AGREEMENT
THIS LEASE IS MADE IN THE STATE OF WASHINGTON AND IS NOT VALID UNTIL ACCEPTED BY
LESSOR IN TACOMA, WASHINGTON. EXCEPT AS TO LOCAL RECORDING STATUTES, THE PARTIES
EXPRESSLY AGREE THAT THE LEASE, LEASE RATES, RENTAL RATES, FINANCE CHARGES, EACH
GUARANTY, ALL DOCUMENTS EXECUTED IN CONNECTION WITH SAME, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF WASHINGTON. FURTHER, THE LESSEE AGREES THAT THE
COURTS OF THE STATE OF WASHINGTON SHALL HAVE JURISDICTION OF ALL SUITS AND
ACTIONS ARISING OUT OF THE LEASE, AND ALL DOCUMENTS EXECUTED IN THE CONNECTION
THEREWITH, AND THAT VENUE OF ANY SUCH ACTION OR SUIT SHALL BE TN PIERCE COUNTY,
STATE OF WASHINGTON.
LESSOR SHALL HAVE THE OPTION OF COMMENCING AN ACTION IN ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND PARTIES TO THE TRANSACTION.
A FACSIMILE OF THIS AGREEMENT WITH SIGNATURE SHALL BE CONSIDERED TO BE AN
ORIGINAL.
LESSOR: LESSEE:
Financial Pacific Leasing, LLC Commercial Concepts, Inc.
BY /s/ B. R. Mosler By /s/ George E. Richards
---------------------------- ----------------------------
ITS: Sponsor ITS: President
DATE: 11-10-99 DATE: 11-02-99
<PAGE>
EQUIPMENT LIST
LEASE NO.: 2103240-01
LEASE DATE: 11-10-99
Quantity Description
1 Canon Camcorder Serial # 2890800730
2 Cannon Battery
1 Camera BagKata
1 Tripod, 501 Head, Sprdr, Bad Bogen (Manfotto)
1 Canon Microphone Adapter
5 Tape DV Mini 60 Min
Lessor: Lessee:
Financial Pacific Leasing Commercial Concept
By: /s/ B.R. Mosler By: /s/ George E. Richards
------------------------ -------------------------
Its: Sponsor Its: President & Individually
Date: 11-10 99 Date: 11-02-99
FPEL002-299 Page 1 of 1
OFFICE BUILDING LEASE
324 South 400 West
(PROPERTY)
1. PARTIES, This Lease, dated, for reference purposes only, February 18, 1999,
is made by and between Fourth West Associates, L.C., a Utah Limited Liability
Company (herein called "Landlord") and Commercial Concepts, Inc. (herein called
"Tenant").
2. PREMISES AND PREPARATION.
(a) Landlord does hereby lease to Tenant and Tenant hereby leases from
Landlord that certain office space (herein called "Premises") indicated on
Exhibit "A" attached and by this reference made a part hereof, said Premises
being agreed, for the purpose of this Lease, to have a net rentable area of
approximately 2,772 square feet (2,359 net useable) and being situated on the
Main Floor floor of that certain Building known as 324 South 400 West Suite B
(herein referred to as the "Building" or the "Project"). Said Lease is subject
to the terms, covenants and conditions herein set forth and the Tenant covenants
as a material part of the consideration for this Lease to keep and perform each
and all of said terms, covenants and conditions by it to be kept and performed
and that this Lease is made upon the condition of said performance.
(b) The respective obligations of Landlord and Tenant to perform the
work and supply the necessary materials and labor to prepare the Premises for
occupancy are described in detail on Exhibit "B." Landlord and Tenant shall
expend all funds and do all acts required of them as described on Exhibit " B"
and shall perform or have such work performed promptly and Diligently in a
first-class and workmanlike manner.
(c) Except as set forth on Exhibit "B" as being work to be performed by
Tenant, Landlord shall, at its own cost and expense, complete the construction
of the Building, if not completed, and complete the work set forth on Exhibit
"B" identified as the work to be performed by Landlord, which work shall be
performed by Landlord as soon as reasonably possible. Notwithstanding anything
to the contrary contained in this Article 2, unless otherwise agreed in writing
by Landlord, upon occupancy of the Premises by Tenant, all of the obligations of
Landlord set forth in Exhibit "B" shall be deemed to be satisfactorily
completed.
3. TERM. The term of this Lease shall be for five (5) years, together with the
partial calendar month during which the commencement date occurs, commencing on
the lst day of March, 1999, and ending on the 29th day of February, 2004.
4. POSSESSION.
(a) If the Landlord, for any reason whatsoever cannot deliver
possession of the Said Premises to the Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom, nor shall the expiation
date of the above term be in any way extended, but in that event, all rent shall
be abated during the period between the commencement of said term and the time
when Landlord deliver possession.
(b) In the event that Landlord shall permit Tenant to occupy the
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of this Lease including but not limited to the
obligation to pay all rentals and charges. Said early possession shall not
advance the termination date herein above provided.
5. RENT. Tenant agrees to pay to Landlord as minimum rental, without prior
notice or demand, for the Premises the sum of: 1 yr. $2,310.00/mo. 2 yr.
$2,402.40/mo. 3 yr. $2,499.42/mo. 4 yr. $2,598.75/mo. 5 yr. $2,703.70/mo on or
before the first day of the term hereof and a like sum on or before the first
day of each and every successive calendar month thereafter during the term
hereof, except that the first month's rent shall be paid upon the execution
hereof. Rent for any period during the term hereof which is for less than one
(1) month shall be a prorated portion of the monthly installment herein, based
upon a thirty (30) day month. All rent shall be paid to Landlord, without
deduction or offset in lawful money of the United States of America, which shall
be legal tender at the time of payment at the Office of the Building, or to such
other person or at such other place as Landlord may from time to time designate
in writing.
6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of Two Thousand
Seven Hundred Three Dollars and Seventy Cents ($2,703.70)said sum shall be held
by Landlord as security for the faithful performance by Tenant of all the terms,
covenants, and conditions of this Lease during the term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to the provisions relating to the payment of rent, Landlord may (but shall not
be required to) use, apply, or retain all or any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is to used or applied. Tenant shall within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount and Tenant's failure to do so shall
be a material breach of this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to the Tenant (or, at
Landlord's option, to the last valid assignee of Tenant's interest hereunder) at
the expiration of the Lease term.
7. OPERATING EXPENSE CONTRIBUTIONS:
(a) For purposes of this Article, the following terms have the
following definitions:
(i) "Expense Stop" shall mean the actual operating expenses per
usable square foot incurred for the calendar year of 1999.
(ii) "Direct Expenses" shall mean all Direct Expenses and costs of
operation and maintenance of the Project, as determined in
accordance with standard accounting practices, including,
without limitation, real property taxes and assessments of
every kind and nature (whether general or special, anticipated
or unanticipated) rent taxes, gross receipt taxes (whether
assessed against Landlord or assessed against Tenant and
collected by Landlord, or both), water and sewer charges,
insurance premiums, utilities, janitorial services, labor,
costs of management of the Project, air conditioning and
heating, elevator maintenance, supplies, materials, equipment,
tools, and costs of maintaining and repairing all parking and
common areas, except that Direct Expenses shall not include
depreciation of the Project, or real estate broker's
commissions.
(b) Tenant shall pay to Landlord, as additional rent, the amount
calculated by subtracting the Expense Stop from the quotient of the Direct
Expenses incurred during each calendar year divided by the total number of net
useable square feet of space in the Project (excluding any storage space) and
multiplying the difference so obtained by the number of square feet of net
useable area in the Premises. The additional rent for any fractional calendar
year of the term of this Lease shall be calculated by determining the additional
rent for such calendar year and prorating it over the fractional calendar year
of the term hereof.
(c) On or before the first day of the term of this Lease and the first
day of each calendar year thereafter, Landlord shall endeavor to give Tenant a
Direct Expense budget for such calendar year. Failure of Landlord to give Tenant
such a budget shall not constitute a waiver of Landlord's right to collect
additional rent or to provide such a budget at a later date. The Direct Expense
budget shall show the amount of Direct Expenses expected to be incurred during
the applicable calendar year and the portion thereof that Tenant must pay to
Landlord. Such portion shall be divided into equal monthly installments, which
shall be paid by Tenant concurrently with payments of rent reserved under
Article 5 hereof, except that Tenant's share of one-time special assessments
levied against the Project may be required to be paid to Landlord in one lump
sum at the time when the payment is due to the assessing entity.
(d) Within thirty (30) days after the end of each calendar year,
Landlord shall give Tenant a statement showing actual Direct Expenses incurred
during such year and Tenant's share thereof. The amount of any overpayment shall
be credited toward the monthly payment(s) next coming due, and the amount of any
deficiency shall be immediately due to Landlord. Tenant's obligation to pay any
deficiency shall survive the termination of this Lease and vacation of the
Premises by Tenant; and Landlord may withhold all or any portion of Tenant's
security deposit until payment has been made by Tenant. Landlord's duty to
refund any overpayment likewise shall survive the termination of this Lease and
vacation of the Premises by Tenant, and Landlord shall promptly rebate any such
overpayment after the end of the calendar year to which it is allocated.
(e)If, during any calendar year, less than 100% of the net useable area
of the Project was occupied by tenants making full utilization of such area,
then Direct Expenses for such year shall be deemed increased to the sum which
would have reasonably been incurred for such 100% occupation and full
utilization.
8. USE. Tenant shall use the Premises for general office purposes and shall not
use or permit the Premises to be used for any other purpose without the prior
written consent of Landlord. Tenant shall not do or permit anything to be done
in or about the Premises nor bring or keep anything therein which will in any
way increase the existing rate of or affect any fire or other insurance upon the
Project or any of its contents, or cause cancellation of any insurance policy
covering said Project or any part thereof or any of its contents. Tenant shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other tenants or occupants of the
Project or insure or annoy them or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant will not
commit or suffer to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything to
be done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter be in force, and
with the requirements of any board of fire insurance underwriters or other
similar bodies now or hereafter constituted, related to, or affecting the
condition, use or occupancy of the Premises, excluding structural changes not
related to or affected by Tenant's Improvements or acts. The judgement of any
court of competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
law, statute ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between the Landlord and Tenant.
10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions, or improvements to or of the Premises or any part
thereof without the written consent of the Landlord first hand and obtained and
any alterations, additions or improvements to or of said Premises including, but
not limited to, wall coverings, carpeting, paneling and built-in cabinet work,
but excepting movable furniture and trade fixtures, shall on the expiration of
the term become a part of the realty and belong to the Landlord and shall be
surrendered with the Premises. In the event Landlord consents to the making of
any alterations, additions or improvements to the Premises by Tenant, the same
shall be made by Tenant at Tenant's sole cost and expense, and any contractor or
person selected by Tenant to make the same must first be approved of in writing
by the Landlord. Upon the expiration or sooner termination of the term hereof,
Tenant shall, upon written demand by Landlord which may be given at Landlord's
sole discretion, given at least thirty (30) days prior to the end of the term,
at Tenant's sole cost and expense, forthwith and with all due diligence remove
any alterations, additions, or improvements made by such Tenant.
11. REPAIRS
(a) By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary wear and tear excepted.
Tenant shall upon the expiration or sooner termination of this term hereof
surrender the Premises to the Landlord in good condition, ordinary wear and tear
and damage from causes beyond the reasonable control of Tenant excepted. Except
as specifically provided in an addendum, if any, to this Lease, Landlord shall
have no obligation whatsoever to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.
(b) Notwithstanding the foregoing provisions of this Article 1 1,
Landlord shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating and electrical systems,
installed or furnished by Landlord, unless such maintenance and repairs are
caused in part or in whole by the act, neglect, fault or omission of any duty by
Tenant, its agents, servants, employees or invitees, in which case Tenant shall
pay to Landlord the reasonable cost of such maintenance and repairs. Landlord
shall not be liable for any failure to make any such repairs or to perform any
maintenance unless such failure materially and adversely affects Tenant's
possession and shall persist for an unreasonable time after written notice of
the need of such repairs or maintenance is given to Landlord by Tenant. Except
as provided in Article 22 hereof, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, therein. Tenant waives the
right to terminate this Lease in the event of any failure to make repairs or
maintenance and the right to make repairs at Landlord's expense under any law,
statute or ordinance now or hereafter in effect.
12. LIENS. Tenant shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of, any work performed, materials
furnished or obligations incurred by Tenant. Landlord may require, at Landlord's
sole option, the Tenant shall provide to Landlord, at Tenant's sole cost and
expense, a lien and completion bond in an amount equal to one and one half
(1-1/2) times any and all estimated cost of any improvements, additions, or
alterations in the Premises, to insure Landlord against any liability for
mechanics and materialmen's liens and to insure completion of the work.
13. ASSIGNING, MORTGAGING, SUBLETTING.
(a) The tenant shall not transfer, assign, sublet, enter into license
or concession agreements, change ownership or hypothecate this Lease or the
Tenant's interest in and to the Premises nor permit the occupancy or use of any
part thereof by another, without first procuring the written consent of the
Landlord. Any assignment, mortgage, pledge, hypothecation, encumbrance
subletting or license of this Lease, the leasehold estate hereby created, or the
Premises or any portion thereof, either voluntary or involuntary whether by
operation or law or otherwise, without the prior written consent of Landlord
first had and obtained, shall be null and void and shall at the option of the
Landlord terminate this Lease.
(b) Without in any way limiting Landlord's right to refuse such
consent, for any other reasons, Landlord reserves the right to refuse to give
such consent unless Tenant remains fully liable during the unexpired term of the
Lease and Landlord further reserves the right to refuse to give such consent if
in Landlord's sole discretion and opinion the quality of tenancy in the project
is or may be in any way adversely affected during the term of the Lease for the
financial worth of the proposed new tenant is less than that of the Tenant
executing this Lease. Landlord may condition its consent to any assignment or
subletting (i) upon Tenant's agreement to termination of this lease and
simultaneous creation of a new lease between landlord and the proposed successor
at them prevailing rents, and upon Tenant's giving its unconditional guaranty of
such new lease, in form and substance satisfactory to counsel for Landlord, with
the understanding that should the Term be longer or the rent higher under such
new lease, Tenant's said guaranty shall cover only the breadth of its
obligations under this lease, or (ii) upon Tenant's agreement simultaneously
with the execution of any sublease approved by Landlord, to name Landlord its
agent for purposes of collection of rent from the sublease under any such
sublease (in order to enable Landlord to maintain its collection and other
relationships). Tenant agrees to reimburse Landlord for Landlord's reasonable
attorney fees and other costs incurred in conjunction with the processing and
documentation of any such requested transfer, assignment, subletting, licensing
or concession agreement, change of ownership or hypothecation of this Lease or
Tenant's interest in and to the Premises.
(c) Each transfer assignment, subletting, license, concession agreement
and hypothecation to which there has been consent shall be by an instrument in
writing in form satisfactory to Landlord, and shall be executed by the
transferor, assignor, sublessor, licensor, concessionaire, hypothecator or
mortgagor and the transferee, assignee, sublessee, licensee, concessionaire or
mortgagee in each instance, -as the case may be; and each transferee, assignee,
sublessee, concessionaire or mortgagee shall agree in writing for the benefit of
the Landlord herein to assume, to be bound by, and to perform the terms,
covenants and conditions of this Lease to be done, kept and performed by the
Tenant. One (1) executed copy of such written instrument shall be delivered to
the Landlord. Failure to first obtain in writing Landlord's consent or failure
to comply with the provisions of this Article 13 shall operate to prevent any
such transfer, assignment, subletting, license, concession agreement or
hypothecation from becoming effective.
(d) Notwithstanding anything to the contrary in the foregoing
provisions, Tenant shall be entitled to assign and transfer this lease to any
corporation or affiliated firm owned or controlled by Tenant, or to the
surviving corporation in the event of a consolidation or merger to which Tenant
shall be a party; however, that such subsidiary, affiliated firm or surviving
corporation shall in writing expressly assume all of the provisions, covenants
and conditions of this Lease on the part of Tenant to be kept and performed; and
provided, further, that no such assignment or transfer shall act as a release of
Tenant from any of the provisions, covenants and conditions of this Lease on the
part of Tenant to be kept and performed. In the event Tenant is a corporation,
unincorporated association or a partnership, the transfer, assignment or
hypothecation of any stock or Interest in such corporation, association or
partnership in the aggregate in excess of forty-nine percent (49%) shall be
deemed an assignment for purposes of this Article 13.
14. HOLD HARMLESS
(a)Tenant shall indemnify and hold harmless Landlord against and from
any and all claims arising from Tenant's use of the Premises for the conduct of
its business or from any activity, work, or other thing done, permitted or
suffered by the Tenant in or about the Building or the Project, and shall
further indemnify and hold harmless Landlord against and from any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from any
act or negligence of the Tenant, or any offer, agent, employee, guest, or
invitee of Tenant, and from all and against all cost, attorney's fees, expenses
and liabilities incurred in or about any such claim or any action or proceeding
brought thereon, and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from landlord, shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord or Landlord shall have the right to retain its own counsel to defend
any action at the cost of Tenant. Tenant as a material part of the consideration
to Landlord hereby assumes all risk of damage to property or injury to persons,
in, upon or about the Premises, from any cause, and Tenant hereby waives all
claims in respect thereof against Landlord.
(b) Landlord or its agent's shall not be liable for any damage to
property entrusted to employees of the Project, nor for loss or damage to any
property by theft or otherwise, nor for any injury to or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or the
Project, or from the pipes, appliances or plumbing works therein or from the
roof, street, or subsurface or from any other place resulting from dampness or
any other cause whatsoever. Landlord or its agents shall not be liable for
interference with the light or other incorporeal hereditaments, loss of business
by Tenant nor shall Landlord be liable for any latent defect in the Premises,
the Building or the Project. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises, the Project or of defects therein or in
the fixtures or equipment.
15. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive the irrespective rights of recovery against each
other for any loss insured by extended coverage and other property insurance
policies existing for the benefit of the respective parties.
16.LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises, and all area
appurtenant thereto. Such insurance shall be combined single limit liability and
shall be in the amount of not less than $1,000,000.00 for injury or death in any
one accident or occurrence. The limit of any such insurance shall not, however,
limit the liability of the Tenant hereunder. Tenant may provide this insurance
under a blanket policy, provided that said insurance shall have a Landlord's
protective liability endorsement attached thereto. If Tenant shall fall to
procure and maintain said insurance, Landlord may, but shall not be required to,
procure and maintain same, but at the expense of tenant. Insurance required
hereunder shall be in companies rated AXV or better in "Best's Insurance Guide,
"Tenant shall deliver to Landlord, prior to right of entry, copies of policies
of liability insurance required herein or certificates evidencing the existence
and amounts of such insurance with loss payable clauses satisfactory to
Landlord. No policy shall be cancelable or subject to reduction of coverage. All
such policies shall be written as primary policies not contributing with and not
in excess of coverage which Landlord may carry.
17. UTILITIES AND SERVICE
(a)During the term of this Lease, landlord agrees to cause to be
furnished to the Premises during customary business hours and during generally
recognized business days, in such manner as is customary in similar buildings in
the same geographical areas, as determined by Landlord and by the Rules and
Regulations, the following utilities and services (the cost of which shall be
included within Operating Expenses):
(i) Electricity, water, gas and sewer service.
(ii) Telephone connection to the core space on the floor on which
the Premises are located, but not including wiring from the
core, telephone stations and equipment (it being expressly
understood and agreed that Tenant shall be responsible for the
ordering and installation of telephone lines and equipment
which pertain to the Premises).
(iii) Heat and air conditioning to such extent and to such levels
as, in Landlord's sole judgment, are reasonably required for
the comfortable use and occupancy of the Premises, subject
however to any limitations imposed by any government agency.
The parties hereto agree and understand that such heat and air
conditioning will be provided Monday through Friday from 8:00
am to 6:00 pm and Saturday from 8:00 am to 12:00 noon only. No
heat or air conditioning shall be provided on holidays. At
Tenant's request and upon Landlord's approval, which may be
withheld for any reason or for no reason, Landlord shall
furnish heat and air conditioning services at other times as
requested by Landlord as Additional Rent, notwithstanding the
fact that such services may also benefit portions of the
Building other than the Premises.
(iv) Snow and trash removal service.
(v) Landscaping and grounds keeping service.
(b) Tenant shall arrange and pay for, prior to delinquency, the entire
cost and expense of all wiring for the core of the floor on which the Premises
are located, telephone stations, equipment and use charges and all other
materials and services not expressly required to be provided and paid for by
Landlord pursuant to the provisions hereof.
(c) Tenant will not, without the prior written consent of Landlord, (i)
use any apparatus or device on the Premises which will in any way or to any
extent cause consumption of electricity or water greater than is customary for
general office tenants or (ii) connect any apparatus or device with electrical
current or water pipes, for the purpose of using electricity or water, except
through existing electrical outlets or water pipes, as the case may be, in the
Premises. Without limiting the generality of the foregoing, Landlord shall
provide heating and air conditioning based upon the following parameters within
each and every walled-off area in the Premises: (i) such space will be occupied
by not more than one (1) person for each 150 square feet of useable area; (ii)
lighting in such space will generate not more than two (2) watts per square foot
of useable area; and (iii) all other electricity consuming equipment in such
space will generate not more than one (1) watt per square foot of useable area.
Tenant warrants that it intends to install the heat generating equipment
specifically set forth on the attachment to the work letter entered into between
Landlord and Tenant. Tenant shall notify only Landlord of any deletion to or
substitution of equipment listed thereon.
(d) If Tenant requires water or electricity in excess of that usually
furnished or supplied for the use designated in Section 7.1 above, or desires to
use a computer on the Premises, Tenant shall first procure the written consent
of Landlord for the use thereof, which consent Landlord may refuse in its sole
discretion, and landlord may cause a water or electric meter, as the case may
be, to be installed in the Premises in order to measure the amount of water and
electricity consumed for any such use. The cost of any such meters and of
installation, maintenance and repair thereof shall be paid promptly by Tenant
and Tenant agrees to pay Landlord promptly upon demand therefore for all such
water and electricity consumed as shown by said meters at the rates charged for
such services by the local public utility furnishing the same, as the case may
be, plus any additional expenses incurred in keeping account of the water and
electricity so consumed.
(e) If heat generating machines or devices are used in the Premises
which affect the temperature other-wise maintained by the air-conditioning
system, Landlord reserves the right to install additional or supplementary
air-conditioning units for the Premises, and the entire cost of installing,
operating, maintaining and repairing the same shall be paid by Tenant to
Landlord promptly upon demand therefore by Landlord.
(f) Landlord shall not be liable for and Tenant shall not be entitled
to terminate this Lease, to effectuate any abatement or reduction of rent or to
collect any damages by reason of Landlord's failure to provide or furnish any of
the utilities or services set forth in hereof, if such failure was occasioned by
any strike or labor controversy, any act or default of Tenant, the inability of
Landlord to obtain services from the company supplying the same or any cause
beyond the reasonable control of Landlord; provided, however, that if such delay
or service interruption continues for a period in excess of thirty (30)
consecutive days and such delay or interruption renders the Premises or any
portion thereof untenantable for Tenant's normal business operations, the rent
shall thereafter be abated in proportion to the unusable portion of the
Premises. In no event shall Landlord be liable for loss or injury to persons or
property, however arising, occurring in connection with or attributable to any
failure to furnish such utilities or services even if within the control of
Landlord.
18. PROPERTY TAXES. Tenant shall pay or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures
and personal property located in the Premises-, except that which has been paid
for by Landlord, and is the standard of the Building. In the event any or all of
the Tenant's leasehold improvements, equipment, furniture, fixtures and personal
property shall be assessed and taxed with the Building, Tenant shall pay to
Landlord its share of such taxes within ten (10) days after delivery to Tenant
by Landlord of a statement in writing setting forth the amount of such taxes as
applicable to Tenant's property.
19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
rules and regulations that Landlord shall from time to time promulgate. Landlord
reserves the right from time to time to make all reasonable modifications to
said rules. The additions and modifications to those rules shall be binding upon
Tenant upon delivery of a copy of them to Tenant. Landlord shall not be
responsible to Tenant for the nonperformance of any said rules by any other
tenant or occupants. Violations by Tenant of said rules shall constitute a
default under this Lease.
20. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be a tenancy from month to month at a
rental of one-hundred-twenty-five percent (125%) of the amount of the last
monthly rental, plus all other charges payable hereunder, and upon all the terms
hereof applicable to a month to month tenancy.
21. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have,
the right to enter the Premises, inspect the same, supply janitorial service and
any other service to be provided by Landlord to Tenant hereunder, to submit said
Premises to prospective purchasers or tenants, to post notices of
non-responsibility, and to alter, improve or repair the Premises and any portion
of the Building of which the Premises are a part that Landlord may deem
necessary or desirable, without abatement of rent and may for that purpose erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, always providing that the entrance to the
Premises shall not be blocked thereby. Tenant hereby waives any claim for
damages or for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may deem
property to open said doors in an emergency, in order to obtain entry to the
Premises without liability to Tenant except for any failure to exercise due care
for Tenant's property. Any entry to the Premises obtained by Landlord by said
means or otherwise, shall not under any circumstances be construed or deemed to
be a forceable or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof.
22. RECONSTRUCTION.
(a) In the event the Premises or the Build of which the Premises or a
part are damaged by fire or other perils covered by extended coverage insurance,
and the Landlord receives sufficient proceeds to cover the cost of replacing the
damage and said proceeds are made available by Landlords Mortgagee then the
Landlord agrees to forthwith repair the same, and this Lease shall remain in
full force and effect, except that Tenant shall be entitled to a proportionate
reduction of the rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall
materially interfere with the business carried on by the Tenant in the Premises.
If the damage is due to the fault or neglect of Tenant or his employees, there
shall be no abatement of rent.
(b) Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article either destroys twenty-five percent (25%) of the building or occurs
during the last twelve (12) months of the term of this Lease or any extension
thereof, and under either of such circumstances, Landlord shall have the right
to terminate this Lease without liability on its part.
(c)Landlord shall not be required to repair any injury or damage by
fire or other cause, or to make any repairs or replacements of any panels,
decoration, office fixtures, railings, floor covering, partitions, or any other
property installed in the Premises by Tenant. The Tenant shall not be entitled
to any compensation or damages from Landlord for loss of the use of the whole or
any part of the premises. Tenant's personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.
23. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder within period of five (5) days
after the same is due and payable.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions, or provisions of this Lease to be observed or performed by the
Tenant, other than described in Article 23(b) above, where such failure shall
continue for a period of ten (10) days after written notice thereof has been
mailed to Tenant by Landlord, provided, however, that if the nature of Tenant's
default is such that more than ten (10) days are reasonably required for its
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said ten (10) day period and thereafter diligently prosecutes such
cure to completion.
(d) The making by Tenant of an general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged bankrupt, or a petition or reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days, or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attached, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
(e) The failure of the Tenant to keep the property free of liens as
required under Article 12 of this Lease.
24. REMEDIES IN DEFAULT. In the event of any default or breach by Tenant,
Landlord may at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of a right or remedy which Landlord
may have by reason of such default or breach:
(a) Landlord may elect to re-enter, as herein provided, or take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, or it may either terminate this Lease or it may from time to time,
without terminating this Lease, make such alterations and repairs as may be
necessary in order to relet the Premises and relet said Premises or any part
thereof for such term or terms (which may be for a term extending beyond the
term of this Lease) and at such rental or rentals and upon such other terms and
conditions as Landlord, in its sole discretion, may deem advisable. Upon each
such reletting, all rentals received by Landlord from such reletting shall be
applied, first, to the payment of any indebtedness other than rent due hereunder
from Tenant to Landlord; second, to the payment of any costs and expenses of
such reletting, including brokerage fees and attorney's fees, and to costs of
such alterations and repair, third, to the payment of rent due and unpaid
hereunder, and the residue, if any, shall be held by Landlord and applied in
payment of future rent as the same may become due and payable hereunder. If such
rentals received from such reletting during any month be less than that to be
paid during that month by Tenant hereunder, Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly or at such
greater intervals as Landlord may see fit; or Landlord may institute action for
the whole of such deficiency shall be calculated and paid monthly or at such
greater intervals as Landlord may see fit; or Landlord may institute action for
the whole of such embrace the whole unexpired portion of the term hereof. No
such re-entry or taking possession of said Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant, or unless the termination thereof
be decreed by a court of competent jurisdiction. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach. Should Landlord at any time
terminate this Lease for any breach, in addition to any other remedies it may
have, it may recover from Tenant all damages it may incur by reason of such
breach, including the cost of recovering the leased Premises and reasonable
attorney's fees, and including the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to rent reserved in
this Lease for the remainder of the stated term over the then reasonable rental
value of the leased Premises for the remainder of the stated term, all of which
amounts shall be immediately due and payable from Tenant.
(b) In the event Landlord or a receiver or trustee should take
possession of the leased Premises at the instance of Landlord in any action
against Tenant or otherwise, the Landlord, receiver or trustee may collect the
rents and profits from the leased Premises or the business of Tenant and may
conduct the business of Tenant on the leased Premises; and all property of
Tenant placed on the Premises may be taken, possessed and used by the Landlord
or receiver or trustee, as the case may be, in conducting the business of
Tenant, without compensation to the Tenant, and may be let with the Premises
upon any reletting provided for in this Lease, and may be taken, possessed and
used by the substitute tenant in the conduct of the substitute tenant's
business, without compensation to the Tenant and without constituting an
eviction of Tenant from the leased Premises or any part thereof. Said right of
taking, using and letting shall apply to any of said property which may be
subject to a lease or to a conditional sale contract, lease contract, reserved
or security title, chattel mortgage or other security document, instrument or
agreement to secure the balance of the purchase price thereof, or other
obligation of Tenant. The Landlord or receiver or trustee shall be subrogated to
all rights of Tenant in the Premises and shall have the right to make such
payments as may be required to prevent repossession or foreclosure or the
exercise of any remedy by the obligee under any such lease or security document,
instrument or agreement; and the amount so paid, with interest therein, shall be
added to the sum due from Tenant to Landlord.
(c) Each of the foregoing remedies may be exercised jointly or
severally with any of the remedies provided by this Lease or by law, at the
option of the Landlord or trustees; and any remedy elected may be abandoned or
terminated and may be resumed after such abandonment or termination, at the
option of the Landlord or receiver or trustee, as the case may be.
(d) Tenant hereby agrees to hold Landlord safe and harmless from any
claim of any character by any person arising out of or in anywise connected with
the entry and the taking possession of the leased Premises and/or said personal
property by the Landlord or receiver or trustee, as the case may be.
(e) In the event Landlord commences any proceeding for nonpayment of
rent, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding. This shall not, however, be construed as a
waiver of the Tenant's right to assert such claims in any separate actions
brought by the Tenant.
(f) In case suit shall be brought by any third party for recovery of
possession of the leased Premises, for the attachment of rent or any other
amount due under the provisions of this Lease, or because of the breech of any
other covenant herein contained on the part of Tenant to be kept or performed,
and a breach shall be established; or should Landlord intervene In any action or
proceeding ,wherein Tenant is a party in order to enforce or protect Landlord's
interests or rights hereunder. Tenant shall pay to Landlord all expenses
incurred therefor, including a reasonable attorney's fee.
(g) Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the leased Premises by reason of the violation by Tenant of any of
the covenants or conditions of this Lease or otherwise.
(h) The rights and remedies herein shall set forth and granted to
landlord shall be cumulative and in addition to any and all other rights and
remedies provided an given to Landlord under the laws of the state where the
Premises are located. The use of any one or more of the rights and remedies
herein enumerated, as otherwise provided for hereunder, shall not be an election
of remedies; nor, in such event, shall Landlord be barred or stopped from using
or asserting any other or different or concurrent or cumulative right or remedy
at the same or any other or different time or place.
25. EMINENT DOMAIN. If more than twenty-five percent (25%) of the Project shall
be taken or appropriated by any public or quasi-public authority under the power
of eminent domain, either party hereto shall have the right, at its option, to
terminate this Lease and Landlord shall be entitled to any and all income, rent,
award, or any interest therein whatsoever which may be paid or made in
connection with such public or quasi-public us or purpose, and Tenant shall have
no claim against Landlord for the value of any unexpired term of this Lease. If
either less than or more than twenty-five percent (25%) of the Premises is
taken, and neither party elects to terminate as herein provided, the rental
thereafter to be paid shall be equitably, reduced. If any part of the Project
other than the Premises may be so taken or appropriated, Landlord shall have the
right at its option to terminate this lease and shall be entitled to the entire
award as above provided.
26. OFFSET STATEMENT. Tenant shall at any time and from time to time upon not
less than ten(10) days prior written notice from Landlord execute, acknowledge
and deliver to Landlord a statement in writing, stating the following:
(a) Lease date;
(b) Any amendments or modifications and the respective dates thereof;
(c) That lease is in full force and effect;
(d) Date to which rental payments and other charges have been made;
(e) Amount of monthly rental payments and other charges;
(f) That there are no uncured defaults and, if there are, what they
are;
(g) The term of the Lease, including the commencement date-,
(h) No payment of rent has been made more than thirty (30) days in
advance of its due date;
(i) All work required by Landlord has been performed and completed; and
(j) No amendment, modification or cancellation shall be effective
without the prior consent of Landlord's mortgage, if any.
27. PARKING
(a) The parking areas, or designated portions thereof, shall be
available for the use of tenants of the Project and, to the extent designated by
Landlord, the employees, agents, customers, and invitees of said tenants and of
Landlord, but subject to the Rules, Regulations, charges, and rates as set forth
by the Landlord from time to time, provided, however, that Landlord may restrict
to certain portions of the parking areas parking for the tenant and other
tenants of the Project (including Tenant) and their employees and agents, and
may designate other areas to be used at large only by customers and invitees of
tenants of the Project.
(b) Pursuant to such an at-large system, specific c stalls will not be
allocated to specific persons or cars, but an area or areas will be designated
by Landlord within which authorized cars (selected by Tenant in accordance with
rules promulgated by Landlord) will be allowed to park. Such area or areas may,
at Landlord's option, be moved from time to time upon written notice to Tenant,
within the parking facilities of the Project as now or hereafter constituted.
Within such at-large areas Landlord can be satisfactorily serviced. Landlord
may, at its option, change form an at-large system to a specific stall or other
system, either as to all or a part of the cars for which Tenant (or any other
Tenant) enjoys parking rights.
(c) Notwithstanding anything elsewhere herein contained, Landlord
reserves the right from time to time to make reasonable changes in, additions
to, and deletions from the parking areas and the purposes to which the same may
be devoted, and the use of parking areas shall at all times be subject to such
reasonable rules and regulations as may be promulgated by Landlord, provided
that Landlord shall not reduce Tenant's parking rights as described in
subparagraph (a) above (although it may change the location thereof).
(d)Landlord, or its agents, (If Landlord has delegated such privileges)
shall have the right to cause to be removed any cars of Tenant, it s employees
or agents that are parked in violation hereof or In violation of Regulations of
the Building, without liability of any kind to Landlord, its agents or
employees, and Tenant agrees to hold Landlord harmless from and defend it
against any and all claims, losses, or damages asserted or arising in respect to
or in connection with the removal owned by its employees and agents who are to
have parking privileges hereunder. Lessor may, as part of the regulations
promulgated by it for use of the Parking Areas, require that Lessee cause an
identification sticker issued by Lessor to be affixed to the bumpers or other
designated location of all automobiles of Lessee and its employees or agents who
are authorized to park in the Parking Areas.
28. AUTHORITY OF PARTIES
(a)If a Tenant is a corporation, each individual executing this lease
on behalf of said corporation represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said corporation, in accordance
with a duly adopted resolution of the board of directors of said corporation or
in accordance with the by-laws of said corporation, and that this Lease is
binding upon said corporation in accordance with its terms.
(b)If the Landlord herein is a limited partnership, it is understood
and agreed that any claims by Tenant on Landlord shall be limited to the assets
of the limited partnership, and furthermore, Tenant expressly waives any and all
rights to proceed against the individual partners or the officers, directors or
shareholders of any corporate partner, except to the extent of their interest in
said limited partnership.
29. CHANGE OF LOCATION. Without in any way affecting the validity of this Lease,
Landlord shall have the following rights and powers, on not less than thirty
(30) days written notice to Tenant.
(a) To terminate this Lease by tender to Tenant of a sum equal to
one-sixth (1/6th) of the total rentals then remaining unpaid under this Lease
(exclusive of the term in any unexercised options for renewal), upon which
tender and notice Landlord shall be completely relieved and exonerated from any
liabilities to Tenant of any kind, and Tenant shall be obligated to remove
itself from the Premises and satisfy the obligations of repair and restoration
herein provided (as if the termination pursuant to such notice had occurred by
unaccelerated expiration of the Term).
(b)To relocate the Premises and substitutes as the Premises other space
within the Building, for all purposes hereunder as though originally leased to
Tenant; provided, however (i) that the substituted Premises shall contain an
area not less than the square footage contained in the original Premises without
any increase in the rent hereunder, (ii) that the power under this subparagraph
29(b) shall be exercisable by Landlord only once during the Term, and (iii) that
Landlord shall pay the expenses reasonably, incurred by Tenant as a direct
result of such substitution of Premises, including moving expenses, door
lettering, and expenses in connection with change of telephone. In the event of
such relocation Landlord agrees to provide in the substitute Premises
decorations and improvements reasonably equivalent to those which were in the
original Premises but which cannot be moved or used in the substitute Premises.
(c)If Landlord gives notice to Tenant to relocate pursuant to 29(b)
above, then Tenant shall have the right and power to terminate this lease,
without receiving compensation therefore, by written notice to Landlord given
not More than fifteen (15) days after receipt of landlord's notice to relocate,
effective at the end of the calendar month next following the month in which
Tenant gives notice of such termination.
30. SURRENDER OF PREMISES. Tenant shall, upon expiration of the term hereof, or
any earlier termination of this Lease for any cause:
(a) Surrender to Landlord the leased premises, including, without
limitation, all building apparatus, equipment then upon the leased Premises; and
all alterations, improvements, and other additions thereto that may have been
made or installed by either party to, in, upon or about the leased Premises. If
Tenant shall not be then in default, Tenant may remove its trade fixtures, signs
and other personal property, but not including ceiling, light fixtures, air
conditioning equipment and duct work, floor and wall coverings, doors, windows,
window coverings including blinds, and partitions, which items shall remain in
the leased Premises and become the property of Landlord without any payment
therefore.
(b) If Tenant shall be then in default, Tenant shall not have the right
to remove any of said trade fixtures, signs and other personal property and the
same shall remain and become the property of Landlord. Landlord shall have a
Landlord's lien against Tenant's property until said default is remedied.
(c) The leased Premises and all said property (other than the trade
fixtures, signs and other personal property which Tenant has the right to
remove) shall be surrendered to Landlord by Tenant without any damage, injury,
or disturbance thereto, or payment therefore. Tenant, at its expense, shall
immediately repair any damage to the leased Premises caused by it vacating the
same or be Tenant's removal of such trade fixtures, signs and other personal
property, and shall have the premises in a neat and clean condition, free of
debris.
(d) If Tenant fails to remove said trade fixtures, signs and other
personal property, which Tenant has a right to remove pursuant hereto, within
three (3) days after the termination of the term hereof, or earlier termination
of the Lease, Landlord may, at its election"
(i) consider the same abandoned and retain the same as Landlord's
property, or
(ii) remove and store the same for the account of Tenant and at
Tenant's cost and expense.
(e)Tenant's obligation to observe and perform any of the provisions of
this Article shall survive the expiration of the term hereof or earlier
termination of this Lease.
31. GENERAL PROVISIONS.
(a)Plats and Riders. Clauses, Plats and riders, if any, signed by the
Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof.
(b)Waiver. The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver or such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other then the failure of the
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach oat the time of the acceptance of such rent.
(c) Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, certified mail, returned receipt requested, addressed to the
Tenant at the Premises, or to such other place as Tenant may from time to time
designate in a notice to the Tenant.
(d) Joint Obligation. If there be more than one Tenant, the obligations
hereunder imposed upon Tenants shall be joint and several.
(e) Headings. The marginal headings and Article titles to the Articles
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
(f) Time. Time is of the essence of this Lease and each and every
provision hereof.
(g) Successors and Assigns. The covenants and conditions herein
continued, subject to the provisions as to assignment, apply to and bind the
heirs, successors, personal representatives, administrators and assigns of the
parties hereof.
(h) Recordation. Neither Landlord nor Tenant shall record this Lease or
a short form memorandum hereof -without the prior written consent of the other
party.
(i)Quiet Possession. Upon Tenant paying the rent reserved hereunder and
observing and performing all of the covenants, conditions, and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all provisions
of this Lease.
(j)Late Charges. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent or other sums due hereunder will cause Landlord to incur
costs no contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Landlord by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or a sum due from Tenant shall not be received by Landlord
or Landlord's designee within ten (10) days after said amount is due, then
Tenant shall pay to Landlord a late charge equal to ten percent (10%) of such
overdue amount. The parties hereby agree that such late charges represent a fair
and reasonable estimate of the cost that Landlord will incur by reason of the
late payment by Tenant. Acceptance of such late charges by the Landlord from
exercising any of the other rights and remedies granted hereunder.
(k)Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and not prior agreements or understanding pertaining to any such matters shall
be effective for any such matters shall be effective for any purpose. No
provisions of this Lease may be amended or added to, except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
This Lease shall not be effective or binding on any party until fully executed
by both parties hereto.
(l) Inability To Perform. This Lease and. the obligation of the Tenant
hereunder shall not be affected or impaired because the Landlord is unable to
fulfill any of its obligations hereunder or is delayed in doing so. If such
inability or delay is caused by reason of strike, labor troubles, acts of God,
or any other causes beyond the reasonable control of the Landlord.
(m) Attorney's Fees. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses, including the fees of its attorney
in such action or proceeding in such amounts as the court may adjudge reasonable
as attorney's fees.
(n) Sale of Premises by Landlord. In the event of any sale of the
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occupancy or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.
(o) Subordination, Attornment. Upon request of the Landlord, Tenant
will in writing subordinate its rights hereunder to the lien of any first
mortgage, or first deed of trust to any bank, insurance company or other landing
Institutions, now or hereafter in force against the land and Building of which
the Premises are a part, and to all advances made or hereafter to be made upon
the security thereof. In the event any proceedings are brought to foreclosure,
or in the event of the exercise of the power of sale under any mortgage or deed
of trust made by the Landlord covering the Premises, the Tenant shall attorn to
the purchaser upon any such and recognize such purchaser as the Landlord under
this Lease. The provisions of this Article to the contrary notwithstanding, and
so long as Tenant is not in default hereunder, this Lease shall remain in full
force and effect for the full term hereof.
(p)Name. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by Tenant in the Premises.
(q)Severability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provisions shall remain in full force and
effect.
(r)Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
(s) Choice of Law. This Lease shall be governed by the laws of the
State in which the Premises are located.
(t) Signs and Auctions. Tenant shall not place any sign upon the
Premises or Buildings or conduct any auction thereon without Landlord's prior
written consent.
32.BROKERS. Except as agreed upon in writing by Landlord, Tenant represents, and
warrants that there are no claims for brokerage commissions or finder's fees in
connection with this Lease and agrees to indemnify Landlord against and hold it
harmless from all liabilities arising form such claim, including any attorney s
fees connected therewith. It is understood that Colliers Commerce CRG represents
the Landlord in this transaction.
The parties hereto have executed this Lease on the date first written
above.
COMMERCE CONCEPTS, INC. FOURTHWEST ASSOCIATES, L.C.
By /s/ G. E. Richards By /s/ William K. Martin
------------------------------- ---------------------------
By George Richards, President By Partner
------------------------------- ---------------------------
(TENANT) (LANDLORD)
The undersigned individuals hereby unconditionally guarantee the performance of
all of the Tenant's obligations under the foregoing Lease including, without
limitation, the payment of all rental money as well as to the other obligations
assumed by Tenant to Landlord and agree that said Lease may be modified or
extended without the knowledge or consent of the undersigned and without
affecting the liability of the undersigned.
<PAGE>
EXHIBIT "B"
Landlord shall give Tenant an allowance not to exceed Five Thousand Dollars
($5,000) for completion of the improvements Tenant desires to be performed in
the Leased Premises (the "Work"). Tenant shall deliver to Landlord plans and
specifications (the "Plans") setting forth the Work. The "Work" shall consist
of, but not limited to, improvements such as painting, partitions, light
fixtures, wiring, plumbing, HVAC and other similar types of permanent
improvements and shall not consist of purchasing movable partitions, furniture
or movable personal property for use by Tenant. The Plans shall be subject to
Landlord's approval, which will not be unreasonably withheld. Landlord shall
review the Plans and notify Tenant of any objections to them within three (3)
business days after receipt thereof and Lessee shall revise the Plans
accordingly within three (3) business days thereafter. Landlord shall not be
liable for any delay in completing the "Work" due to governmental regulation,
unusual scarcity or inability to obtain labor or material, labor difficulties,
casualty or other causes reasonably beyond Landlord's control. In the event
Tenant desires to perform the "Work", prior to commencing same it shall secure
all necessary licenses and permits and submit to Landlord, for its approval, a
complete list of all contractors, subcontractors and material suppliers who will
be performing the "Work" or supplying materials therefor. Lessee shall also
deliver to each contractor or subcontractor a policy or policies providing
comprehensive general liability insurance, Workers' compensation insurance and
property damage insurance, naming the contractor or subcontractor, as
applicable, as the insured and the Landlord as an additional insured, all such
certificates and insurance to be in a form, amount and substance satisfactory to
Landlord. All work performed by Tenant, its contractors and subcontractors shall
be performed in a good and workmanlike manner in compliance with all applicable
laws, codes and ordinances.
COLLIERS COMMERCE CRG
SALE AND/OR LEASE
HAZARDOUS MATERIALS WARNING & DISCLAIMER
Property: 324 South 400 West
The real estate salesperson and brokers in this transaction have no
expertise with respect to toxic wastes, hazardous materials or undesirable
substances. Proper inspection of the Property by qualified experts are an
absolute necessity to determine whether or not there are any current or
potential toxic wastes, hazardous materials or undesirable substances in or on
the Property. The real estate salespersons and brokers in the transaction have
not made, nor will make, any representations, either express or implied,
regarding the existence or nonexistence of toxic wastes, hazardous materials or
undesirable substances in or on the Property. Problems involving toxic wastes,
hazardous materials or undesirable substances can be extremely costly to
correct. It is the responsibility of Sellers/Lessors/Sublessors and
Buyers/Tenants to retain qualified experts to deal with the detection and
correction of such matters.
Various materials utilized in the construction of any improvements to
the Property may contain materials that have been or may in the future be
determined to be toxic, hazardous, or undesirable and may need to be specially
treated, specially handled and/or removed from the Property. For example, some
electrical transformers and other electrical components can contain PCBs, and
asbestos has been used in a wide variety of building components such as
fireproofing, air duct insulation, acoustical tiles, spray-on acoustical
materials such as metals, minerals, chemicals, hydrocarbons biological or
radioactive materials and other substances which are considered, or in the
future may be determined to be, toxic wastes, hazardous materials or undesirable
substances. Such substances may be in above and below ground containers on the
Property or may be present on or in soils, water, building components or other
portions of the property in areas that may or may not be accessible or
noticeable.
Current and future federal, state and local laws and regulations may
require the clean-up of such toxic, hazardous or undesirable materials at the
expense of those persons who in the past, present or future have had any
interest in the Property including, but not limited to, current, past and future
owners and users of the Property. Sellers/Lessors/Sublessors and Buyers/Tenants
are advised to consult with independent legal counsel of their choice to
determine their potential liability with respect to toxic, hazardous, or
undesirable materials. Sellers/Lessors/Sublessors and Buyers/Tenants should also
consult with such legal counsel to determine what provisions regarding toxic,
hazardous or undesirable materials they may wish to include in purchase and sale
agreements, leases, options and other legal documentation related to
transactions they contemplate entering into with respect to the property.
SELLER/BUYER Fourthwest Associates, LC BUYER/TENANT Commercial Concepts, Inc.
By /s/ W. K. Martin By /s/ G. E. Richards
- ------------------------------------ -------------------------------------
Title Partner Title President/CEO
- ------------------------------------ -------------------------------------
Date 2/22/99 Date 2/22/99
- ------------------------------------ -------------------------------------
FIRST AMENDMENT TO OFFICE BUILDING LEASE
This First Amendment to Office Building Lease, is made and entered into this 5th
day of October, 1999 by and between Fourth West Associates, L.C., a Utah
Limited Liability Company, ("Landlord") and Commercial Concepts, Inc. ("Tenant")
RECITALS
A. Landlord, entered into a lease with Tenant dated February 18, 1999,
(the "Lease") covering certain Premises located within 324 South 400
West in Salt Lake City, Utah. A copy of the Lease is attached hereto as
Exhibit "A".
B. Landlord and Tenant have neither amended nor modified the Lease prior
to the date hereof.
C. Tenant is desirous of increasing its Premises within 324 South 400 West
and the Landlord is desirous of accommodating the Tenant, all
conditioned upon the various terms and conditions set forth below.
NOW, THEREFORE, in consideration of the usual covenants contained herein, as
well as other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged Landlord and Tenant agree as follows:
1. Declaration of Enforceability - Not withstanding any provision of the
Lease to the contrary, whether exercised previously or not, Tenant
hereby declares that the Lease attached as Exhibit "A" hereto is
currently fully binding on Tenant in accordance with its terms and that
all terms thereof with the provisions of this Amendment, shall fully
apply and be enforceable as of this date and into the future.
2. Modification of Lease Premises - Paragraph 2(a) the Lease is amended to
provide for a rentable square footage of 7,105 square feet and a usable
square footage of 6,042 square feet, inclusive of Suite B & E. This
increase of the Premises shall become effective November 1, 1999.
3. Minimum Rent - Paragraph 5 of the lease is hereby amended to provide
for a Minimum Rental per month as follows:
Term Monthly Rental
November - December 1999 $2,310.00
January - February 2000 $6,051.38
March - October 2000 $6,143.78
November 2000 - February 2001 $6,374.32
March - October 2001 $6,471.34
November 2001 - February 2002 $6,651.88
March - October 2002 $6,751.21
November 2002 - February 2003 $6,931.75
March - October 2003 $7,036.70
November 2003 - February 2004 $7,217.24
4. Security Deposit - Tenant has deposited with Landlord the sum of. Two
Thousand Seven Hundred Three Dollars and Seventy Cents ($ 2,703.70 )
said sum shall be increased by $4,513.54 and will be held by Landlord
as security for the faithful performance by Tenant of all the terms,
covenants, and conditions of this Lease during the term hereof. If
Tenant defaults with respect to any provision of this Lease, including,
but not limited to the provisions relating to the payment of rent,
Landlord may (but shall not be required to) use, apply, or retain all
or any part of this security deposit for the payment of any rent or any
other sum in default, or for the payment of any amount which Landlord
may spend or become obligated to spend by reason of Tenant's default,
or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of said
deposit is to used or applied. Tenant shall within five (5) days after
written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the security deposit to its original amount and
Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep this security deposit separate
from its general funds, and Tenant shall not be entitled to interest on
such deposit. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit or
any balance thereof shall be returned to the Tenant (or, at Landlord's
option, to the last valid assignee of Tenant's interest hereunder) at
the expiration of the Lease term.
5. Exhibit "A" Amendment - Exhibit "A" to the Lease which outlines the
Premises shall be amended effective November 1, 1999 as outlined in
Amendment Exhibit "B".
6. Tenant Iml2rovement - Landlord agrees to improve the Premises in
accordance with the plans and specifications which have been agreed
upon between Landlord and Tenant as outlined in Amendment Exhibit "C"
7. Ratification - In all other respects not inconsistent with this
Amendment, the Lease is hereby ratified and affirmed in its entirety.
8. Tenant shall have First Right to Purchase 324 South 400 West, Salt Lake
City, Utah building which will extend for a period of 12 months
expiring on October 31, 2000. Price on said purchase shall be
$800,000.00 cash.
9. Tenant shall have the right of early occupancy of Suite E upon mutual
execution of this document.
IN WITNESS WHEREOF, the parties have executed this FIRST AMENDMENT TO OFFICE
BUILDING LEASE as of the date first above written.
LANDLORD:
Fourth West Associates, L.C., a Utah
Limited Liability Company
By: /s/ William K. Martin
---------------------------------
William K. Martin, Member
TENANT:
Commercial Concepts, Inc.
/s/ George Richards
<PAGE>
AMENDMENT EXHIBIT "C"
Tenant will take aforementioned space on an "as is" basis. No Tenant
Improvements will be provided for by Landlord. If Tenant improves space by doing
any improvements valued over $1,000, Tenant shall deliver to Landlord plans and
specifications (the "Plans") setting forth the Work. The "Work" shall consist
of, but not limited to, improvements such as painting, partitions, light
fixtures, wiring, plumbing, HVAC and other similar types of permanent
improvements and shall not consist of purchasing movable partitions, furniture
or movable personal property for use by Tenant. The Plans shall be subject to
Landlord's approval, which will not be unreasonably withheld. Landlord shall
review the Plans and notify Tenant of any objections to them within three (3)
business days after receipt thereof and Lessee shall revise the Plans
accordingly within three (3) business days thereafter. Landlord shall not be
liable for any delay in completing the "Work" due to governmental regulation,
unusual scarcity or inability to obtain labor or material, labor difficulties,
casualty or other causes reasonably beyond Landlord's control. In the event
Tenant desires to perform the "Work", prior to commencing same it shall secure
all necessary licenses and permits and submit to Landlord, for its approval, a
complete list of all contractors, subcontractors and material suppliers who will
be performing the "Work" or supplying materials therefor. Lessee shall also
deliver to each contractor or subcontractor a policy or policies providing
comprehensive general liability insurance, Workers' compensation Insurance and
property damage insurance, naming the contractor or subcontractor, as
applicable, as the insured and the Landlord as an additional insured, all such
certificates and insurance to be in a form, amount and substance satisfactory to
Landlord. All work performed by Tenant, its contractors and subcontractors shall
be performed in a good and workmanlike manner in compliance with all applicable
laws, codes and ordinances.
================================================================================
324 South 400 West Salt Lake City, UT 84101
================================================================================
================================================================================
Telephone (888) 349-3475 Fax (801)328-0542 General e-mail: [email protected]
================================================================================
July 27, 1999
Douglas Fonnesbeck
IHC, Inc.
Re: Agreement to develop software
Dear Douglas,
As per your ongoing conversation with Larry Nybo of our office, it is
understood:
That in exchange for valuable consideration, in the amount of $12,000, our
office will develop and deliver to IHC on of before September 30, 1999 a beta
version of new medical imaging software. (The details and functionality of this
software will be spelled out in a separate memorandum.)
All rights title and interest to this software will remain the property of
Commercial Concepts, Inc.. IHC, Inc. is hereby granted a user license for up to
30 operating rooms. IHC will provide all of the requisite hardware for the
system, and Commercial Concepts will provide the specifications for the hardware
and technical support.
As the product is revised and improved, IHC will be provided upgrades until such
time as the product is ready for market.
If the above meets with your approval please signify by signing below and
returning a copy of this document to our office.
Thank you.
Best regards,
George Richards Accepted /s/ Douglas Fonnesbeck
---------------------------------
Douglas Fonnesbeck for IHC, Inc.
[Fitzgerald Sanders Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form 10-SB of our
report, which includes an explanatory paragraph which discusses the Company's
ability to continue as a going concern, dated December 21, 1999, on our audits
of the financial statements of Commercial Concepts for the year ended February
28, 1999.
Fitzgerald Sanders, LLC
/s/ Fitzgerald Sanders
Salt Lake City, Utah
January 11, 2000
[Letterhead of David T. Thomson P.C.]
CONSENT OF INDEPENDENT ACCOUNTANTS
I consent to the inclusion in this registration statement on Form 10-SB of my
report, which includes an explanatory paragraph which discusses the Company's
ability to continue as a going concern, dated March 11, 1998, on my audit of the
financial statements of Commercial Concepts for the year ended February 28,
1998.
David T. Thomson, P.C.
/s/ David T. Thomson P.C.
Salt Lake City, Utah
January 11, 2000
