<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 333-14477
SPORTSNUTS.COM INTERNATIONAL, INC.
----------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 87-0561426
------------------------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
The Towers at South Towne #2, Suite 550,
10421 South 400 West,
Salt Lake City, Utah 84095.
-------------------- ------
(Address of principal executive offices) (Zip Code)
(801) 816-2500
Issuer's telephone number
Durwood, Inc. 4085 West 4715 South Kearns, Utah 84118
------------------------------------------------------
(Former name or former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares of the issuer's classes of common stock, as of the
latest practicable date. As of April 7, 1999, the Company had outstanding
12,741,361 shares of common stock, par value $0.0001 per share.
Transitional Small Business Disclosure Format (check one) [ ] Yes [x ] No
<PAGE> 2
PART I
FINANCIAL INFORMATION
The Financial Statements of the Company are prepared as of March 31, 1999. On
April 6, 1999, the Company concluded an exchange offer (the "Exchange Offer")
for approximately 81% of the outstanding common stock of SportsNuts.com, Inc., a
Delaware corporation ("SportsNuts"). Therefore, these Financial Statements and
accompanying notes do not reflect the condition, balance sheet, profit and loss,
and operations of the Company, following the Exchange Offer.
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
1999 1998
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 330 $ 520
Total Current Assets 330 520
-------- --------
TOTAL ASSETS $ 330 $ 520
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ --
-------- --------
Total Current Liabilities -- --
-------- --------
TOTAL LIABILITIES $ -- $ --
STOCKHOLDERS' EQUITY
Preferred stock: 500,000 shares authorized of $0.001
par value but unissued -- --
Common stock: 50,000,000 shares authorized of
$0.001 par value, 1,103,500 shares issued and
outstanding 1,104 1,104
Additional paid-in capital 48,534 48,534
Deficit accumulated during the development stage (49,308) (49,118)
-------- --------
Total Stockholders' Equity 330 520
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 330 $ 520
======== ========
</TABLE>
<PAGE> 3
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended July 12,
March 31, 1996 Through
----------------------------- March 31,
1999 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
EXPENSES -- -- --
OPERATING LOSS -- -- --
LOSS FROM DISCONTINUED
OPERATIONS (190) (2,616) (49,308)
----------- ----------- -----------
NET LOSS $ (190) $ (2,616) $ (49,308)
=========== =========== ===========
BASIC NET LOSS PER SHARE
OF COMMON STOCK $ (0.00) $ (0.00)
=========== ===========
BASIC WEIGHTED AVERAGE
OF OUTSTANDING SHARES 1,103,500 1,103,500
=========== ===========
</TABLE>
<PAGE> 4
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------------------ Paid-in Development
Shares Amount Capital Stage
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, July 12, 1996 -- $ -- $ -- $ --
Common stock issued for cash at
$0.01 per share on July 15, 1996 1,000,000 1,000 9,000 --
Net loss for the five months
ended December 31, 1996 -- -- -- (7,001)
--------- --------- --------- ---------
Balance, December 31, 1996 1,000,000 1,000 9,000 (7,001)
Common stock issued for cash
at $0.50 per share on
April 21, 1997 103,500 104 51,646 --
Stock issuance costs -- -- (12,112) --
Net loss for the year ended
December 31, 1997 -- -- -- (18,583)
--------- --------- --------- ---------
Balance, December 31, 1997 1,103,500 1,104 48,534 (25,584)
Net loss for the year ended
December 31, 1998 -- -- -- (23,534)
--------- --------- --------- ---------
Balance, December 31, 1998 1,103,500 1,104 48,534 (49,118)
Net loss for the three months ended
March 31, 1999 (unaudited) -- -- -- (190)
--------- --------- --------- ---------
Balance, March 31, 1999 (unaudited) 1,103,500 1,104 $ 48,534 $ (49,308)
========= ========= ========= =========
</TABLE>
<PAGE> 5
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended July 12,
March 31, 1996 Through
----------------------- March 31,
1999 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from operations $ (190) $ (2,616) $(49,308)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation -- 272 5,439
Increase in accounts payable -- 1,225 --
-------- -------- --------
Net Cash Used by Operating Activities (190) (1,119) (43,869)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in equipment -- -- (5,439)
-------- -------- --------
Net Cash Provided by Investing Activities -- -- (5,439)
-------- -------- --------
CASH FLOWS FORM FINANCING ACTIVITIES
Payment of deferred stock offering costs -- -- (12,112)
Common stock issued for cash -- -- 61,750
-------- -------- --------
Net Cash Provided by Financing Activities -- -- 49,638
-------- -------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS (190) (1,119) 330
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 520 18,068 --
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 330 $ 16,949 $ 330
======== ======== ========
Cash Paid For:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
</TABLE>
<PAGE> 6
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
SportsNuts.com International, Inc. (formerly Durwood, Inc.) (the
"Company") was incorporated under the laws of the State of Delaware
on July 12, 1996. The Company has not commenced active business
operations and is considered a development stage company. The
proposed business and purpose of the Company's formation is to engage
in the business of making and selling custom pool cues as collectors
items as well as for playing pool and billiards; and to engage in and
perform any and all acts and activities customary in connection
therewith, or incident thereto. In December 1998, the Company
determined to terminate its pool cue business and to seek new
business opportunities.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31, year
end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Basic Loss Per Share
The computations of basic loss per share of common stock are based on
the weighted average number of shares outstanding during the period
of the financial statements.
e. Income Taxes
The Company provides for income taxes based on income reported for
financial reporting purposes. At March 31, 1999, the Company has a
loss carryover of approximately $49,000 which expires in 2014. The
potential benefit of the tax loss carryover has been offset by a
valuation allowance.
f. 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.
g. Unaudited Financial Statements
<PAGE> 7
The accompanying unaudited financial statements include all of the
adjustments which in the opinion of management are necessary for a
fair presentation. All such adjustments are of a normal recurring
nature.
SPORTSNUTS.COM INTERNATIONAL, INC.
(formerly Durwood, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1999 and December 31, 1998
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has not established
revenues sufficient to cover its operating costs and allow it to
continue as a going concern. It is the intent of the Company's
management to merge with an existing operating company. In the
interim, management has committed to meeting its operating costs.
NOTE 3 - DISCONTINUED OPERATIONS
The Company determined in December 1998 to discontinue its pool cue
business. Therefore, all revenues generated by the Company have been
netted against the expenses and are grouped into the discontinued
operations line on the statement of operations. The loss on
discontinued operations is summarized as follows:
<TABLE>
<CAPTION>
From
Inception on
July 12,
1996 Through
December 31,
1998
------------
<S> <C>
Condensed Income $ 3,280
Condensed Expenses (52,588)
Condensed Net Loss $(49,308)
========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of SportsNuts.com International, Inc. (formerly Durwood, Inc.) should
be read in conjunction with the Unaudited Financial Statements and related Notes
thereto included herein.
<PAGE> 8
OVERVIEW
As of March 31, 1999, the Company has not commenced any active
business operations and is considered a development stage company. The proposed
business and purpose of the Company's formation is to engage in the business of
making and selling custom pool cues as collectors items as well as for playing
pool and billiards and to engage in and perform any and all acts and activities
customary in connection therewith, or incident thereto. In December 1998, the
Company determined to terminate its pool cue opportunities.
On January 20, 1999, the Company entered into a letter of intent to
acquire all of the outstanding shares of SportsNuts.com, Inc., a privately-held
Delaware corporation ("SportsNuts"). On April 6, 1999, the Company completed the
first stage of the acquisition of SportsNuts (the "Acquisition"), acquiring
approximately 81% of the outstanding common stock of SportsNuts on a basis of
one (1) share of SportsNuts in exchange for 0.654904748 shares of the Company.
On April 20, 1999, the Company filed with the Commission a report on Form 8-K
summarizing the Acquisition.
SportsNuts is an online sports community and sports "club" that uses
the Internet, media, and direct sales to sell sports, outdoors, and
fitness-related products and services to the members of its club throughout the
world. Through its web site located at http:www.sportsnuts.com, SportsNuts is
attempting to build the most comprehensive online sports community and
electronic sports mall in the world.
PROJECTED USES OF FUNDS
Over the next twelve months, the Company intends to direct its
working capital in four areas: (i) development of its Web Site and its Internet
and extranet electronic commerce solutions, (ii) media and promotions, and (iii)
development of its network of independent distributors. The Company plans to
allocate $1.2M toward the development and acquisition of hardware and software
systems, acquisition of technology personnel and programmers, and outside
consulting. With respect to media, the Company plans to allocate $1.5 million to
marketing and advertising. To properly motivate, train, and attract distributors
to the Company's sales force, the Company intends to allocate $1.1 million for
training, giveaways, contests, and events for its distributors. The Company also
intends to allocate $0.4 million toward the development of a comprehensive
database for its distributors that will be accessible via the World Wide Web and
will enable them to track product/service sales, enrollments of customers and
other distributors within their downline sales force, and commissions earned.
Finally, the Company intends to allocate $1.1, $0.5, and $0.4 million for
administration, facilities, and professional fees, respectively, during the next
twelve months.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, SportsNuts has financed its operations through a
combination of short and long-term loans, and through the private placement of
its common stock. Several of SportsNuts's loans outstanding have since been
converted to common stock.
<PAGE> 9
The Company believes that its capital resources are sufficient to
meet its working capital needs for the next six months. Accordingly, the Company
intends to raise additional funds through a private offering of its common stock
in an amount sufficient to maintain operations until such time the Company can
sustain operations internally from its revenues. Notwithstanding the foregoing,
the Company's capital needs will depend upon many factors in the execution of
the Company's future strategy, including the Company's future growth rate, the
number of distributors and customers who enroll with the Company, the success of
the Company's external marketing effort, the number of visits (in terms of hits
and page views) on its web site, and various other factors.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
FORWARD LOOKING STATEMENTS
To the extent any statement presented herein deals with information
that is not historical, such statement is necessarily forward looking. As such,
it is subject to the occurrence of many events outside of the Company's control
that could cause the Company's results to differ materially from predicted
results.
RISK FACTORS
The risk factors described below are based on the business of the
Company following the Acquisition of SportsNuts, with the Company pursuing the
business conducted by SportsNuts prior to the Acquisition.
OPERATING RISKS
LACK OF EXTENSIVE OPERATING HISTORY. The SportsNuts business was
formed in 1996 and is subject to all risks inherent in the creation of a new
business and the development of new products and services, including the absence
of a history of significant operations and of proven products and services which
have been produced and sold over a significant period of time. SportsNuts is
continuing to establish many functions which are necessary to conduct business,
including without limitation, managerial and administrative structure, marketing
activities, financial systems and personnel recruitment. SportsNuts has a
limited operating history and limited sales revenues.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends, in large
part, upon the talents and skills of its management and, in particular, Kenneth
Forrest, the President and founder of the Company. To the extent that any of its
key personnel are unable or refuse to continue their association with the
Company, a suitable replacement would have to be found. There is no assurance
that the Company would be able to find suitable replacements for such personnel
or that suitable personnel could be obtained for an amount affordable to the
Company.
ADDITIONAL FINANCING REQUIREMENTS. The Company may require additional
capital in the future for expansion, additional marketing, computer software and
systems, overhead, administrative, and other expenses. There is no assurance
that the Company will be able to raise additional funds or that financing will
be available on acceptable terms. Lack of additional funds
<PAGE> 10
could significantly affect the Company and its business. Further, funds raised
through equity financing could be dilutive to holders of the Shares.
RELIANCE UPON INDEPENDENT DISTRIBUTORS. The Company's principal sales
force consists of independent distributors ("Players") who are not employees of
the Company. Relationships with distributors are voluntarily terminable by the
distributors, or the Company at any time. The Company's revenue is substantially
dependent upon the efforts of the distributors, and any growth in future sales
volume will require an increase in the productivity of existing Distributors
and/or growth in the total number of distributors. As is typical in the direct
selling industry, there is turnover in distributors from year to year, which
requires the sponsoring and training of new distributors by existing
distributors to maintain or increase the overall distributor force and motivate
new and existing distributors. The size of the distribution force can also be
particularly impacted by general economic and business conditions and a number
of intangible factors such as adverse publicity regarding the Company, or the
public's perception of products sold through the Company or its Web Site, the
content of the material and the overall theme of the Web Site, product
ingredients or components, the distributors themselves, the Internet or
Internet-based companies in general, or network marketing. Because of the number
of factors that impact the sponsoring of new distributors, and the fact that the
Company has little or no control over the level of sponsorship of new
distributors, the Company cannot predict the timing or degree of those
fluctuations. There can be no assurance that the number of productivity of the
distributors will be sustained at current levels or increased in the future. In
addition, the number of distributors as a percent of the population in a given
market could theoretically reach levels that become difficult to exceed due to
the finite number of persons inclined to pursue a network marketing business
opportunity. Since distributors are independent contractors, the Company is not
in a position to provide the same level of direction, motivation and oversight
as it would with respect to its own employees.
DEVELOPMENT STAGE COMPANY. Since the date of its inception, the
Company has operated on a small scale and has not yet generated a profit. To
achieve any significant measure of profitability, the Company must create
substantial activity through its Web Site to generate advertising revenues,
product sales, and the enrollment of distributors, with each such distributor
attracting additional customer ("Fans") to participate in the SportsNuts.com
club or otherwise purchase products from the Company. Although the Company has
generated increased activity on its Web Site and has increased the number of
distributors and customers on a monthly basis over the course of 1999, there can
be no assurance that the Company will continue to do so in the future or that
such increases will ultimately lead to the Company becoming profitable.
SEASONALITY. While neither seasonal nor cyclical variations have
materially affected the Company's results of operations in the past, the
Company's short operating history may have suppressed these factors. For
example, with respect to product sales, the use of sports, outdoor, and fitness
equipment and apparel is generally seasonal and therefore demand for these items
can fluctuate greatly depending upon the time of year. There can be no assurance
that seasonal or cyclical variations will not materially adversely affect the
Company's results of operations in the future.
RELIANCE UPON MANUFACTURER-SUPPLIERS. The Company does not
manufacture any of the products sold from its Internet Web Site, and therefore
relies upon the Affiliates who sell
<PAGE> 11
these products through the Web Site to supply all of the products to
SportsNuts.com customers. These Affiliates are primarily manufacturer's
representatives. The Company's profit margins and the ability for consumers to
receive existing products on a timely basis are substantially dependent upon
these Affiliates. The development of additional new products in the future will
likewise be dependent in part on the services of suitable Affiliates. The
failure of any one of the Company's Affiliates to produce and deliver quality
products and services in a timely manner on a consistent basis could negatively
affect the sale of products from the Company's Web Site and could have a
material adverse effect on the Company's financial condition and results of
operations.
POTENTIAL EFFECTS OF ADVERSE PUBLICITY. The size of the distribution
force and the results of the Company's operations can be particularly impacted
by adverse publicity regarding the Company, including publicity regarding the
content of material displayed on the Web Site, activities and events sponsored
by the Company, the legality of the Company's distribution system, the quality
of the products distributed through the Company's Web Site, regulatory
investigations of the Company and the products distributed by Affiliates who
sell such products through the Web Site, actions by certain Distributors, and
the public's perception of the Distributors as representatives of the Company
and of direct selling and network marketing businesses generally.
POTENTIAL NEGATIVE IMPACT OF DISTRIBUTOR ACTIONS. Actions by certain
distributors can negatively impact the Company and its products. The publicity
resulting from Distributor activities such as inappropriate earnings claims and
product representations by distributors can make the sponsoring and retaining of
distributors more difficult, thereby negatively impacting sales. There can be no
assurance that these or actions of other distributors will not have a material
adverse effect on the Company's business or results of operations.
MANAGEMENT OF GROWTH. The Company anticipates that it will experience
rapid growth in the next few years of operations. The management challenges
imposed by this growth include entry into new markets, growth in the number of
persons accessing the Web Site, Affiliates, employees, distributors, and
customers, expansion of facilities and computer systems necessary to accommodate
such growth, and additions and modifications to the product lines offered
through the Company's Web Site. To manage these changes effectively, the Company
may be required to hire additional management and operations personnel and to
improve its operational, financial, computer, and management systems. If the
Company is unable to manage growth effectively or hire or retain qualified
personnel, the Company's business and results of operations could be materially
adversely affected.
GOVERNMENT REGULATION OF DIRECT SELLING ACTIVITIES. Direct selling
activities are regulated by various governmental agencies. These laws and
regulations are generally intended to prevent fraudulent or deceptive schemes,
often referred to as "pyramid" or "chain sales" schemes, that promise quick
rewards for little or no effort, require high entry costs, use high pressure
recruiting methods and/or do not involve legitimate products. As is the case
with most companies which are involved in network marketing, the Company may
receive inquiries from various government regulatory authorities regarding the
nature of its business and other issues such as compliance with local business
opportunity and securities laws. Although the Company has not received any such
inquiry to date, there can be no assurance that the Company will not
<PAGE> 12
face such inquiries in the future which, either as a result of findings adverse
to the Company or as a result of adverse publicity resulting from the
instigation of such inquiries, could have a material adverse effect on the
Company's business and results of operations. While the regulations governing
network marketing are complex and vary from state to state, based on research
conducted to date, the Company believes that its method of distribution is in
compliance in all material respects with the laws and regulations relating to
direct selling activities of the states in which the company currently operates,
and intends to modify its network marketing system to comply with various
regulatory authorities. The failure to comply in any one state could cause the
Company to pay fines as well as cease operations in that state, which in turn
could influence the decisions of regulatory authorities in other states and
could have a material adverse effect upon the Company's financial condition and
results of operations.
GOVERNMENTAL REGULATION OF NETWORK MARKETING IN GENERAL. The
Company's network marketing system is or may be subject to or affected by
extensive government regulation of marketing practices and federal and state
regulation of the offer and sale of business franchises, business opportunities,
and securities. In addition, the Internal Revenue Service and state taxing
authorities in any of the states or U.S. territories where the Company has
distributors could classify the distributors as employees of the Company (as
opposed to independent contractors). Any assertion of determination that the
Company's business is not in compliance with government requirements could have
a material adverse effect upon the Company's financial condition and results of
operations.
GOVERNMENTAL REGULATION OF PRODUCTS AND MARKETING. The Company is
subject to or affected by extensive governmental regulations not specifically
addressed to network marketing. Such regulations govern, among other things, (i)
content of material displayed on the Internet, (ii) product formulation,
labeling, packaging and importation, (iii) product claims and advertising,
whether made by the Company, the Company's Affiliates or distributors of the
Company, (iv) fair trade and distributor practices, and (v) taxes. Based on the
Company's experience and research (including assistance from legal counsel), the
Company believes that it is in material compliance with all regulations
applicable to the Company. Despite this belief, the Company could be found not
to be in material compliance with existing regulations as a result of, among
other things, the considerable interpretative and enforcement discretion given
to regulators or misconduct by its distributors. Any assertion or determination
that the Company or any of its distributors are not in compliance with existing
laws or regulations could potentially have a material adverse effect on the
Company's business and results of operations. In addition, in any jurisdiction,
the adoption of new laws or regulations or changes in the interpretation of
existing laws or regulations could generate negative publicity and/or have a
material adverse effect on the Company's business and results of operations. The
Company cannot determine the effect, if any, that future governmental
regulations or administrative orders may have on the Company's business and
results of operations. Regulatory action, whether or not it results in a final
determination adverse to the Company, has the potential to create negative
publicity, with detrimental effects on the retention, motivation, and
recruitment of distributors and, consequently, on the Company's sales and
earnings.
GOVERNMENT REGULATION OF THE INTERNET. There are currently few laws
or regulations directly applicable to electronic commerce. Due to the increasing
popularity and use of the Internet, it is possible that a number of laws and
regulations may be adopted with respect
<PAGE> 13
to the Internet which could materially increase the cost of transacting business
on the World Wide Web. Although transmissions from the Company's Web Site will
originate from the States of Utah and California, the government of the United
States and the governments of other states and foreign countries might attempt
to regulate such transmissions or assess taxes, fees, tariffs, duties, or other
payments against the Company, the Company's affiliates, or customers purchasing
products through the Web Site.
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET. The Company's
future success is substantially dependent upon continued growth in the use of
the Internet and the World Wide Web in order to support the volume of activity
necessary to generate advertising revenue and the sale of the products. Rapid
growth in the use of the Internet is a recent phenomenon, and the Company relies
on consumers who have historically used traditional means of media and commerce
for entertainment and the purchase of goods and services. For the Company to be
successful, these consumers must accept and utilize novel ways of conducting
business and exchanging information. There can be no assurance that
communication or commerce over the Internet will become more widespread or that
the Internet will otherwise become a viable commercial marketplace. Moreover, to
the extent that the Internet continues to experience significant growth in the
number of users and frequency of use, there can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
upon it by such growth, or that the performance or reliability of the World Wide
Web will not be adversely affected thereby. In addition, certain factors such as
Internet commerce security and the speed of Internet transmissions may deter
existing as well as potential SportsNuts.com customers from engaging in
transactions on the Internet. The occurrence of any of these risks could
adversely affect the Company's business, operating results, and financial
condition.
RISK OF COMPUTER SYSTEM FAILURE. The success of the Company is
substantially dependent upon its ability to deliver high quality, uninterrupted
access to its Web Site, which requires that the Company protect its computer
hardware and software systems and the data and information stored in connection
therewith. The Company's systems are vulnerable to damage by fire, natural
disaster, power loss, telecommunications failures, unauthorized intrusion, and
other catastrophic events. Any substantial interruption in the Company's systems
would have a material adverse effect on the Company's business, operating
results, and financial condition. Although the Company carries general
commercial insurance coverage, such coverage may not be adequate to compensate
for the losses that may occur. In addition, the Company's systems may be
vulnerable to computer viruses, physical or electronic break-ins, sabotage, or
other problems caused by third parties which could lead to interruptions,
delays, loss of data, or cessation in service to persons desiring to access the
Company's Web Site. The occurrence of any of these risks could have a material
adverse effect upon the Company's business, results of operations, and financial
condition.
ELECTRONIC COMMERCE SECURITY RISKS. A significant barrier to
electronic commerce is the secure transmission of confidential information over
the Internet. The Company relies upon encryption and authentication technology
to provide the security necessary to affect secure transmissions of confidential
information. There can be no assurance that advances in decryption technology,
computer espionage, and other developments will not result in a breach or
compromise of the algorithms used by the Company to protect transaction data of
persons accessing the Web Site, and therefore lead to the misappropriation of
such data by third parties.
<PAGE> 14
Any such breach, compromise, or misappropriation could damage the Company's
reputation and expose the Company to a risk of loss or litigation and possible
liability, and could have a material adverse effect upon the Company's business,
results of operations, or financial condition.
RAPID TECHNOLOGICAL CHANGE. The Internet and on-line commerce
industries are characterized by rapid technological change, changing market
conditions and customer demands, and the emergence of new industry standards and
practices that could render the Company's existing Web Site and the services
provided pursuant thereto obsolete. The Company's future success will
substantially depend on its ability to enhance its existing services, develop
new services, and otherwise respond to technological advances in a timely and
cost-effective manner. If the Company is unable, for technical, legal,
financial, or other reasons, to adapt in a timely manner in response to changing
market conditions or customer requirements, or if the Company's Web site does
not achieve market acceptance, the Company's business, operating results, and
financial condition would be adversely affected.
RELIANCE ON CERTAIN DISTRIBUTORS. The Company's compensation plan
allows existing distributors to sponsor new distributors. The sponsoring of new
distributors creates multiple distributor levels in the network marketing
structure. Sponsored distributors are referred to as "downline" distributors
within the sponsoring distributor's "downline network." If downline distributors
also sponsor new distributors, additional levels of downline distributors are
created, with the new downline distributors also becoming part of the original
sponsor's "downline network." As a result of this network marketing distribution
system, distributors develop relationships with other distributors. A few key
distributorships comprise the Company's highest distributor levels. These
distributorships have developed extensive downline networks which consist of
many sub-networks. Together with such networks, these distributorships account
for substantially all of the Company's revenue attributable to direct sales.
Consequently, the loss of such a key distributor together with a group of
leading distributors in such distributor's downline network, or the loss of a
significant number of distributors for any reason, could adversely affect sales
of products, impair the Company's ability to attract new distributors and
adversely impact earnings and the business and financial condition of the
Company.
NO PROPRIETARY PRODUCTS/NON-EXCLUSIVE LICENSE FOR PRODUCT SALES. The
Company does not offer products or services through its Web Site that enjoy any
significant proprietary protection for the benefit of the Company. Moreover,
because written distribution agreements are not common for firms which sell
sporting goods, apparel, and outdoor products, the Company's Affiliates
distribute most of the products without written agreements or licenses from the
manufacturer. The lack of proprietary protection and exclusive licenses
substantially diminishes the barriers to entry for potential competitors of the
Company, and could adversely affect the Company's future prospects for growth
and profitability.
TRADEMARK REGISTRATION. The U.S. Patent and Trademark Office
("USPTO") has not approved the Company's applications for use of the name
"SPORTSNUTS.COM," the Company's logo, and the slogan: "The Business of Sports."
If the Company is unsuccessful in obtaining the right of full usage of its name
from the USPTO, other companies with names, marks, or slogans similar to those
of the Company could seek to require that the Company obtain a license from them
or require the Company to change its name, either of which could entail
<PAGE> 15
substantial costs. Additionally, if the Company were required to change its
name, it could lose all goodwill associated with the "SPORTSNUTS.COM" mark. In
addition, future products and services offered by the Company may need to be
marketed under different names if the mark "SPORTSNUTS.COM" or similar name is
likely to cause confusion with another trade name being used by another company.
The Company could also incur substantial costs to defend any legal action taken
against the Company pursuant to a trademark or service mark dispute. If, in any
legal action against the Company, its asserted trademarks, or service marks
should be found to infringe upon intellectual property rights of a third party,
the Company could be enjoined from further infringement and could be required to
pay damages. In the event a third party were to sustain a valid claim against
the Company, and in the event any required license were not available on
commercially reasonable terms, the Company's financial operations and results of
operations could be materially adversely affected. Litigation, which could
result in substantial cost to and diversion of resources of the Company, may
also be necessary to enforce intellectual property rights of the Company or to
defend the Company against claimed infringement of the rights of others.
COMPETITION. The Company competes with other sports-themed Internet
sites, sports clubs, and direct selling and electronic commerce-based
organizations, many of which have longer operating histories and higher
visibility, name recognition, and financial resources. Management envisions the
entry of many more direct selling organizations into the marketplace as this
channel of distribution expands over the next several years. Moreover, as use of
the Internet grows, Management also anticipates a rapid increase in the number
of firms selling goods and services over the Internet. There can be no assurance
that the Company will be able to successfully meet the challenges posed by this
increased competition. The Company's Affiliates compete in the intensely
competitive market for sports, outdoor, and fitness goods and apparel and
compete directly with companies that manufacture and market these goods and
services. Many competitors of the Company's Affiliates have much greater name
recognition and financial resources than the Company's Affiliates. While the
Company believes that consumers appreciate the convenience of ordering products
from home through a sales person, through a catalog, or on the Internet, the
buying habits of many consumers accustomed to purchasing products through
traditional retail channels are difficult to change. The Company's offerings on
its Web Site in each product category are also relatively small compared to the
wide variety of products and services offered by other electronic commerce
companies. There can be no assurance that the Company's business and results of
operations will not be affected materially by market conditions and competition
in the future.
PRODUCT LIABILITY. Although the Company does not manufacture any of
the products purchased or sold through its Web Site, it may be subject to
liability for losses caused by such products. While the Company maintains a
general commercial liability insurance policy, there is no guarantee that this
policy will provide coverage for or that any such coverage will be sufficient to
satisfy the claims of a successful product liability claim. Accordingly, a
successful products liability claim against the Company could have a material
adverse effect on the Company's business, results of operations, and financial
condition.
<PAGE> 16
PRIVATE CAPITAL/NEED FOR ADDITIONAL CAPITAL
SportsNuts presently has limited operating capital with which to
engage in its business. Upon completion of the Private Offering and the
Acquisition, the amount of capital available to SportsNuts will still be limited
and may not be sufficient to enable it to conduct its business operations
without additional fund-raising. The Company has no commitments for additional
cash funding beyond the proceeds expected to be received from this offering. It
is very probable that the Company will have to raise additional capital in order
to fund its anticipated growth. If the Company seeks new equity investors in
order to raise additional capital, it will dilute the ownership of the Company's
stockholders, including persons who purchase shares in the Private Offering, and
such dilution could be significant.
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation of the Company contains
certain provisions which could be an impediment to a non-negotiated change in
control of the Company, namely an ability, without stockholder approval, to
issue up to 5,000,000 shares of preferred stock with rights and preferences
determined by the board of directors, staggered terms for directors and
super-voting requirements. These provisions could impede a non-negotiated change
in control and thereby prevent stockholders from obtaining a premium for their
common stock.
SECURITIES ELIGIBLE FOR PUBLIC TRADING.
Of the 12,741,361 shares of the Company's common stock to be
outstanding immediately after completing both stages of the Acquisition,
2,441,713 shares will be freely tradeable or immediately eligible for resale
under Rule 144 promulgated pursuant to the Securities Act of 1933, as amended
(the "Securities Act"). Sales of substantial amounts of the freely tradeable
stock in the public market could adversely affect the market price of the common
stock.
NO DIVIDENDS.
The Company does not currently intend to pay cash dividends on its
common stock and does not anticipate paying such dividends at any time in the
foreseeable future. At present, the Company will follow a policy of retaining
all of its earnings, if any, to finance the development and expansion of its
business.
PRIVATE LIABILITY OF MANAGEMENT.
The Company has adopted provisions in its Certificate of
Incorporation which limit the liability of its Officers and Directors and
provisions in its by-laws which provide for indemnification by the Company of
its Officers and Directors to the full extent permitted by Delaware corporate
law. The Company's certificate of incorporation generally provides that its
directors shall have no personal liability to the Company or its stockholders
for monetary damages for breaches of their fiduciary duties as directors, except
for breaches of their duties of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, acts involving
unlawful payment of dividends or unlawful stock purchases or
<PAGE> 17
redemptions, or any transaction from which a director derives an improper
personal benefit. Such provisions substantially limit the shareholders' ability
to hold directors liable for breaches of fiduciary duty.
POTENTIAL ISSUANCE OF ADDITIONAL COMMON AND PREFERRED STOCK.
The Company will be authorized to issue up to 50,000,000 shares of
common stock. To the extent of such authorization, the Board of Directors of the
Company will have the ability, without seeking shareholder approval, to issue
additional shares of common stock in the future for such consideration as the
Board of Directors may consider sufficient. The issuance of additional common
stock in the future will reduce the proportionate ownership and voting power of
the common stock offered hereby. The Company will also be authorized to issue up
to 5,000,000 shares of preferred stock, the rights and preferences of which may
be designated in series by the Board of Directors. To the extent of such
authorization, such designations may be made without shareholder approval. The
designation and issuance of series of preferred stock in the future would create
additional securities which would have dividend and liquidation preferences over
the common stock offered hereby. See "Description of Securities."
VOLATILITY OF STOCK PRICES.
In the event that there is an established public market for the
Company's common stock, market prices will be influenced by many factors and
will be subject to significant fluctuations in response to variations in
operating results of the Company and other factors such as investor perceptions
of the Company, supply and demand, interest rates, general economic conditions
and those specific to the industry, developments with regard to the Company's
activities, future financial condition and management.
APPLICABILITY OF LOW PRICED STOCK RISK DISCLOSURE REQUIREMENTS.
The common stock of the Company may be considered a low priced
security under rules promulgated under the Exchange Act. Under these rules,
broker-dealers participating in transactions in low priced securities must first
deliver a risk disclosure document which describes the risks associated with
such stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the customer's
financial situation, investment experience and objectives. Broker-dealers must
also disclose these restrictions in writing to the customer, obtain specific
written consent of the customer, and provide monthly account statements to the
customer. With all these restrictions, the likely effect of designation as a low
priced stock will be to decrease the willingness of broker-dealers to make a
market for the stock, to decrease the liquidity of the stock and to increase the
transaction cost of sales and purchases of such stock compared to other
securities.
YEAR 2000 COMPLIANCE
The Company's three servers have all been tested for Year 2000
compliance and each
<PAGE> 18
have been found to meet the National Software Testing Laboratories Standard.
Each of the Company's two operating systems have also been updated for Year 2000
compliance. With respect to the Company's hubs, switches, and PIX Firewall, each
have been found to meet the Information Technology Association of America
standards for Year 2000 compliance. Management believes that its computer
systems are Year 2000 compliant, and intends to work with its Affiliates over
the coming year to ensure that their systems are also Year 2000 compliant.
Nevertheless, significant uncertainty exists concerning the potential impact of
the Year 2000 on computer systems generally. Any year 2000 compliance problems
of the Company or any of its customers or Affiliates could have a material
adverse effect upon the Company's business, results of operations, or financial
condition.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a)
The following document is incorporated by reference from the Form SB-2 of the
Company filed October 18, 1996:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3* Bylaws of Durwood, Inc.
The following document is incorporated by reference from the Form 8-K of the
Company filed April 20, 1999:
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1* Agreement and Plan of Reorganization among
Durwood, Inc., SportsNuts.com, Inc., and Darren
Heiselt
</TABLE>
The following documents are filed as exhibits to this Form 10-QSB:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Exhibit 3(i) Restated Certificate of Incorporation of
SportsNuts.com International, Inc. (formerly,
Durwood, Inc.)
Exhibit 10.1# SportsNuts.com International, Inc. 1999 Stock
Option Plan
Exhibit 10.2# Form of Stock Option Grant.
Exhibit 10.3 Lease Agreement for Corporate Office in Salt Lake
City, Utah
Exhibit 10.4 First Amendment to Lease Agreement for Corporate
Office in Salt Lake City, Utah
Exhibit 10.5 Three Gateway Office Lease for Company office
located in Phoenix, Arizona
Exhibit 10.6# Executive Employment Agreement between Company and
Kenneth Denos
Exhibit 10.7# Executive Employment Agreement between Company and
Rodger Smith
Exhibit 10.8# Summary of Agreement between Company and Anthony
Moore, a Director, regarding payment for capital
raising services
Exhibit 10.9 Business Loan Agreement and related documents
between the Company and Zions First National Bank
Exhibit 27 Financial Data Schedule
</TABLE>
* Denotes exhibits specifically incorporated in this Form 10-QSB by reference to
other filings pursuant to the provisions of Rule 12B-32 under the Securities
Exchange Act of 1934.
# Identifies management or compensatory plans, contracts, or arrangements.
(b) Not applicable
<PAGE> 20
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SPORTSNUTS.COM INTERNATIONAL, INC.
(Formerly Durwood, Inc.)
Date: May 18, 1999 By /s/Kenneth Denos
-------------------------------------
Kenneth Denos
Chief Financial Officer
<PAGE> 21
Exhibit Index
The following document is incorporated by reference from the Form SB-2 of the
Company filed October 18, 1996:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3 Bylaws of Durwood, Inc.
</TABLE>
The following document is incorporated by reference from the Form 8-K of the
Company filed April 20, 1999:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization among
Durwood, Inc., SportsNuts.com, Inc., and Darren
Heiselt
</TABLE>
The following documents are filed as exhibits to this Form 10-QSB:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Exhibit 3(i) Restated Certificate of Incorporation of
SportsNuts.com International, Inc. (formerly,
Durwood, Inc.)
Exhibit 10.1 SportsNuts.com International, Inc. 1999 Stock
Option Plan
Exhibit 10.2 Form of Stock Option Grant.
Exhibit 10.3 Lease Agreement for Corporate Office in Salt Lake
City, Utah
Exhibit 10.4 First Amendment to Lease Agreement for Corporate
Office in Salt Lake City, Utah
Exhibit 10.5 Three Gateway Office Lease for Company office
located in Phoenix, Arizona
Exhibit 10.6 Executive Employment Agreement between Company and
Kenneth Denos
Exhibit 10.7 Executive Employment Agreement between Company and
Rodger Smith
Exhibit 10.8 Summary of Agreement between Company and Anthony
Moore, a Director, regarding payment for capital
raising services
Exhibit 10.9 Business Loan Agreement and related documents
between the Company and Zions First National Bank
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 3 (i)
RESTATED CERTIFICATE OF INCORPORATION
Durwood, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Durwood, Inc., and it was
originally incorporated under the same name, and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on July 12, 1996.
2. Pursuant to Section 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation.
3. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
CERTIFICATE OF INCORPORATION
OF
SPORTSNUTS.COM INTERNATIONAL, INC.
ARTICLE I. NAME
The name of the corporation is SPORTSNUTS.COM INTERNATIONAL, INC.
(the "Corporation").
ARTICLE II. REGISTERED OFFICE
<PAGE> 2
The address of the Corporation's registered office in the State of
Delaware is Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle and its registered agent at such address is
CORPORATION SERVICE COMPANY.
ARTICLE III. PURPOSE
The purpose or purposes of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV. CAPITAL STOCK
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Preferred Stock" and "Common Stock". The number of
shares of Preferred Stock authorized to be issued is Five Million (5,000,000).
The number of shares of Common Stock authorized to be issued is Fifty Million
(50,000,000). The Preferred Stock and the Common Stock shall each have a par
value of $.0001 per share.
(a) Provisions Relating to the Common Stock. Each holder of
Common Stock is entitled to one vote for each share of Common Stock
standing in such holder's name on the records of the Corporation on
each matter submitted to a vote of the stockholders, except as
otherwise required by law.
(b) Provisions Relating to Preferred Stock. The Board of
Directors (the "Board") is authorized, subject to limitations
prescribed by law and the provisions of this Article IV, to provide
for the issuance of the shares of Preferred Stock in accordance with
Sections 102(a) and 151(a) of the General Corporation Law of
Delaware, in one or more series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in each such series,
and to fix the designation, powers, preferences and rights of the
shares of each such series and the qualification, limitations or
restrictions thereof.
ARTICLE V. BOARD OF DIRECTORS
(a) Number. The number of directors constituting the entire
Board shall be as fixed from time to time by vote of a majority of
the entire Board, provided, however, that the number of directors
shall not be reduced so as to shorten the terms of any director at
any time in office.
(b) Classified Board. The Board shall be divided into three
classes, as nearly equal in numbers as the then total number of
directors constituting the entire Board permits with the term of
office of one class expiring each year. At the first annual meeting
of the stockholders, directors of the first class will be elected to
hold office for a term expiring at the next succeeding annual
meeting, directors of the second class will be elected to hold office
for a term expiring at the second succeeding annual meeting, and
directors of the third class will be elected to hold office for a
term expiring at the third succeeding annual meeting.
<PAGE> 3
(c) Vacancies. Vacancies on the Board shall be filled by the
affirmative vote of the majority of the remaining directors, though
less than a quorum of the Board, or by election at an annual meeting
or at a special meeting of the stockholders called for that purpose.
(d) Election of directors need not be by written ballot.
ARTICLE VI. BY-LAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized to make, alter, amend or repeal the
By-Laws of the Corporation.
ARTICLE VII. LIABILITY
To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for or with respect to any acts or omissions in the performance of his or her
duties as a director of the Corporation. Any amendment or repeal of this Article
VII will not eliminate or reduce the affect of any right or protection of a
director of the Corporation existing immediately prior to such amendment or
repeal.
ARTICLE VIII. SPECIAL VOTING REQUIREMENTS
The following actions, when submitted to the stockholders of the
Corporation for their consideration, shall require the affirmative vote of at
least 66 2/3% of the outstanding Common Stock of the Corporation: amendment of
Sections (a), (b), or (c) of Article V of the Certificate of Incorporation. The
foregoing voting requirements shall not otherwise be deemed to affect the voting
rights granted by this Certificate of Incorporation, the By-laws, or the
Delaware General Corporation Law, to the Board.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been signed under the seal of the Corporation this 6th day of April, 1999.
DURWOOD, INC.
By: /s/ Darren Heiselt
----------------------------------------
Darren Heiselt, President and Secretary
<PAGE> 1
Exhibit 10.1
SPORTSNUTS.COM INTERNATIONAL, INC.
1999 STOCK OPTION PLAN
ARTICLE 1.
GENERAL PROVISIONS
1.1. PURPOSE OF THE PLAN
This 1999 Stock Option Plan (the "Plan") is intended to promote the
interests of SPORTSNUTS.COM INTERNATIONAL, INC., a Delaware corporation, (the
"Corporation") by providing eligible persons with the opportunity to acquire or
increase their proprietary interest in the Corporation as an incentive for them
to remain in the Service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
1.2. ADMINISTRATION OF THE PLAN
a. Prior to the Section 12(g) Registration Date, the Plan
shall be administered by the Board or a committee of the Board.
b. Beginning with the Section 12(g) Registration Date, the
Primary Committee shall have sole and exclusive authority to administer the Plan
with respect to Section 16 Insiders. Administration of the Plan with respect to
all other persons eligible under the Plan may, at the Board's discretion, be
vested in the Primary Committee or a Secondary Committee, or the Board may
retain the power to administer the Plan with respect to all such persons.
c. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also terminate the functions of
any Secondary Committee at any time and reassume all powers and authority
previously delegated to such committee.
d. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the provisions of the Plan and any outstanding options
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the Plan under
its jurisdiction or any option thereunder.
<PAGE> 2
e. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.
f. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares, the acceleration of such vesting schedule,
the maximum term for which the option is to remain outstanding, whether the
option shares shall be subject to rights of repurchase and/or rights of first
refusal, and all other terms and conditions of the option grants.
1.3. ELIGIBILITY
The following persons shall be eligible to participate in the Plan:
a. Employees,
b. non-employee members of the Board or the board of directors
of any Parent or Subsidiary, and
c. consultants and other independent advisors who provide
Services to the Corporation or any Parent or Subsidiary.
1.4. STOCK SUBJECT TO THE PLAN
a. The stock issuable under the Plan shall be shares of
authorized but unissued Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed fifteen million
(15,000,000) shares, which number of shares may be changed from time to time in
accordance with Section 3.4 below.
b. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii) the
options are canceled in accordance with the cancellation-regrant provisions of
Article 2. However, should the Exercise Price be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an option under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced by
the gross number of shares for which the option is exercised, and not by the net
number of shares of Common Stock issued to the holder of such option.
<PAGE> 3
c. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted options per calendar year, and (iii) the number
and/or class of securities and the Exercise Price in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding, and conclusive.
ARTICLE 2.
OPTION GRANT PROGRAM
2.1. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of Section 2.2
of the Plan, below.
a. Exercise Price
(1) The Exercise Price shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the Grant Date.
(2) The Exercise Price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Article 3.1, and
the documents evidencing the option, be payable in one or more of the forms
specified below:
(a) cash or check made payable to the Corporation,
(b) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(c) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
Purchased Shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the Purchased Shares plus all applicable federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver the
certificates for the Purchased Shares directly to such brokerage firm in order
to complete the sale.
Except to the extent the sale and remittance procedure is
utilized, payment of
<PAGE> 4
the Exercise Price for the Purchased Shares must be made on the Exercise Date.
b. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the Grant Date.
c. Effect of Termination of Service
(1) The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service:
(a) Any option outstanding at the time of the Optionee's
cessation of Service for any reason except death, Permanent Disability or
Misconduct shall remain exercisable for a three (3) month period thereafter,
provided no option shall be exercisable after the Expiration Date.
(b) Any option outstanding at the time of the Optionee's
cessation of Service due to death or Permanent Disability shall remain
exercisable for a twelve (12) month period thereafter, provided no option shall
be exercisable after the Expiration Date. Subject to the foregoing, any option
exercisable in whole or in part by the Optionee at the time of death may be
exercised subsequently by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
(c) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
(d) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of shares
for which the option is exercisable on the date of the Optionee's cessation of
Service; the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable. Upon the expiration of the applicable exercise period
or (if earlier) upon the Expiration Date, the option shall terminate and cease
to be outstanding for any shares for which the option has not been exercised.
(2) The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(a) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the Expiration
Date, and/or
(b) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of shares of
Common Stock for which such
<PAGE> 5
option is exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional shares that would have vested under
the option had the Optionee continued in Service.
d. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the Exercise Price, and become a
holder of record of the Purchased Shares.
e. Limited Transferability of Options. During the lifetime of
the Optionee, Incentive Options may be exercised only by the Optionee, and shall
not be assignable or transferable except by will or the laws of descent and
distribution following the Optionee's death. Non-Statutory Options may be
assigned or transferred in whole or in part only (i) during the Optionee's
lifetime if in connection with the Optionee's estate plan to one or more members
of the Optionee's immediate family (spouse and children) or to a trust
established exclusively for the benefit of one or more such immediate family
members, or (ii) by will or the laws of descent and distribution following the
Optionee's death. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
2.2. INCENTIVE OPTIONS
The terms specified below shall apply to all Incentive Options.
Except as modified by the provisions of this Section 2.2, all the provisions of
this Plan shall apply to Incentive Options. Options specifically designated as
Non-Statutory Options when issued under the Plan shall not be subject to the
terms of this Section 2.2.
a. Eligibility. Incentive Options may only be granted to
Employees.
b. Exercise Price. The Exercise Price shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the Grant Date.
c. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied in the
order in which such options are granted.
d. 10% Stockholder. If an Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the Exercise Price shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the Grant Date, and the option term shall not exceed five (5) years
measured from the Grant Date.
<PAGE> 6
e. Holding Period. Shares purchased pursuant to an option
shall cease to qualify for favorable tax treatment as Incentive Option Shares if
and to the extent Optionee disposes of such shares within two (2) years of the
Grant Date or within one (1) year of Optionee's purchase of said shares.
2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL
a. In the event of any Corporate Transaction, the Board of
Directors shall have the sole discretion to elect that each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The Board may exercise its discretion to accelerate the vesting of options
whether or not (i) such option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or Parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or Parent thereof, (ii) such option is to be replaced with
a cash incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option, except to the extent that the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of the option grant. The determination of option comparability under clause
(i) above shall be made by the Plan Administrator, whose determination shall be
final, binding and conclusive.
b. In the event of any Corporate Transaction, the Board of
Directors shall have sole discretion to elect that all outstanding repurchase
rights may also be terminated automatically whether or not those repurchase
rights are to be assigned to the successor corporation (or Parent thereof) in
connection with such Corporate Transaction.
c. The Plan Administrator's discretion under Sections 2.3.a.
and b. above shall be exercisable either at the time the option is granted or at
any time while the option remains outstanding, whether or not those options are
to be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.
d. If the Board of Directors elects the automatic acceleration
of some or all of the outstanding options upon the occurrence of a Corporate
Transaction, all such outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) immediately following the consummation of the Corporate
Transaction.
e. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities that would have been
issuable to the Optionee in consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate
<PAGE> 7
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction, (ii) the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same and (iii) the maximum number
of securities and/or class of securities for which any one person may be granted
stock options.
f. The Plan Administrator shall have the discretion,
exercisable at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of any options
assumed or replaced in a Corporate Transaction that do not otherwise accelerate
at that time (and the termination of any of the Corporation's outstanding
repurchase rights that do not otherwise terminate at the time of the Corporate
Transaction) in the event the Optionee's Service should subsequently terminate
by reason of an Involuntary Termination within eighteen (18) months following
the effective date of such Corporate Transaction. Any options so accelerated
shall remain exercisable for shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.
g. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period (not to exceed eighteen (18)
months) following the effective date of such Change in Control. Any options
accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.
h. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the federal tax laws.
i. The grant of options under the Plan shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
2.4. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution new options covering the same or different number of shares of
Common Stock but with an Exercise Price based on the Fair Market Value per share
of Common Stock on the new Grant Date.
<PAGE> 8
ARTICLE 3.
MISCELLANEOUS
3.1. FINANCING
a. The Plan Administrator may permit any Optionee to pay the
option Exercise Price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. Promissory notes may be authorized with or without security
or collateral. In all events, the maximum credit available to the Optionee may
not exceed the sum of (i) the aggregate option Exercise Price payable for the
Purchased Shares plus (ii) the amount of any federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise.
b. The Plan Administrator may, in its discretion, determine
that one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
3.2. TAX WITHHOLDING
a. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
b. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options under the Plan with the right to use
shares of Common Stock in satisfaction of all or part of the Taxes incurred by
such holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:
(1) Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
(2) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise triggering the Taxes) with an aggregate Fair
Market Value equal to the percentage of the Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
3.3. EFFECTIVE DATE AND TERM OF THE PLAN
a. The Plan shall become effective on the Plan Effective Date.
However, no shares shall be issued under the Plan pursuant to Incentive Options
until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all Incentive Options previously granted under this
<PAGE> 9
Plan shall automatically convert into Non-Statutory Options.
b. The Plan shall terminate upon the earliest of (i) June 30,
2008, (ii) the date on which all shares available for issuance under the Plan
shall have been issued, or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all
outstanding options shall continue to have force and effect in accordance with
the provisions of the documents evidencing such options.
3.4. AMENDMENT OF THE PLAN
a. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect any rights and obligations with
respect to options at the time outstanding under the Plan unless each affected
Optionee consents to such amendment or modification. In addition, amendments to
the Plan shall be subject to approval of the Corporation's stockholders to the
extent required by applicable laws or regulations.
b. Options to purchase shares of Common Stock may be granted
under the Plan that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued are held in escrow until there is obtained Board approval (and
shareholder approval if required by applicable laws or regulations) of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan.
3.5. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
3.6. REGULATORY APPROVALS
a. The implementation of the Plan, the granting of any option
under the Plan, and the issuance of any shares of Common Stock upon the exercise
of any option shall be subject to the Corporation's obtaining all approvals and
permits required by regulatory authorities having jurisdiction over the Plan and
the options granted under it, and the shares of Common Stock issued pursuant to
the Plan.
b. No shares of Common Stock shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of federal and state securities laws and all applicable
listing requirements of any stock exchange (or the NASDAQ market, if applicable)
on which Common Stock is then listed for trading.
<PAGE> 10
3.7. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
<PAGE> 11
APPENDIX
The following definitions shall be in effect under the Plan
and the Plan Documents:
1. BOARD shall mean the Corporation's Board of Directors.
2. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders, which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.
3. CODE shall mean the Internal Revenue Code of 1986, as amended.
4. COMMON STOCK shall mean the Corporation's common stock.
5. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
6. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible
to participate in the Plan.
7. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to
<PAGE> 12
both the work to be performed and the manner and method of performance.
8. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
9. EXERCISE PRICE shall mean the exercise price per share as
specified in the Stock Option Grant.
10. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Stock Option Grant.
11. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is traded at the time on the NASDAQ
National Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the NASDAQ National Market or
any successor system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(iii) If the Common Stock is not listed on any Stock Exchange
nor traded on the NASDAQ National Market, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.
(iv) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public offering
pursuant to the Underwriting Agreement.
12. FIRST REFUSAL RIGHT shall mean the right granted to the
Corporation in Section E of the Stock Option Exercise Notice and Purchase
Agreement.
13. GRANT DATE shall mean the date on which the option is granted to
Optionee as specified in the Stock Option Grant.
14. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
<PAGE> 13
15. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces his
or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
16. MARKET STAND OFF shall mean the market stand off restriction on
disposition of the Purchased Shares as specified in Section F of the Stock
Option Exercise Notice and Purchase Agreement.
17. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).
18. 1933 ACT shall mean the Securities Act of 1933, as amended.
19. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
20. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
21. OPTIONEE shall mean any person to whom an option is granted under
Plan.
22. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Stock Option Grant.
23. OWNER shall mean Option and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
24. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock
<PAGE> 14
in one or the other corporations in such chain.
25. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
26. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death, or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
27. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Board or a committee of the Board, which is authorized to administer the Plan
with respect to one or more classes of eligible persons, to the extent such
entity is carrying out its administrative functions under the Plan with respect
to the persons under its jurisdiction.
28. PLAN DOCUMENTS shall mean the Plan, the Stock Option Grant, and
Stock Option Exercise Notice and Purchase Agreement, collectively.
29. PLAN EFFECTIVE DATE shall mean July 1, 1999, the date as of which
the Plan was adopted by the Board.
30. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members (as defined in the regulations to Section 16 of the
1934 Act) appointed by the Board to administer the Plan with respect to Section
16 Insiders.
31. PURCHASED SHARES shall mean the shares purchased upon exercise of
the Option.
32. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other charge
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
33. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity;
(ii) a sale, transfer, or other disposition of all or
substantially all of the Corporation's assets;
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting securities
are transferred in whole or in part to a
<PAGE> 15
person or persons different from the persons holding those securities
immediately prior to the merger; or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company structure.
34. REPURCHASE RIGHT shall mean the Corporation's right to repurchase
Purchased Shares as set forth in Section D of the Stock Option Exercise Notice
and Repurchase Agreement.
35. SEC shall mean the Securities Exchange Commission.
36. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
37. SECTION 12(g) REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
38. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
39. SERVICE shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
40. STOCK EXCHANGE shall mean either the American Stock Exchange, the
New York Stock Exchange, or another regional stock exchange.
41. STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT shall mean
the agreement of said title in substantially the form of Exhibit A to the Stock
Option Grant, pursuant to which Optionee gives notice of his intent to exercise
the option and purchase Shares.
42. STOCK OPTION GRANT shall mean the Stock Option Grant document,
pursuant to which Optionee has been informed of the basic terms of the option
granted under the Plan.
43. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
44. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options in
connection with the exercise of those options.
<PAGE> 16
45. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
<PAGE> 1
Exhibit 10.2
Grant No.________________
SPORTSNUTS.COM INTERNATIONAL, INC.
STOCK OPTION GRANT
OPTIONEE:________________________________________________________
ADDRESS:_________________________________________________________
GRANT DATE:______________________________________________________
EXERCISE PRICE: $ ________ per share
NUMBER OF OPTION SHARES: _________________________________ shares
EXPIRATION DATE:_________________________________________________
TYPE OF OPTION: _____ Incentive Option _____ Non-Statutory Option
ISSUED UNDER SEC RULE 701: ________ Yes __________ No
EXERCISE SCHEDULE: Subject to the terms contained herein, the Option shall be
exercisable, in full or in part, at any time prior to the Expiration Date.
<PAGE> 2
This Stock Option Grant is made, as of the Grant Date set forth
above, by and between SPORTSNUTS.COM INTERNATIONAL, INC., a Delaware corporation
(the "Corporation") and the Optionee named above. This Stock Option Grant
includes the terms of the Stock Option Exercise Notice and Purchase Agreement
attached hereto as Exhibit A, and is subject to the terms of the Corporation's
1999 Stock Option Plan (the "Plan"), a copy of which is attached hereto as
Exhibit B. All capitalized terms not defined herein shall have the meaning set
forth in the Appendix to the Plan.
1. GRANT OF OPTION. The Corporation hereby grants to Optionee named
above, as of the Grant Date, an option to purchase up to the total number of
Option Shares specified above. The Option Shares shall be purchasable from time
to time during the option term specified in paragraph 2 below at the Exercise
Price.
2. OPTION TERM. The option term shall be measured from the Grant Date
and shall accordingly expire at the close of business on the Expiration Date
specified above, unless sooner terminated in accordance with paragraph 5 below.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable, in whole or in part, by Optionee other than by will or by the
laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, if this option
is designated a Non-Statutory Option above, then this option may also, in
connection with Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's immediate family
(spouse or children) or to a trust established exclusively for the benefit of
one or more such immediate family members. Optionee shall give written notice of
any such assignment during Optionee's lifetime to the Corporation within 20 days
of assignment. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
4. EXERCISABILITY. This option shall become exercisable for the
Option Shares in one or more installments provided in the Exercise Schedule
above. As the option becomes exercisable for such installments, those
installments shall accumulate and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of the
option term under paragraph 5 below.
5. CESSATION OF SERVICE. The option term specified in paragraph 2
above shall terminate, and this option shall cease to be outstanding prior to
the Expiration Date, upon Optionee's ceasing to be in the Service of the
Corporation. In such event, the following provisions shall apply:
<PAGE> 3
a. Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while this option is
outstanding, then Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise this option
as to vested Option Shares.
b. Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate (or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution) shall have a period of twelve (12) months
(commencing with the date of such cessation of service) during which to exercise
this option as to vested Option Shares.
c. Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a period
of twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option as to vested Option Shares.
d. Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain outstanding.
e. During the limited post-Service exercise period, this
option may not be exercised in the aggregate for more than the number of vested
Option Shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of such limited post-Service exercise
period or upon the Expiration Date (if earlier), this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. In no event shall this option be exercisable at any time
after the Expiration Date. To the extent this option is not otherwise
exercisable for vested Option Shares at the time of Optionee's cessation of
Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.
6. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option, and (ii) the Exercise Price,
in order to reflect such change and thereby preclude a dilution or enlargement
of benefits hereunder.
7. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price, and become a holder of
record of the Purchased Shares.
8. MANNER OF EXERCISING OPTIONS
a. In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising this option) must take the
following actions:
<PAGE> 4
(1) Execute and deliver to the Corporation a Stock Option
Exercise Notice and Purchase Agreement (Exhibit A) for the Option Shares for
which the option is exercised.
(2) Pay the aggregate Exercise Price for the Purchased Shares
in one or more of the following forms:
(a) Cash or check made payable to the Corporation; or
(b) A promissory note payable to the Corporation, but only to
the extent authorized by the Plan Administrator in accordance
with paragraph 13.
Upon prior written approval of the Plan Administrator, the
Exercise Price may also be paid as follows:
(c) In shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(d) Through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (1) to a Corporation-designated brokerage firm
to effect the immediate sale of the Purchased Shares and remit
to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the Purchased Shares plus all
applicable federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (2) to the Corporation to deliver the
certificates for the Purchased Shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Stock Option Exercise Notice and Purchase Agreement delivered
to the Corporation in connection with the option exercise.
(3) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
(4) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in
order for it to comply with the applicable requirements of
federal and state securities laws.
(5) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all federal, state and local income and
employment tax withholding requirements applicable to the
option exercise.
<PAGE> 5
b. As soon as practical after the Exercise Date, the
Corporation shall issue to, or, on behalf of Optionee (or any other person or
persons exercising this option), a share certificate for the Purchased Shares,
with the appropriate legends affixed thereto.
c. In no event may this option be exercised for any fractional
shares.
9. ESCROW. As security for the faithful performance of this
Agreement, Optionee agrees, immediately upon receipt of the certificates
evidencing the Purchased Shares, to deliver such certificates, together with a
Stock Power in the form attached to Exhibit A hereto, executed by Optionee (with
the date and number of Shares left blank), to the Secretary of the Corporation
or its designee ("Escrow Holder"), who is hereby appointed to hold such
certificates and Stock Power in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Optionee and the Corporation agree
that Escrow Holder shall not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent relative thereto. The Escrow Holder may rely upon any letter, notice,
or other document executed by any signature purported to be genuine and may rely
on advice of counsel and obey any order of any court with respect to the
transactions contemplated herein. The Shares shall be released from escrow when
all the Corporation's Repurchase Rights, First Refusal Right, and Market
Standoff Right as set forth in Exhibit A hereto.
10. COMPLIANCE WITH LAWS AND REGULATIONS
a. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or NASDAQ, if applicable) on which
the Common Stock may be listed for trading at the time of such exercise and
issuance.
b. The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in paragraph 3 above, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's permitted assigns and the legal representatives, heirs
and legatees of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated on the Stock Option Grant. All
<PAGE> 6
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchase Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan and the Stock Option Exercise Notice and
Purchase Agreement. All decisions of the Plan Administrator with respect to any
question or issue arising under the Plan or this Agreement shall be conclusive
and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Utah without resort
to its conflict-of-laws rules.
16. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option above, the following terms and
conditions shall also apply to the grant:
a. This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (1) more than three (3) months after the date
Optionee ceases to be an Employee or in the Service of the Corporation for any
reason other than death or Permanent Disability or (2) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of death or
Permanent Disability.
b. No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of any earlier installments of the Common Stock and any other securities for
which this option or any other Incentive Options granted to Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be
exceeded in any calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory Option.
c. Should the Board elect to accelerate the exercisability of
this option upon a Corporate Transaction, then this option shall qualify as an
Incentive Option only to the extent the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which this option first becomes
exercisable in the calendar year in which the Corporate Transaction occurs
<PAGE> 7
does not, when added to the aggregate value (determined as of the respective
date or dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the Corporation
or any Parent or Subsidiary) first become exercisable during the same calendar
year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should
the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in
the calendar year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory Option.
d. Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
e. The grant of this option is subject to approval of the Plan
by Corporation's stockholders within twelve (12) months after the adoption of
the Plan by the Board. In the event that such stockholder approval is not
obtained, then this option shall not qualify as an Incentive Option.
f. If the Option Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall cease to
qualify as an Incentive Option unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
g. If Optionee is a 10% Stockholder, then the Exercise Price
shall not be less than one hundred ten percent (110%) of the Fair Market Value
per share of Common Stock on the Grant Date, and the option term shall not
exceed five (5) years measured from the Grant Date.
h. Shares purchased pursuant to this option shall cease to
qualify for favorable tax treatment as Incentive Option shares if and to the
extent Optionee disposes of such shares within two (2) years from the Grant Date
or within one (1) year of Optionee's purchase of said shares.
i. Optionee acknowledges that the rules regarding Incentive
Options as contained in the Internal Revenue Code are subject to amendment in
the future. Optionee should consult his or her tax advisor prior to taking any
action with respect to this option or the shares purchased hereunder.
IN WITNESS WHEREOF, this Agreement is executed as of the Grant Date
first noted above.
SPORTSNUTS.COM INTERNATIONAL,
INC.
<PAGE> 8
By: _____________________________
Its:_____________________________
ACKNOWLEDGMENT
Optionee understands and agrees that the option is granted subject to
and in accordance with the terms of the Corporation's 1999 Stock Option Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the option as set forth in this Agreement. Optionee understands
that any Option Shares purchased under the option shall be subject to the terms
set forth in the Stock Option Exercise Notice and Purchase Agreement attached
hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the Plan in the
form attached hereto as Exhibit B, and represents that Optionee has read and
understands the Plan, and accepts this option subject to all terms and
provisions of the Plan and the Plan documents. Optionee hereby agrees to accept
as binding, conclusive and final, all decisions and interpretations of the Board
of Directors upon any questions arising under the Plan. Optionee acknowledges
that there may be adverse tax consequences upon exercise of this option and/or
upon disposition of the Purchased Shares, and that Optionee should consult a tax
advisor prior to such exercise or disposition.
OPTIONEE
_________________________________
OPTIONEE
_________________________________
DATE
<PAGE> 9
EXHIBIT A
STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT
<PAGE> 10
EXHIBIT B
1999 STOCK OPTION PLAN
<PAGE> 1
EXHIBIT 10.3
LEASE AGREEMENT
THIS LEASE AGREEMENT (Lease) is entered into this 22nd day of January, 1999, by
and between 106TH SOUTH BUSINESS PARK L.P., a Utah Limited Partnership,
hereinafter referred to as LANDLORD, and SPORTSNUTS.COM, INC., A Delaware
Corporation, hereinafter referred to as TENANT.
W I T N E S S E T H:
WHEREAS, this Lease relates to a six story office building located at
10421 South Jordan Gateway (400 West), South Jordan City, Salt Lake County, Utah
84095; and
WHEREAS, LANDLORD and TENANT are desirous of entering into this
Lease.
NOW, THEREFORE, for and in consideration of the mutual promises and
provisions herein contained and for other good and valuable consideration the
receipt and sufficiency whereof are hereby acknowledged, the parties mutually
certify and agree to the following terms and conditions:
1. OPERATIVE FACTS. This Agreement (hereafter referred to as the
"Lease") is made with respect to the following salient facts and definitions:
1.1 Premises & Preparation.
1.1.1 LANDLORD does hereby lease to TENANT and TENANT hereby leases
from LANDLORD, that certain office space commonly known as Suite 550, as
indicated on Exhibit "A" attached and by this reference made a part hereof
(herein called "Premises"), said Premises being agreed, for the purpose of this
Lease, to have a net useable area of 2,993 square feet and a net rentable area
of 3,521 square feet and being situated on the 5th floor of that certain
building known as Towers Phase II 6 story office building at 10421 South Jordan
Gateway, South Jordan, Utah (hereinafter referred to as the "Building.") Net
rentable area is defined as the net useable area plus a 15% building load factor
for common areas and is calculated by dividing the net useable area by .85. 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.
1.1.2 The respective obligations, if any, of LANDLORD and TENANT to
perform the work and supply the necessary materials and labor to prepare the
Premises for occupancy by TENANT are described in detail on Exhibit "B" attached
hereto and by this reference made a part hereof. LANDLORD and TENANT shall
expend all funds and do all acts required of them
<PAGE> 2
as described on Exhibit "B" and shall perform or have such work promptly and
diligently completed in a first-class and workmanlike manner.
1.1.3 LANDLORD and TENANT shall complete the work required of each
party, as specified in Exhibit "B" as soon as reasonably possible.
Notwithstanding anything to the contrary contained in this Lease, upon occupancy
of the Premises by Tenant, all of the obligations of LANDLORD set forth in
Exhibit "B" shall be deemed to be satisfactory completed, "Punch List" items
excepted. "Punch List" items are defined as being minor construction defects or
incomplete work, the non-completion of which will not materially interfere with
the use of the Premises.
1.2 Term. Five (5) Lease years.
1.3 Projected Commencement Date. April 15, 1999.
1.4 Basic Monthly Rent. Five Thousand, Five Hundred Seventy-Four
Dollars and 92 Cents ($5,574.92). Basic monthly rent is calculated at the Lease
rate of $19.00 per square foot (annual) times the net rentable square foot of
the Premises adjusted to the monthly payment. Net rentable size of the Premises
includes a 15% common area load factor.
1.4.1 LANDLORD has agreed to alter the monthly Lease payment
referenced in 1.4 above by reducing the monthly payment amount to
$4,574.92 for the first 24 months of the Lease Term and increasing
the monthly payment amount to $6,241.59 for the remaining 36 months
of the Lease Term. Notwithstanding the alternation of the payment
schedule provided in this Section 1.4.1 Consumer Price Index
adjustments, if any, as provided in Section 4.3 shall be based on the
basic monthly rent as provided for in Section 1.4.
1.5 LANDLORD's Operating Expenses. LANDLORD'S share of Operating
Expenses is computed by multiplying the number of net rentable square feet
applicable to the Premises by $5.00 per square foot.
1.6 TENANT'S Operating Expenses. TENANT'S share of Operating Expenses
shall be computed pursuant to Subsection 5.1.4.
1.7 Security Deposit. Security Deposit means an amount equal to Four
Thousand, Five Hundred Seventy-Two Dollars and Ninety-Two Cents ($4,572.92).
2. PARKING. The Building shall have uncovered parking spaces.
Approximately five percent (5%) of these spaces will be reserved for visitor
parking with thirty (30) minute time limits, a minimum of four (4) spaces shall
be reserved for handicap parking and up to sixty (60) spaces shall be available
as reserve parking at a reasonable monthly fee. The remaining parking spaces
shall be available to all TENANTS on a "first-come-first-serve" basis and shall
be at no cost to TENANT or other TENANTS.
<PAGE> 3
2.1 LANDLORD, or its agents (if LANDLORD has delegated such
privileges) shall have the right to cause to be removed any cars of TENANT, its
employees or agents that are parked in violation hereof or in violation of the
rules and regulations of the Building, without liability of any kind to TENANT,
its agents or employees, and TENANT agrees to hold LANDLORD harmless from and
defend it against any and all claims, losses, or damages and demands asserted or
arising in respect to or in connection with the removal of any such automobiles
as aforesaid. TENANT shall from time to time, upon request of LANDLORD, supply
LANDLORD with a list of license plate numbers of all automobiles owned by its
employees or agents who are to have parking privileges hereunder. LANDLORD may,
as part of the regulations promulgated by it for use of the parking areas
require than TENANT cause an identification sticker issued by LANDLORD to be
affixed to the bumpers or other designated location of all automobiles of TENANT
and its employees or agents who are authorized to park in the parking areas.
2.2 Parking Privileges. In addition to the parking on the building
site TENANT shall have parking privileges on the following adjacent properties:
Country Inn & Suites Hotel, Francesco's Restaurant, and Reel Theaters. Parking
privileges for the Building and for the adjacent properties provide for parking
on a first come first serve basis and are further regulated as provided for in
Section 22.4 of the Lease.
3. TERM.
3.1 Length of Term. The initial term of this Lease shall be for the
period defined as the Term, plus the partial calendar month, if any, occurring
after the Actual Commencement Date (as hereinafter defined) if the Actual
Commencement Date occurs other than on the first day of a calendar month. Lease
Year shall include twelve (12) calendar months, except that first Lease Year
will also include any partial calendar month beginning after the Actual
Commencement Date.
3.2 Actual Commencement Date. The actual commencement date (Actual
Commencement Date) of the Term shall be the earliest of the following dates:
3.2.1 The date on which the Premises are ready for Occupancy
as outlined in Exhibit "B" hereto;
3.2.2 The date on which the Premises would have been Ready for
Occupancy had there been no delay due to changes in the Final Plans
requested by TENANT, if any; or
3.2.3 The date TENANT, with prior written consent of LANDLORD,
actually commences to do business on the Premises.
3.3 Acknowledgment of Actual Commencement Date. Within five
(5) days after LANDLORD'S or TENANT'S request to do so, LANDLORD and
TENANT shall execute a written acknowledgment of the Actual
Commencement Date, which acknowledgment shall be deemed to be part of
this Lease.
<PAGE> 4
4. MONTHLY RENT.
4.1 Basic Monthly Rent. TENANT agrees to pay LANDLORD, at 10421 South
Jordan Gateway, Suite 600, South Jordan, Utah 84095 or at such other address
designated by LANDLORD, the Basic Monthly Rent, without prior demand therefor,
without offset or deduction and in advance before the end of first day of each
calendar month during the Term, commencing on the Actual Commencement Date.
TENANT shall thereafter, subject to any C.P.I. or any other adjustment contained
in the Lease, pay the amount of $5,574.92 in monthly lease payments until the
expiration of the Lease term. In the event the Actual Commencement Date occurs
on a day other than the first day of a calendar month, then the Basic Monthly
Rent to be paid on the first day rent is due shall include both the Basic
Monthly Rent for the first full calendar month occurring after the first day
rent is due, plus the Basic Monthly Rent for the initial fractional calendar
month prorated on a per-diem basis (based upon a thirty (30) day month).
4.2 Additional Rent. All charges required to be paid by TENANT
hereunder, including, without limitation, payments for Operating Expenses, and
any other amounts payable hereunder, shall be considered additional rent for the
purposes of this lease (Additional Rent), and TENANT shall pay Additional Rent
upon written demand by LANDLORD with reasonable justification or otherwise as
provided in this lease.
4.3 Consumer Price Index Escalation.
4.3.1 TENANT'S Basic Monthly Rent shall be increased on the
first year anniversary of the first day of the first full calendar
month of the lease Term and on each anniversary thereafter, to the
product obtained by multiplying the Initial Basic Monthly Rent in the
amount of $5,574.92 by a fraction, the numerator of which is the
Consumer Price Index as of the first anniversary of the first day of
the first full calendar month of the Term, (or each subsequent
anniversary for each subsequent year) and the denominator of which is
the Consumer Price Index as of the second anniversary of the first
day of the first full calendar month of this Lease. Rent increases in
any one Lease year as a result of an adjustment as provided for in
this Section 4.3 shall not exceed 3% of the previous years annual
rent amount. In no event shall TENANT'S Basic Monthly Rent ever be
decreased as a result of this subsection 4.3.
4.3.2 Consumer Price Index shall mean Consumer Price Index -
Adjusted U.S. City Average for All Items For All Urban Consumers
(1982-84=100) published monthly in the Monthly Labor Review by the
Bureau of Labor Statistics of the United States Department of Labor.
5. TENANT'S RESPONSIBILITY FOR OPERATING EXPENSES.
5.1 Definitions. The following words and phrases shall have the meanings
set forth below:
<PAGE> 5
5.1.1 Operating Year means each calendar year ending during the
Term and the calendar year ending immediately following the last day of
the Term.
5.1.2 Operating Expenses means all actual costs and expenses
incurred by LANDLORD in connection with the ownership, operation,
management and maintenance of the Building and the Property and the
related improvements located thereon (the Improvements), including, but
not limited to, all expenses incurred by LANDLORD as a result of
LANDLORD'S compliance with any and all of its obligations under this
Lease (or under similar leases with other TENANTS) other than the
performance by LANDLORD of its construction obligations under Section 1
hereof or similar provisions of leases within other TENANT spaces. In
explanation of the foregoing, and not in limitation thereof Operating
Expenses shall include (except as set forth in Subsection 8.6 hereof)
all fees, costs and expenses incurred by LANDLORD relating to the
following: all real and personal property taxes and assessments whether
general or special and any tax or assessment levied or charged in lieu
thereof, whether assessed against LANDLORD and/or TENANT and whether
collected from LANDLORD and/or TENANT, snow and trash removal,
utilities, supplies, public liability and fire insurance with extended
coverage, licenses, permits and inspection, legal fees incurred with
respect to enforcing rules and regulations of the building and
evictions, accounting fees relating to operations of the Building,
services of independent contractors, reasonable fees and expenses
incurred in property management, including, without limitation,
compensation, employment taxes and fringe benefits of all persons who
perform regular and recurring duties connected with day-to-day
operation, maintenance and repair of the Building, its equipment and the
adjacent parking area, driveways, walks and landscaped areas, including
without limitation janitorial, scavenger, gardening, security, parking
(whether underground, on the surface or in an elevated ramp), elevator,
painting, plumbing, electrical, carpentry, heating, ventilation,
air-conditioning, window washing, signing, but excluding persons
performing services not uniformly available to or performed for
substantially all TENANTS of the Building; rental or a reasonable
allowance for depreciation of personal property used in the maintenance,
operation and repair of the Building. All Operating Expenses shall be
computed on an annual basis. Operating Expenses shall not include
depreciation on the Building and the Improvements, income taxes of
LANDLORD, costs specifically charged to and recovered from other
TENANTS, insurance and condemnation proceeds, costs for corrections of
defects in the original construction of the Building, lease commissions
pertaining to the initial rental of office space in the Building,
capital additions to the Building or amounts paid toward principal or
interest on loans to LANDLORD. The foregoing sentence notwithstanding,
if LANDLORD incurs any cost in making capital improvements or structural
repairs to the Building or Property to effect labor savings, reduce
Operating Expenses or comply with any law, ordinance, rule or regulation
of a governmental or quasi-governmental authority, after the Actual
Commencement Date, such costs shall be amortized over the useful life of
the capital improvement or structural repair as an Operating Expense.
5.1.3 Estimated Operating Expenses means the projected amount of
Operating Expenses for any given Operating Year as estimated by
LANDLORD, in its sole discretion.
<PAGE> 6
5.1.4 During the term of this lease, TENANT'S share of Operating
Expenses for a calendar year shall be the amount in excess of $5.00 per
net rentable square foot applicable to the Premises.
5.1.5 TENANT'S Share of Operating Expenses for any fractional
calendar year shall be calculated by determining TENANT'S share of
Operating Expenses for the relevant calendar year and then prorating
such amount over the fractional period of such calendar year.
5.1.6 TENANT'S Share of Estimated Operating Expenses for a
calendar year means Operating Expenses reasonably estimated by LANDLORD
to be in excess of $5.00 per net rentable square foot applicable to the
Premises, subject to the limitation set forth in paragraph 5.1.4.
5.1.7 TENANT'S share of Estimated Operating Expenses for any
fractional calendar year shall be calculated by determining TENANT'S
Share of Estimated Operating Expenses for the relevant calendar year and
then prorating amount over the fractional period of such calendar year.
5.1.8. TENANT'S share of operating expenses for the first full
calendar year and any fraction thereof shall be determined as provided
for herein. Thereafter, TENANT'S operating expenses shall be limited to
a maximum increase each calendar year of .50 per net rentable square
feet of Premises.
5.2 Statement of Operating Expenses and Estimated Operating Expenses.
5.2.1 Within One Hundred Twenty (120) days after the expiration
of any Operating Year, LANDLORD shall furnish TENANT with a written
statement showing in reasonable detail the computation of TENANT'S Share
of Operating Expenses if any, for such year and the amount by which such
amount exceeds or is less than the amounts paid by TENANT during such
year pursuant to Subsection 5.1.2.
5.2.2 LANDLORD, in its sole discretion, may also furnish TENANT
from time to time, written statements showing in reasonable detail the
computation of TENANT'S Share of Estimated Operating Expenses.
5.3 Payment of Additional Rent. TENANT shall pay as additional rent
(Additional Rent) the following amounts at the times indicated:
5.3.1 Within thirty (30) days after delivery of the written
statement referred to in Subsection 5.2.1 hereof, TENANT shall pay to
LANDLORD, without offset or deduction, the amount by which TENANT'S
Share of Operating Expenses, as specified in such written statement,
exceeds the amount of Estimated Operating Expenses actually paid by
TENANT for the year at issue. Payments by TENANT shall be made pursuant
to this Subsection 5.3.1 notwithstanding that a statement pursuant to
subsection 5.2.1 is furnished to TENANT after the expiration of the
Term.
<PAGE> 7
5.3.2 With each payment of Basic Monthly Rent made pursuant to
Section 4 hereof, TENANT shall pay to LANDLORD, without offset or
deduction, one-twelfth (1/12th) of TENANT'S Share of Estimated Operating
Expenses as specified in the last written statement delivered to TENANT
pursuant to Subsection 5.2.2.
5.3.3 If the written statement delivered pursuant to Subsection
5.2.1 indicates that the amount actually paid by TENANT pursuant to
subsection 5.3.1 for any year exceeds TENANT'S Share of Operating
Expenses for the same year, LANDLORD, at its election, may either (i)
pay the amount of such excess to TENANT or (ii) apply such excess
against any amount payable by TENANT.
5.3.4 No failure by LANDLORD to require the payment of Additional
Rent by TENANT for any period shall constitute a waiver of LANDLORD'S
right to collect such Additional Rent for such period or for any
subsequent period.
5.4 Resolution of Disagreement. Every statement given by LANDLORD
pursuant to Subsection 5.2 hereof shall be conclusive and binding upon TENANT
unless within thirty (30) days after the receipt of such statement TENANT
notifies LANDLORD in writing that it disputes the correctness thereof,
specifying the particular respects in which the statement is claimed to be
incorrect. Pending the determination of such dispute by agreement between
LANDLORD and TENANT, TENANT shall, within thirty (30) days after receipt of such
statement, pay Additional Rent in accordance with LANDLORD'S statement, and such
payment shall be without prejudice to TENANT'S position. If the dispute shall be
determined in TENANT'S favor, LANDLORD shall forthwith apply the amount of
TENANT'S overpayment of rents resulting from compliance with LANDLORD'S
statement, without interest being due thereon, in accordance with Subsection
5.3.3 hereof. LANDLORD agrees to grant to an independent certified public
accountant retained by TENANT reasonable access to LANDLORD'S books and records
for the purpose of verifying Operating Expenses incurred by LANDLORD, at
TENANT'S sole expense.
5.5 Limitation. Nothing contained in this Section 5 shall be construed
so as to reduce the installments of Basic Monthly Rent payable hereunder below
the amount set forth in Section 1.
6. SECURITY DEPOSIT. Upon execution of this lease, TENANT will deposit
the security deposit with LANDLORD as security for the full, faithful, and
timely performance of every provision of this lease to be performed by TENANT.
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 use,
apply, or retain all or any part of the security deposit for the payment of any
rent, or any other sum in default, or for the payment of any other amount
LANDLORD may spend or become obligated to spend by reason of TENANT'S default,
or to compensate LANDLORD for any other loss or damage LANDLORD may suffer by
reason of TENANT'S default. If any portion of the security deposit is so used,
applied, or retained, TENANT will within 5 days after written demand deposit
cash with LANDLORD in an amount sufficient to restore the security deposit to
its original amount. LANDLORD will not be required to keep the security deposit
separate from its general funds, and TENANT will not be entitled to interest on
the security deposit. The security deposit will not be deemed a limitation on
LANDLORD'S damages or a payment of liquidated damages or a payment of the
monthly rent due for the last month of the term. If TENANT fully, faithfully,
and timely performs every provision of this
<PAGE> 8
lease to be performed by it, the security deposit or any balance of the security
deposit will be returned to TENANT within 30 days after the expiration of the
term. LANDLORD may deliver the funds deposited under this lease by TENANT to the
purchaser of the building in the event the building is sold, and after such time
LANDLORD will have no further liability to TENANT with respect to the security
deposit.
7. USE.
7.1 Use of Premises. TENANT shall not use or permit the Premises or any
part thereof to be used for any purpose other than for general office purposes.
7.2 Prohibition of Certain Activities or Uses.
7.2.1 TENANT shall not do or permit anything to be done in the
Building or on the Land which may:
7.2.1.1 Increase the existing rate or violate the
provisions of any insurance carried with respect to the Building
or any contents of such Building.
7.2.1.2 Create any public or private nuisance, commit
waste, or disturb the quiet enjoyment of any other occupant of
the Building.
7.2.1.3 Violate any present or future law, ordinance,
regulation or requirement of any governmental authority or any
restriction or covenant existing with respect to the Premises or
Building or Land whereon it is located.
7.2.1.4 Overload the floors or otherwise damage the
structure of the Building.
7.2.1.5 Constitute an immoral or illegal purpose.
7.2.1.6 Increase the cost of electricity, natural gas or
other utility service beyond that level permitted below by
Section 8.
7.2.1.7 Subject LANDLORD or any other TENANT to any
liability to any third party.
7.2.2 TENANT shall not bring into or permit the placing
within the Premises of any machine, personal property or fixture
heavier than customarily used in connection with general office
purposes.
7.2.3 Subject to the provisions of Paragraph 23, Exhibit B
or Exhibit F, TENANT shall not place any holes in any part of the
Premises or place any exterior signs or interior drapes, blinds
or similar items visible from outside the Premises or the
Building without prior written consent of LANDLORD.
<PAGE> 9
7.3 Affirmative Obligations with Respect to Use. TENANT shall, at its
sole cost and expense:
7.3.1 Comply with all present and future governmental laws,
ordinances, regulations and requirements in its occupancy of the
Premises.
7.3.2 Comply with the requirements of any board of fire
underwriters or other similar body relating to the Premises, excluding
structural changes not caused by the Improvements or the nature of
TENANT'S occupancy of the Premises.
7.3.3 Keep the Premises in a clean and orderly condition, free of
objectional noises, odors or nuisances subject to LANDLORD'S janitorial
service requirements.
7.4 Suitability. TENANT acknowledges that, except as expressly set forth
in this Lease, neither LANDLORD nor any other person has made any representation
or warranty with respect to the Premises or any other portion of the Building or
Improvements, nor has LANDLORD agreed to undertake any modification, alteration
or improvement thereof. Specifically, but not in limitation of the foregoing, no
representation has been made or relied upon concerning the suitability of the
Premises or any other portion of the Building or Improvements for the conduct of
TENANT'S business. As to matters that are identifiable by visual inspection, the
Premises, Building and Improvements (and each and every part thereof) shall be
deemed to be in satisfactory condition unless, on or before the Actual
Commencement Date, TENANT shall give LANDLORD written notice specifying, in
reasonable detail, the respects in which the Premises, Building or Improvements
are not in satisfactory condition.
7.5 Taxes. Notwithstanding Subsection 5.1.2 or any other Lease
provision, TENANT shall have sole responsibility for and shall pay all taxes,
assessments, charges and fees which during the Term may be imposed, assessed or
levied by any governmental or public authority against or upon TENANT, TENANT'S
use of the Premises or any personal property or fixture kept or installed
therein by TENANT.
8. UTILITIES AND SERVICE.
8.1 Obligations of LANDLORD. During the Term of this lease, subject to
the limitation in Subsection 8.6, and so long as TENANT is not in material
default under 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, the following utilities and
services (the cost of which shall be included within Operating Expenses):
8.1.1 Electricity, water, gas and sewer service shall be provided
to TENANT'S Premises 24 hours per day.
8.1.2 Telephone connection to the core space on the ground floor
of the building but not including wiring from the core or telephone
stations and equipment (it being expressly understood and agreed that
TENANT shall be responsible for the ordering,
<PAGE> 10
installation, and cost of telephone lines and equipment from the ground
floor telephone room.
8.1.3 Snow and trash removal service.
8.1.4 Landscaping and grounds-keeping service.
8.1.5 Elevator service 24 hours per day.
8.1.6 Reasonable daily janitorial service, weekends and holidays
excluded; provided, that if TENANT'S floor covering or other
improvements are other than standard for the Building, TENANT shall pay
the additional cleaning costs, if any, attributable thereto as
Additional Rent upon presentation of a written statement relating
thereto by LANDLORD.
8.1.7 Heating, overheat lighting, ventilation and air
conditioning reasonably necessary for the comfortable use and occupancy
of the Premises during customary business hours. For purposes of this
Subsection, customary business hours shall be from 7:00 a.m. to 6:00 pm,
Monday through Friday, and from 7:30 a.m. to 12:00 noon on Saturday,
excluding legal holidays.
8.1.8 Window washing of the exterior windows; not more than three
times or less than 1 time per annum.
8.2 Additional Services. LANDLORD shall have no obligation to provide
utilities, overhead lighting, heating, air conditioning and/or cleaning services
to TENANT beyond the standard services set forth in Subsection 8.1 above, or at
times other than during the Business Hours, as defined in the Rules and
Regulations, but if LANDLORD elects to provide such additional services at
TENANT'S request, TENANT shall pay LANDLORD's reasonable charge for such special
services as Additional rent.
8.3 Utilities Consumption. TENANT shall not, without the prior written
consent of LANDLORD, use any apparatus or device in the Premises which will in
any way increase the amount of gas, electricity or water usually furnished or
supplied for use of the Premises as general office space; nor connect with
electric current, except through existing electrical outlets in the Premises, or
water pipes or gas outlets, any apparatus or device for the purposes of using
gas, electrical current or water. If TENANT shall require water or electric
current or any other service in excess of that usually furnished or supplied for
use on the Premises as general office space, TENANT shall first obtain the prior
written consent of LANDLORD, which LANDLORD will not unreasonably withhold, for
the use thereof, and LANDLORD may cause a special meter to be installed in the
Premises so as to measure the amount of water, electric current or other service
consumed. The cost of any such meters and of installation, maintenance, and
repair thereof shall be paid for by TENANT, and TENANT agrees to pay LANDLORD
promptly upon demand by LANDLORD for all such water, electric current or other
service consumed, as shown by said meters, at rates charged by the local public
utility furnishing the same, plus any additional expense incurred in keeping
account of the water, electric current or other service so consumed. In each
such case, the costs for administering such methods shall be borne by TENANT.
<PAGE> 11
8.3.1. Computer Room Utilities. Computer room utilities including
air conditioning shall be maintained on a 24 hour basis, and will be
separately metered for after hours usage. TENANT shall pay as
"Additional Rent" the actual cost of after hours utility consumption for
the computer room. All other after hours utility consumption shall be
monitored and paid for as referenced in Section 8.5 below.
8.4 TENANT'S Obligations. TENANT shall arrange and pay for, prior to
delinquency, the entire cost and expense of all telephone wiring from the first
floor telephone closet to Premises. Telephone stations, and phone equipment,
wiring inside the Premises, use charges, and all other communication materials
and services shall be provided and paid for by TENANT.
8.5 Non Business Hour HVAC and Overhead Lighting. LANDLORD shall provide
TENANT, at TENANT'S request, with heat and air conditioning and overhead
lighting outside the customary Business hours, as defined in the Rules and
Regulations, at the rate of Twenty Dollars ($20.00) per hour. LANDLORD shall
determine the amount of such usage during Non Business Hours by the installation
of a separate time meter or other measuring device. LANDLORD shall deliver to
TENANT a statement (Statement), on a monthly basis, of TENANT'S Non Business
Hours use of heat and air conditioning and overhead lighting for the previous
month. TENANT shall pay the amount owing to LANDLORD as set forth in the
Statement, as Additional Rent, within five (5) days after TENANT'S receipt of
the Statement. If the HVAC or lighting System of the Building is modified or
LANDLORD'S operating costs change and as a result of such modification or change
LANDLORD offers a rate for after hours usage lower or higher than Twenty Dollars
($20.00) per hour to the Building in general, LANDLORD shall accept, and TENANT
shall pay, such lower or higher amount. Notwithstanding the foregoing, LANDLORD
shall have no obligation to provide TENANT with heat and air conditioning and
overhead lighting during Non Business Hours if a material Event of Default
exists under this Lease.
8.6 Limitation on LANDLORD'S Liability. 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
Subsection 8 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 ten (10) consecutive days or
for ten (10) days in a twenty (20) day period, 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 for the period of such non-usability. 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.
9. MAINTENANCE AND REPAIRS; ALTERATIONS; ACCESS.
9.1 Maintenance and Repairs by LANDLORD. LANDLORD as part of operating
expense shall maintain in good order, condition and repair the Building, the
Common Areas and
<PAGE> 12
the Improvements, excluding the Premises and those other portions of the
Building leased, rented or otherwise occupied by persons not affiliated with
LANDLORD. LANDLORD shall supply and pay for regular janitorial and cleaning
services reasonably required, exclusive of weekends and holidays, to keep the
Building and Improvements in a clean, sanitary and orderly condition, the cost
and expense of which shall be included in Operating Expenses.
9.2 Maintenance and Repairs by TENANT. Subject to LANDLORD'S obligation
to provide janitorial service, TENANT shall maintain the Premises in good order,
condition and repair, reasonable wear and tear excepted, including without
limitation, the following: electric light bulbs (but not including fluorescent
lights and ballasts used in overhead fixtures originally installed in the
Premises, which LANDLORD shall maintain and replace as necessary); the interior
surfaces of the ceilings, walls, interior windows; and all equipment and
fixtures installed by TENANT. In the event that TENANT fails to maintain the
Premises in good order, condition and repair, LANDLORD shall give TENANT notice
to do such acts as are reasonably required to so maintain the Premises. In the
event that TENANT fails to promptly commence such work and diligently prosecute
it to completion, LANDLORD shall have the right to do such acts and expend such
funds at the expense of TENANT as are reasonably required to perform such work.
Any amount so expended by LANDLORD shall be paid by TENANT promptly upon demand
therefor with interest thereon from the date of such expenditure at the greater
of the prime or base rate then charged by Zions First National Bank of Utah,
N.A. plus two percent (2%) or eighteen percent (18%) per annum (the Interest
Rate). LANDLORD shall have no liability to TENANT for any damage, inconvenience
or interference with the use of the Premises by TENANT as a result of performing
any such work.
9.3 Alterations.
9.3.1 General.
9.3.1.1 During the term, TENANT will not make or allow to
be made any alterations, additions, or improvements to or of the
premises or any part of the premises, or attach any fixtures or
equipment to the premises, without first obtaining LANDLORD'S
written consent. All such alterations, additions, and
improvements consented to by LANDLORD, and capital improvements
that are required to be made to the project as a result of the
nature of TENANT'S use of the premise shall:
9.3.1.1.1 Be performed by contractors approved by LANDLORD
and subject to conditions specified by LANDLORD (which may
include requiring the posting of a mechanic's or materialmen's
lien bond,) certificates issued by applicable insurance companies
evidencing that workmen's compensation, personal injury liability
and property damage insurance are in force and effect and are
maintained by all contractors and subcontractors); and,
9.3.1.1.2 Conform to the applicable building codes, A.D.A.
and any applicable fire codes; and,
<PAGE> 13
9.3.1.1.3 At LANDLORD'S option, will be made by LANDLORD
for TENANT'S account, and TENANT will reimburse LANDLORD for
their cost (including 15% for LANDLORD'S overhead) within 10 days
after receipt of a statement of such cost.
9.3.1.2 Alterations, additions, fixtures, and
improvements, including but not limited to built in cabinetry and
work stations, whether temporary or permanent in character, made
in or upon the premises either by TENANT or LANDLORD, will
immediately become LANDLORD'S property and at the end of the term
will remain on the premises without compensation to TENANT,
unless when consenting to such alterations, additions, fixtures,
or improvements, LANDLORD has advised TENANT in writing that such
alterations, additions, fixtures, or improvements must be removed
at the expiration or other termination of this Lease.
9.3.1.3 Notwithstanding the provisions of paragraph
9.3.1.1 above, LANDLORD consents to TENANT making alterations to
the Premises so long as the cost does not exceed Five Hundred
Dollars ($500.00) per alteration and so long as such alterations
do not unreasonably increase power usage. LANDLORD will not
require approval of the contractor or the posting of a
performance bond, nor will LANDLORD charge TENANT an overhead
charge for said alterations performed by TENANT.
9.3.2 Free-Standing Partitions. TENANT will have the right to
install free-standing work station partitions, without LANDLORD'S prior
written consent, so long as no building or other governmental permit is
required for their installation or relocation; however, if a permit is
required, LANDLORD will not unreasonably withhold its consent to such
relocation or installation. The free-standing work station partitions
for which TENANT pays will be part of TENANT'S trade fixtures for all
purposes under this Lease. All other partitions installed in the
Premises are and will be LANDLORD'S property for all purposes under this
Lease.
9.3.3 Removal. If LANDLORD has required TENANT to remove any or
all alterations, additions, fixtures, and improvements that are made in
or upon the Premises pursuant to this Section 9 prior to the expiration
date, TENANT will remove such alterations, additions, fixtures, and
improvements at TENANT'S sole cost and will restore the Premises to the
condition in which they were before such alterations, additions,
fixtures, improvements, and additions were made, reasonable wear and
tear excepted.
9.4 LANDLORD'S Access to Leased Premises. LANDLORD shall have the right
to place, maintain and repair all utility equipment of any kind in, over, upon
and under the Premises as may be necessary for the servicing of the Premises and
any other portion of the Building. LANDLORD also shall have the right to enter
the Premises at all reasonable times in order to inspect the same, to supply
janitorial service and any other service to be provided by LANDLORD to TENANT
hereunder, to exhibit the Premises to prospective purchasers, mortgagees,
TENANTS and lessees, and to make such repairs, additions, alterations or
improvements as LANDLORD may deem desirable. LANDLORD shall be allowed to take
all
<PAGE> 14
material upon the Premises that may be required therefor without the same
constituting an actual or constructive eviction of TENANT in whole or in part
and the rents and other monetary obligations reserved herein shall in no wise
abate, except as expressly provided in Subsection 8.6, while such work is in
progress by reason of loss or interruption of TENANT'S business or otherwise.
TENANT hereby expressly waives any claim for damages 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.
LANDLORD shall at all times have and retain a key with which to unlock all the
doors in, upon and about the Premises, excluding TENANT'S vaults and safes.
LANDLORD shall have the right to use any and all means which LANDLORD may deem
proper to open such doors in an emergency in order to obtain entry to the
Premises. Any entry to the Premises obtained by LANDLORD shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into or
detainer of the Premises or an eviction of TENANT from any portion of the
Premises. LANDLORD shall be permitted to show the premises to prospective
lessees during the last 12 months of the Lease. Any such showings shall be
during reasonable hours, with reasonable notice to TENANT and shall not
materially interfere with TENANT'S business.
10. LIENS. TENANT shall keep the building and the property free from any
liens arising out of work performed on or materials furnished to the Premises or
obligations incurred by TENANT and shall indemnify, hold harmless and defend
LANDLORD from any liens and encumbrances arising out of any work performed or
any materials furnished by or at the direction of TENANT. In the event that
within ten (10) days following the imposition of any such lien or encumbrance
TENANT shall not cause such lien or encumbrance to be released of record by
payment or posting of a proper bond, LANDLORD shall have, in addition to all
other remedies provided herein and by law the right, but not the obligation, to
cause the same to be released by such means as it shall deem proper, including
payment of the claim giving rise to such lien or encumbrance. All such sums paid
by LANDLORD and all expenses incurred by LANDLORD in connection therewith
including attorney's fees and costs shall be payable to LANDLORD by TENANT upon
demand with interest thereon at the Interest Rate. LANDLORD shall have the right
at all times to post and keep posted on the Premises any notices permitted or
required by law, or which LANDLORD shall deem proper, for the protection of
LANDLORD and the Premises and any other party having an interest therein from
mechanics' and materialmen's liens, and TENANT shall give to LANDLORD at least
ten (10) business days prior written notice of the expected date of commencement
of any work relating to alterations or additions to the Premises.
11. ASSIGNMENT.
11.1 General. TENANT, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors, and assigns, covenants that
it will not assign, mortgage, or encumber this Lease, nor sublease, nor permit
the premises or any part of the premises to be used or occupied by others,
without the prior written consent of LANDLORD in each instance, which consent
will not be unreasonably withheld or delayed. Any assignment or sublease in
violation of this Lease will be void. If this Lease is assigned, or if the
premises or any part of the premises are subleased or occupied by anyone other
than TENANT, LANDLORD may, after default by TENANT, collect rent from the
assignee, subtenant, or occupant, and apply the net amount collected to rent. No
assignment, sublease, occupancy, or collection will be deemed (a) a waiver
<PAGE> 15
of the provisions of this Lease; (b) the acceptance of the assignee, subtenant,
or occupant as TENANT; or (c) a release of TENANT from the further performance
by TENANT of covenants on the part of TENANT contained in this Lease. The
consent by LANDLORD to an assignment or sublease will not be construed to
relieve TENANT from obtaining LANDLORD'S prior written consent in writing to any
further assignment or sublease. No permitted subtenant may assign or encumber
its sublease or further sublease all or any portion of its subleased space, or
otherwise permit the subleased space or any part of its subleased space to be
used or occupied by others, without LANDLORD'S prior written consent in each
instance.
11.2 Submission of Information. If TENANT requests LANDLORD'S consent to
a specific assignment or subletting, TENANT will submit in writing to LANDLORD
(a) the name and address of the proposed assignee or subtenant; (b) the business
terms of the proposed assignment or sublease; (c) reasonably satisfactory
information as to the nature and character of the business of the proposed
assignee or subtenant, and as to the nature of its proposed use of the space;
(d) banking, financial, or other credit information reasonably sufficient to
enable LANDLORD to determine the financial responsibility and character of the
proposed assignee or subtenant; and (e) the proposed form of assignment or
sublease for LANDLORD'S approval.
11.3 Payments to LANDLORD. If LANDLORD consents to a proposed assignment
or sublease, then LANDLORD will have the right to require TENANT to pay to
LANDLORD a sum equal to (a) 1/2 of any rent or other consideration paid to
TENANT by any proposed transferee that (after first deducting the costs of
TENANT, if any, in effecting the assignment or sublease, including reasonable
alterations costs, commissions, legal fees, TENANT'S relocation costs and the
unamortized portion of TENANT Improvements installed by TENANT) is in excess of
the rent allocable to the transferred space then being paid by TENANT to
LANDLORD pursuant to this Lease; (b) 1/2 of any other profit or gain (after
first deducting any necessary expenses incurred) realized by TENANT from any
such sublease or assignment; and (c) LANDLORD'S reasonable attorneys' fees and
costs incurred in connection with negotiation, review, and processing of the
transfer. All such sums payable will be payable to LANDLORD at the time the next
payment of monthly rent is due.
11.4 Prohibited Transfers. The transfer of a majority of the issued and
outstanding capital stock of any corporate TENANT or subtenant of this Lease, or
a majority of the total interest in any partnership TENANT or subtenant in a
single transaction, will be deemed an assignment of this Lease or of such
sublease requiring LANDLORD'S consent in each instance. For purposes of this
Lease, the transfer of outstanding capital stock of any corporate TENANT will
not include any sale of such stock by persons other than those deemed "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended, effected
through the "over-the-counter market" or through any recognized stock exchange.
12. INDEMNITY.
12.1 Indemnification. Each party hereto shall indemnify, defend and hold
the other harmless from and against (i) any and all liability, penalties,
losses, damages, costs and expenses, demands, causes of action, claims or
judgements arising from or growing out of any injury to any person or persons or
any damage to any property as a result of any accident or other occurrence
during the Term occasioned in any way as a result of the indemnifying parties
officers',
<PAGE> 16
employees', agents', servants', subtenants', concessionaires', licensees',
contractors', or invites' use, maintenance, alteration, occupation, or operation
of the Premises, Building or Improvements during the Term, and (ii) from and
against all costs and charges, including attorneys' fees and investigation
costs, incurred in and about any of such matters and the defense of any action
arising out of the same or in discharging the parcel or any part thereof from
any and all liens, charges or judgements which may accrue or be placed thereon
by reason of any act or omission of the indemnifying party. The indemnifying
party's obligations pursuant to the foregoing indemnity shall survive the
termination of this Lease. In case any proceeding is brought against the
indemnified party by reason of any such claim, the indemnifying party, upon
notice from the indemnified party, shall defend the same at the indemnifying
party's expense by counsel reasonably satisfactory to the indemnified party.
12.2 Release. LANDLORD and TENANT each hereby release and relieve the
other, and each waives its entire right of recovery against the other, or
against any other TENANT or occupant of the Building, or against the officers,
directors, shareholders, partners, joint venturers, employees, agents,
customers, invitees, or business visitors of such other party or of such other
TENANT or occupant of the Building, for loss or damage arising out of or
incident to the perils which the releasing party is required to insure against
under provisions of Paragraph 13, which perils occur in, on, or about the
premises or the building of which the premises are a part, whether due to the
negligence of LANDLORD or TENANT or their respective agents, employees,
contractors, or invites, if and to the extent that such loss or damage (i) is
actually compensated by insurance or (ii) would have been compensated by
insurance except for the fact that the insuring company availed itself of a
defense arising from the action or failure to act of the releasing party, its
employees or agents. Each party shall, upon obtaining the policies of insurance
which it is required to maintain under this Lease, give notice to its insurance
company or companies that the foregoing mutual waiver of subrogation is
contained in this lease. Each party shall cause each such insurance policy
obtained by it to provide that the insurance company waive all rights of
recovery by way of subrogation against either party in connection with any
damage or liability covered by such policy. If any insurance policy cannot be
obtained with a waiver of subrogation, or is obtainable only by the payment of
an additional premium charge above that charged by insurance companies issuing
policies with out waiver of subrogation, the party undertaking to obtain the
insurance shall notify the other party of such fact. The other party shall have
a period of ten (10) days after receiving the notice either to place the
insurance with a company that is reasonably satisfactory to the other party and
that will carry the insurance with a waiver of subrogation, or to agree to pay
the additional premium if such a policy is obtainable at additional cost. If the
insurance cannot be obtained with a waiver of subrogation or the party in whose
favor a waiver of subrogation is desired refuses to pay the additional premium
charge, the other party shall be relieved of the obligation to obtain a waiver
of subrogation rights with respect to that particular insurance policy.
12.3 Notice. TENANT shall give notice to LANDLORD in case of fire or
material accidents in the Premises or of material defects therein or in any
fixtures or equipment thereon located.
12.4 Litigation. In case LANDLORD, without fault on its part, shall be
made a party to any litigation commenced by or against TENANT, TENANT shall
protect and hold LANDLORD harmless and shall pay all costs, expenses, and
reasonable attorneys' fees incurred
<PAGE> 17
therein. In case TENANT, without fault on its part, shall be made a party to any
litigation commenced by or against LANDLORD, LANDLORD shall protect and hold
TENANT harmless and shall pay all costs, expenses, and reasonable attorneys'
fees incurred therein.
13. INSURANCE.
13.1 LANDLORD'S Insurance. At all times during the term, LANDLORD will
carry and maintain:
13.1.1 Fire and extended coverage insurance covering the
Building, its equipment, common area furnishings, and leasehold
improvements in the Premises to the extent of the TENANT finish
allowance;
13.1.2 Bodily injury and property damage insurance with a
combined single occurrence limit of not less than $2,000,000; and
13.1.3 Such other insurance as LANDLORD reasonably determines
from time to time.
The insurance coverages and amounts in this Section 13.1 will be
reasonably determined by LANDLORD, based on coverages carried by
prudent owners of comparable buildings in the vicinity of the
project, and such insurance as may reasonably be required by
mortgage lenders.
13.2 TENANT'S Insurance. At all times during the term, TENANT will carry
and maintain, at TENANT'S expense, the following insurance, in the amounts
specified below or such other amounts as LANDLORD may from time to time
reasonably request, with insurance companies and on forms satisfactory to
LANDLORD:
13.2.1 Bodily injury and property damage liability insurance,
with a combined single occurrence limit of not less than $3,000,000. All
such insurance will be equivalent to coverage offered by a commercial
general liability form, including without limitation personal injury and
contractual liability coverage for the performance by TENANT of the
indemnity agreements set forth in this Lease;
13.2.2 Insurance covering all of TENANT'S furniture and fixtures,
machinery, equipment, stock, and any other personal property owned and
used in TENANT'S business and found in, on, or about the project, and
any leasehold improvements to the premises in excess of the allowance,
if any, in an amount not less than the full replacement cost. Property
forms will provide coverage on a broad form basis insuring against "all
risks of direct physical loss." All policy proceeds will be used for the
repair or replacement of the property damaged or destroyed; however, if
this Lease ceases under the provisions of section 14, TENANT will be
entitled to any proceeds resulting from damage to TENANT'S furniture and
fixtures, machinery, equipment, stock, and any other personal property;
<PAGE> 18
13.2.3 Worker's compensation insurance insuring against and
satisfying TENANT'S obligations and liabilities under the worker's
compensation laws of the state in which the premises are located,
including employer's liability insurance in the limits required by the
laws of the state in which the project is located; and
13.2.4 If TENANT operates owned, hired, or nonowner vehicles on
the Property, comprehensive automobile liability at a limit of liability
not less than $500,000 combined bodily injury and property damage.
13.3 Forms of Policies. Certificates of insurance, together with copies
of the endorsements, when applicable, naming LANDLORD and any others specified
by LANDLORD as additional insures, at the sole discretion of LANDLORD, will be
delivered to LANDLORD prior to TENANT'S occupancy of the premises and from time
to time at least 10 days prior to the expiration of the term of each such
policy. All general liability and property policies maintained by TENANT will be
written as primary policies, not contributing with and not supplemental to the
coverage that LANDLORD may carry.
14. DAMAGE OR DESTRUCTION.
14.1 LANDLORD'S Obligations. If the Premises shall be partially damaged
by any casualty insured against under any insurance policy maintained by
LANDLORD, LANDLORD shall, upon receipt of the insurance proceeds, repair the
Premises within 180 days of the date of damage. Until such repair is complete,
the Basic Monthly Rent and Additional Rent shall be abated from the date of
damage proportionately as to that portion of the Premises rendered untenantable,
if any. Notwithstanding the foregoing, if (a) by reason of such occurrence the
Premises are rendered wholly untenantable; or (b) the Premises are damaged as a
result of a risk which is not covered by insurance; or (c) the Premises are
damaged in whole or in part during the last six (6) months of the term hereof or
of any renewal hereof; or (d) the Premises or the Building (whether the Premises
are damaged or not) is damaged to the extent of fifty percent (50%) or more of
then-monetary value thereof, LANDLORD may either elect to repair the damage or
may cancel this Lease by notice of cancellation within sixty (60) days after
such event and there upon this Lease shall expire, and TENANT shall vacate and
surrender the Premises to LANDLORD. TENANT's liability for rent upon the
termination of this Lease shall cease as of the effective date of such
termination. In the event LANDLORD elects to repair any such damage, any
abatement of rent shall end five (5) days after notice by LANDLORD to TENANT
that the Premises have been repaired and TENANT has accepted said repairs, which
acceptance TENANT shall not unreasonably withhold. If the damage is caused by
the negligence of TENANT or its employees, agents, invites or concessionaires,
there shall be no abatement of rent. Except for abatement of rent, if any,
TENANT shall have no claim against LANDLORD for any damage suffered by reason of
such damage, destruction, repair or restoration, nor shall TENANT have the right
to terminate this Lease as a result of any statutory provision now or hereafter
in effect pertaining to the damage and destruction of the Premises or the
Building, except as expressly herein provided. The proceeds of all insurance
carried by TENANT on its property and fixtures shall be held in trust by TENANT
for the purpose of said repair and replacement. TENANT shall have the right to
terminate this Lease if (a) the repairs to the Premises are not completed within
180 days of the date of damage; or (b) by reason of such occurrence the Premises
are rendered wholly untenantable; or (c) the Premises are damaged in
<PAGE> 19
whole or in part during the last six (6) months of the term hereof and the
Premises or the Building (whether the Premises are damaged or not) is damaged to
the extent of fifty percent (50%) or more of then-monetary value thereof.
14.2 TENANT'S Obligation. LANDLORD shall not be required to repair any
injury or damage caused by fire or any other cause, or to make any restoration
or replacement of any paneling, decoration, partition, railing, floor covering,
office fixture or any other improvement or property installed in the Premises by
TENANT or at the direct or indirect expense of TENANT. Unless this Lease is
terminated by LANDLORD pursuant to Subsection 15.1 hereof, TENANT shall be
required to restore or replace such improvements and property in the event of
injury or damage in at least a condition equal to that existing prior to the
destruction or casualty.
15. CONDEMNATION.
15.1 Total Condemnation. If the whole of the Premises shall be acquired
or taken by condemnation proceeding, this Lease shall cease and terminate as of
the date of title vesting in such condemnor.
15.2 Partial Condemnation. If any part of the Premises shall be acquired
or taken by condemnation proceeding, and such partial taking shall render that
portion not so taken unsuitable for the business of TENANT, then this Lease
shall cease and terminate as of the date of title vesting in such condemnor. If
such partial taking does not render the Premises unsuitable for the business of
TENANT, this Lease shall continue in effect except that the Basic Monthly Rent
and Additional Rent shall be reduced from the time of taking in the same
proportion that the portion of the Premises taken bears to the total rented area
of the Premises immediately prior to the taking. LANDLORD shall, upon receipt of
the award in condemnation, make all necessary repairs or alterations to the
Building in which the Premises are located; provided, however, that LANDLORD
shall not be required to expend for such work an amount in excess of the amount
received by LANDLORD as damages for the part of the Premises so taken. Amount
received by LANDLORD shall mean that part of the award in condemnation which is
free and clear to LANDLORD of any collection by mortgage lenders for the value
of the diminished fee.
15.3 LANDLORD'S Option to Terminate. If more than twenty percent (20%)
of the Building shall be acquired or taken by condemnation proceeding, LANDLORD
may, by written notice to TENANT, terminate this Lease. If this Lease is
terminated as provided in this Subsection 15.3, rent shall be paid up to the day
that possession is so taken by public authority and LANDLORD shall make an
equitable refund of any rent paid by TENANT in advance.
15.4 Award. TENANT shall not be entitled to any condemnation award for
any taking, whether whole or partial and whether for diminution in value of the
leasehold or the fee, and assigns to LANDLORD all rights of TENANT, if any, to
receive such award, although TENANT shall have the right, to the extent that the
same shall not reduce LANDLORD'S award, to claim from the condemnor, but not
from LANDLORD, such compensation as may be recoverable by TENANT in its own
right for TENANT'S relocation costs and for damages to TENANT'S business and
fixtures.
<PAGE> 20
15.5 Definitions. As used in this Section 15 the term condemnation
proceeding means any action or proceeding in which any interest in the Premises
is taken for any public or quasi-public purpose by any lawful authority through
exercise of the power of eminent domain or right of condemnation or by purchase
or otherwise in lieu of and under threat of condemnation. The definition of
Premises shall be expanded to include elevators, parking and common areas.
16. LANDLORD'S RIGHT TO CURE. In the event of any noncompliance
hereunder by LANDLORD, TENANT shall, before exercising any right or remedy
available to it, give LANDLORD written notice of such noncompliance. If prior to
its giving such notice TENANT has been notified in writing (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the address of a Lender which
has furnished any of the financing referred to in Section 17 hereof,
concurrently with giving the aforesaid notice to LANDLORD, TENANT shall, by
registered or certified mail postage prepaid, transmit a copy thereof to such
Lender. For the thirty (30) days following the giving of the notice(s) required
by the foregoing portion of this Section 16 (or such longer period of time as
may be reasonably required to cure a matter which, due to its nature, cannot
reasonably be rectified within thirty (30) days), LANDLORD shall have the right
to cure the noncompliance involved. If LANDLORD has failed to effect such cure
within such period, any such Lender shall have an additional thirty (30) days
within which to cure the same or, if such default cannot be cured within that
period, such additional time as may be necessary, if within such thirty (30) day
period said Lender has commenced and is diligently pursuing the actions or
remedies necessary to cure the noncompliance involved (including, but not
limited to, commencement and prosecution of proceedings to foreclose or
otherwise exercise its rights under its mortgage or other security instrument,
if necessary to effect such cure), in which event this Lease shall not be
terminated by TENANT so long as such actions or remedies are being diligently
pursued by said Lender. LANDLORD shall not be liable to TENANT for any default
under this Lease which occurs after the sale of the Building by LANDLORD, and
TENANT agrees that its rights with respect to any such default, if asserted,
shall be asserted against LANDLORD'S successor in interest, and not against
LANDLORD.
17. SUBORDINATION; AMENDMENT; ATTORNMENT.
17.1 Subordination. This Lease, at LANDLORD'S option, shall be
subordinate to any existing or future mortgage, deed of trust, ground lease or
declaration of covenants (regarding maintenance and use of any areas contained
in any portion of the Building), declaration of planned unit development,
including, without limitation, the Declaration of Covenants, Conditions and
Restrictions of South Towne, any and all advances made under any mortgage or
deed of trust and all renewals, modifications, amendments, consolidations,
replacements and extensions thereof. TENANT agrees that with respect to any of
the foregoing documents, no documentation, other than this Lease, shall be
required to evidence such subordination. If any holder of a mortgage or deed of
trust shall elect to have this Lease superior to the lien of its mortgage or
deed of trust and shall give written notice thereof to TENANT, this Lease shall
be deemed prior to such mortgage or deed of trust or to the date of recording
thereof. TENANT agrees to execute such documents which may be required by
LANDLORD to confirm such subordination or priority within ten (10) days of
request therefor from LANDLORD. Notwithstanding anything to the contrary
contained in this Subsection 17.1, so long as TENANT fulfills all its
obligations under this Lease, TENANT'S rights under this Lease shall not be
disturbed or impaired by any holder of a mortgage or a deed of trust, or by any
person claiming
<PAGE> 21
through or under LANDLORD. TENANT shall not subordinate its interests hereunder
or in the Premises to any lien or encumbrance other than those encumbrances
described in this Subsection 17.1 without the prior consent of LANDLORD. Any
attempted unauthorized subordination by TENANT shall be void and of no force or
effect.
17.2 Amendment. TENANT agrees that from time to time it shall, if so
requested by LANDLORD and if doing so will not materially and adversely affect
TENANT'S economic interests hereunder, join with LANDLORD in amending this Lease
so as to meet the needs or requirements of any Lender which is considering
making or which has made a loan secured by the Building and/or related Land. Any
change in the Basic Monthly Rent or Additional Rent shall be deemed adverse or
material.
17.3 Attornment. Any sale, assignment or transfer of LANDLORD'S interest
under this Lease or in the Premises, including any such disposition resulting
from LANDLORD'S default under a debt obligation, shall be subject to this Lease
and TENANT shall attorn to LANDLORD'S successors and assigns and shall recognize
such successors or assigns as LANDLORD under this Lease, regardless of any rule
of law to the contrary or absence of privity of contract.
18. DEFAULT; REMEDIES; ABANDONMENT; PAST SUMS DUE; PENALTY.
18.1 Default by TENANT. Upon the occurrence of any of the following
events, LANDLORD shall have the remedies set forth in Subsection 18.2:
18.1.1 TENANT fails to pay any installment of Basic Monthly Rent
or Additional Rent or any other sum due hereunder within five (5)
calendar days of when the same shall be due.
18.1.2 TENANT fails to perform any other term, condition, or
covenant to be performed by it pursuant to this Lease within thirty (30)
days after written notice of such default shall have been given to
TENANT by LANDLORD or if cure would reasonably require more than thirty
(30) days to complete if TENANT fails to commence performance within the
thirty (30) day period or fails to diligently pursue such cure to
completion.
18.1.3 TENANT or any guarantor of this Lease shall become
bankrupt or insolvent or file any debtor proceedings or have taken
against such party in any court pursuant to state or federal statute, a
petition in bankruptcy or insolvency, reorganization, or appointment of
a receiver of trustee; or TENANT petitions for or enters into an
arrangement; or suffers this Lease to be taken under a writ of
execution.
18.1.4 If an abandonment of the Premises by TENANT has occurred,
as defined in Section 78-36-12.3 of the Utah Code Ann. (or similar
replacement provision).
18.2 LANDLORD'S Remedies. If any one or more of the events of default
set forth in Section 18.1 occurs and is not cured, then LANDLORD shall have,
besides other rights and remedies it may have at law or equity, the following
remedies:
<PAGE> 22
18.2.1 To give TENANT written notice of LANDLORD'S intention to
terminate this Lease on the earliest date permitted by law or on any
later date specified in such notice, in which case TENANT'S right to
possession of the premises will cease and this Lease will be terminated,
except as to TENANT'S liability, as if the expiration of the term fixed
in such notice were the end of the term;
18.2.2 Without further demand or notice, to reenter and take
possession of the premises or any part of the premises, repossess the
same, expel TENANT and those claiming through or under TENANT, and
remove the effects of both or either, using such force for such purposes
as may be necessary, without being liable for prosecution, without being
deemed guilty of any manner of trespass, and without prejudice to any
remedies for arrears of monthly rent or other amounts payable under this
Lease or as a result of any preceding breach of covenants or conditions;
or
18.2.3 Without further demand or notice to cure any event of
default and to charge TENANT for the cost of effecting such cure,
including without limitation reasonable attorneys' fees and interest on
the amount so advanced at the Interest Rate set forth in Section 9.2,
provided that LANDLORD will have no obligation to cure any such event of
default of TENANT.
18.2.4 Should LANDLORD elect to reenter as provided in subsection
(b), or should LANDLORD take possession pursuant to legal proceedings or
pursuant to any notice provided by law, LANDLORD may, from time to time,
without terminating this Lease, relet the premises or any part of the
premises in LANDLORD'S or TENANT'S name, but for the account of TENANT,
for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the term) and on
such conditions and upon such other terms (which may include concessions
of free rent and alteration and repair of the premises) as LANDLORD, in
its reasonable discretion, may determine, and LANDLORD may collect and
receive the rent. No such reentry or taking possession of the premises
by LANDLORD will be construed as an election on LANDLORD'S part to
terminate this Lease unless a written notice of such intention is given
to TENANT. No written notice from LANDLORD under this Section or under a
forcible or unlawful entry and detainer statute or similar law will
constitute an election by LANDLORD to terminate this Lease unless such
notice specifically so states. LANDLORD reserves the right following any
such reentry or reletting to exercise its right to terminate this Lease
by giving TENANT such written notice, in which event this Lease will
terminate as specified in such notice.
18.3 Certain Damages. In the event that LANDLORD does not elect to
terminate this Lease as permitted in Section 18.2.1, but on the contrary elects
to take possession as provided in Section 18.2.2, TENANT will pay to LANDLORD
monthly rent and other sums as provided in this Lease that would be payable
under this Lease if such repossession had not occurred, less the net proceeds,
if any, of any reletting of the premises after deducting all of LANDLORD'S
reasonable expenses in connection with such reletting, including without
limitation all repossession costs, brokerage commissions, attorneys' fees,
expenses of employees, alteration and repair costs, and expenses of preparation
for such reletting. If, in connection with any reletting, the new Lease term
extends beyond the existing term, or the premises covered by such
<PAGE> 23
new Lease include other premises not part of the premises, a fair apportionment
of the rent received from such reletting and the expenses incurred in connection
with such reletting as provided in this Section will be made in determining the
net proceeds from such reletting, and any rent concessions will be equally
apportioned over the term of the new Lease. TENANT will pay such rent and other
sums to LANDLORD monthly on the day on which the monthly rent would have been
payable under this Lease if possession had not been retaken, and LANDLORD will
be entitled to receive such rent and other sums from TENANT on each such day.
18.4 Continuing Liability After Termination. If this Lease is terminated
on account of the occurrence of an event of default, TENANT will remain liable
to LANDLORD for damages in an amount equal to monthly rent and other amounts
that would have been owing by TENANT for the balance of the term, had this Lease
not been terminated, less the net proceeds, if any, of any reletting of the
premises by LANDLORD subsequent to such termination, after deducting all of
LANDLORD'S expenses in connection with such reletting, including without
limitation the expenses enumerated in Section 18.3. LANDLORD will be entitled to
collect such damages from TENANT monthly on the day on which monthly rent and
other amounts would have been payable under this Lease if this Lease had not
been terminated, and LANDLORD will be entitled to receive such monthly rent and
other amounts from TENANT on each such day.
18.5 Cumulative Remedies. Any suit or suits for the recovery of the
amounts and damages set forth in Sections 18.3 and 18.4 may be brought by
LANDLORD, from time to time, at LANDLORD'S election, and nothing in this Lease
will be deemed to require LANDLORD to await the date upon which this Lease or
the term would have expired had there occurred no event of default. Each right
and remedy provided for in this Lease is cumulative and is in addition to every
other right or remedy provided for in this Lease or now or after the Lease date
existing at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by LANDLORD of any one or more of the rights or
remedies provided for in this Lease or now or after the Lease date existing at
law or in equity or by statute or otherwise will not preclude the simultaneous
or later exercise by LANDLORD of any or all other rights or remedies provided
for in this Lease or now or after the Lease date existing at law or in equity or
by statute or otherwise. All costs incurred by LANDLORD in collecting any
amounts and damages owing by TENANT pursuant to the provisions of this Lease or
to enforce any provision of this Lease, including reasonable attorneys' fees
from the date any such matter is turned over to an attorney, whether or not one
or more actions are commenced by LANDLORD, will also be recoverable by LANDLORD
from TENANT.
18.6 Waiver of Redemption. TENANT waives any right of redemption arising
as a result of LANDLORD'S exercise of its remedies under this Section 18.
18.7 Past Due Sums; Penalty. Except as otherwise expressly provided for
in this Lease, if TENANT fails to pay, when the same is due and payable, or
within five (5) calendar days thereafter, any sum required to be paid by it
hereunder, such unpaid amount shall bear interest from the due date thereof to
the date of payment at a fluctuating rate equal to five percent (5%) per annum
above the prime rate of interest charged by Zions First National Bank, Salt Lake
City, Utah. In addition thereto, LANDLORD may charge a sum of five percent (5%)
of such unpaid amounts as a service fee. Notwithstanding the foregoing,
LANDLORD'S right concerning such
<PAGE> 24
interest and service fee shall be limited by the maximum amount which legally
may be charged by LANDLORD for such purposes under applicable law.
19. NOT USED.
20. END OF TERM. At the end of this Lease, TENANT will promptly quit and
surrender the premises broom-clean, in good order and repair, ordinary wear and
tear excepted. If TENANT is not then in material default, TENANT may remove from
the premises any trade fixtures, equipment, and movable furniture placed in the
premises by TENANT, whether or not such trade fixtures or equipment are fastened
to the building; TENANT will not remove any trade fixtures or equipment without
LANDLORD'S prior written consent if such fixtures or equipment are used in the
operation of the building, or if the removal of such fixtures or equipment will
result in impairing the structural strength of the building. Whether or not
TENANT is in default, TENANT will remove such alterations, additions,
improvements, trade fixtures, equipment, and furniture as LANDLORD has requested
in accordance with Section 9.3: TENANT will fully repair any damage occasioned
by the removal of any trade fixtures, equipment, furniture, alterations,
additions, and improvements. All trade fixtures, equipment, furniture,
inventory, effects, alterations, additions, and improvements on the Premises 10
days after the end of the term will be deemed conclusively to have been
abandoned and may be appropriated, sold, stored, destroyed, or otherwise
disposed of by LANDLORD without written notice to TENANT or any other person and
without obligation to account for them. TENANT will pay LANDLORD for all
expenses incurred in connection with the removal of such property, including but
not limited to the cost of repairing any damage to the building or premises
caused by the removal of such property. TENANT'S obligation to observe and
perform this covenant will survive the expiration or other termination of this
Lease.
21. ESTOPPEL CERTIFICATE.
21.1 LANDLORD'S Right to Estoppel Certificate. TENANT shall, within five
(5) days after LANDLORD'S request therefor, execute and deliver to LANDLORD an
Estoppel Certificate in recordable form setting forth the following: (a) a
ratification of this Lease; (b) the Actual Commencement Date and termination
date hereof; (c) a certification that this Lease is in full force and effect and
has not been assigned, modified, supplemented or amended (except by such writing
as shall be stated); (d) that all conditions under this Lease to be performed by
LANDLORD have been satisfied or a statement of any conditions not satisfied; (e)
that there are no defenses or offsets against the enforcement of this Lease by
LANDLORD, or, in the alternative, those claimed by TENANT; (f) the amount of
advance rent, if any, (or none if such is the case) paid by TENANT; (g) the date
to which rent has been paid; (h) the amount of security deposited with LANDLORD;
and (i) such other information as LANDLORD (or its mortgagees or potential
purchasers of the Premises) may reasonably request. In the event TENANT fails
within five (5) days after LANDLORD has delivered to TENANT an Estoppel
Certificate pursuant to this Subsection 21.1 to properly execute and deliver the
same to LANDLORD, TENANT shall be deemed to have consented to such Estoppel
Certificate as written. LANDLORD'S mortgage lenders and/or purchasers shall be
entitled to rely upon such declaration.
<PAGE> 25
21.2 Effect of Failure to Provide Estoppel Certificate. TENANT'S failure
to furnish any Estoppel Certificate pursuant to Subsection 21.1 hereof within
fifteen (15) days after request is made by LANDLORD therefor shall be deemed a
default hereunder and, moreover, it shall be conclusively presumed that (a) this
Lease is in full force and effect without modification in accordance with the
terms set forth in the request; (b) there are no breaches or defaults on the
part of LANDLORD; and (c) no more than one month's rent has been paid in
advance.
22. COMMON AREAS.
22.1 Definition of Common Areas. Common Areas means all areas, space,
equipment and special services provided for the joint or common use and benefit
of the TENANTS or occupants of the Building and related Land or portions
thereof, and their employees, agents, licensees and other invites (collectively
referred to herein as Occupants), including without limitation, the following:
parking areas, access roads, driveways, plaza retaining walls, landscaped areas,
service ways, loading docks, pedestrian walks, courts, stairs, ramps and
sidewalks, common corridors, monuments, water features, lobby elevators, rooms
and rest rooms, air conditioning, fan, janitorial, electrical and telephone
rooms or closets, and all other areas within the Building which are not
specified for exclusive use or occupancy by LANDLORD or any TENANT (whether or
not they are Leased or occupied).
22.2 License to Use Common Areas. The Common Areas shall be available
for the common use of all Occupants and to the extent such access to the Common
Areas has been or shall be granted, also shall be used by the general public. If
the amount of such areas shall be changed or diminished, LANDLORD shall not be
subject to any liability to TENANT in any respect, provided LANDLORD will take
no action permitted under this section 22 in such a manner as to materially
impair or adversely affect TENANT'S substantial benefit and enjoyment of the
premises. All common Areas shall be subject to the exclusive control and
management of LANDLORD.
22.3 Deliveries. All deliveries to and from the Premises shall be made
using those areas of the Building designated for deliveries by LANDLORD, during
the time periods reasonably specified by LANDLORD, and so as to cause the
minimum amount of interference with the business of other TENANTS of the
Building or impedance of traffic corridors or blockage of stairwells or fire
exits from the Building.
22.4 Parking. Subject to TENANT'S rights under Section 2 hereof,
automobiles of TENANT and all Occupants associated with TENANT shall be parked
only within parking areas not otherwise reserved by LANDLORD or specifically
designated to use by any other tenant and/or occupants associated with any other
tenant, and shall observe visitor parking time limitations. LANDLORD or its
agents, shall, without any liability to TENANT or its occupants have the right
(but not the obligation) to cause to be removed any automobile that may be
wrongfully parked in a prohibited or reserved parking area, and TENANT agrees to
indemnify, defend and hold harmless LANDLORD from and against any and all claims
asserted or arising with respect to or in connection with any such removal of an
automobile of TENANT. TENANT shall from time to time, upon request of LANDLORD,
supply LANDLORD with a list of license plate numbers of all automobiles owned by
TENANT or its day-to-day Occupants. TENANT shall not allow its employees or
agents to park in uncovered parking spaces overnight without
<PAGE> 26
prior written consent of LANDLORD. Upon 24 hours notice, TENANT shall
temporarily relocate all TENANT owned vehicles to a location designated by
LANDLORD for the duration of any parking lot maintenance activities. TENANTS of
the Building may exercise and will be subject to, the parking rights as
contained herein on any portion of the adjacent Towers Phase III subdivision
properties which are asphalted and improved for parking.
23. SIGNS, AWNINGS AND CANOPIES. LANDLORD, at LANDLORD's expense shall
install identification signs for TENANT, in accordance with LANDLORD's signage
standards. TENANT shall not place or suffer to be placed or maintained on any
exterior door, exterior wall or window of the Premises, or in the Premises
visible to the Common Areas of the Building, or elsewhere in the Building, any
sign, awning, marquee, decoration, lettering, attachment, canopy, advertising
matter or other thing of any kind, without first obtaining LANDLORD'S written
approval. Signs inside the Premises not visible from the Common Areas of the
Building are not prohibited by this paragraph. LANDLORD may, at TENANT'S cost,
and without liability to TENANT, enter the Premises and remove any item erected
in violation of this Section 23. All signage shall further be subject to
approval by the City of South Jordan.
24. REQUIREMENTS OF LAW; FIRE INSURANCE.
24.1 General. At its sole cost and expense, TENANT will promptly comply
with all laws, statutes, ordinances, and governmental rules, regulations, or
requirements now in force or in force after the Lease date, with the
requirements of any board of fire underwriters or other similar body constituted
now or after the date, with any direction or occupancy certificate issued
pursuant to any law by any public officer or officers, as well as with the
provisions of all recorded documents affecting the premises, insofar as they
relate to the condition, use, or occupancy of the premises, excluding
requirements of structural changes to the premises or the building, unless
required by the unique nature of TENANT'S use or occupancy of the premises.
24.2 Hazardous Materials.
24.2.1 For purposes of this Lease, "hazardous materials" means
any explosives, radioactive materials, hazardous wastes, or hazardous
substances, including without limitation substances defined as
"hazardous substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ##
9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C.
## 1801-1812; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ## 6901-6987; or any other federal, state, or local statute, law,
ordinance, code, rule, regulation, order, or decree regulating, relating
to, or imposing liability or standards of conduct concerning hazardous
materials, waste, or substances now or at any time hereafter in effect
(collectively, "hazardous materials laws").
24.2.2 Except in compliance with hazardous waste laws, TENANT
will not cause or permit the storage, use, generation, or disposition of
any hazardous materials in, on, or about the premises or the project by
TENANT, its agents, employees, or contractors. TENANT will not permit
the premises to be used or operated in a manner that may cause the
premises or the project to be contaminated by any hazardous materials in
violation of any hazardous materials laws. TENANT will immediately
advise LANDLORD in writing
<PAGE> 27
of (1) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed, or threatened
pursuant to any hazardous materials laws relating to any hazardous
materials affecting the premises; and (2) all claims made or threatened
by any third party against TENANT, LANDLORD, or the premises relating to
damage, contribution, cost recovery, compensation, loss, or injury
resulting from any hazardous materials on or about the premises. Without
LANDLORD'S prior written consent, TENANT will not take any remedial
action or enter into any agreements or settlements in response to the
presence of any hazardous materials in, on, or about the premises.
24.2.3 TENANT will be solely responsible for and will defend,
indemnify and hold LANDLORD, its agents, and employees harmless from and
against all claims, costs, and liabilities, including attorneys' fees
and costs, arising out of or in connection with TENANT'S breach of its
obligations in this Section 24. TENANT will be solely responsible for
and will defend, indemnify, and hold LANDLORD, its agents, and employees
harmless from and against any and all claims, costs, and liabilities,
including attorneys' fees and costs, arising out of or in connection
with the removal, cleanup, and restoration work and materials necessary
to return the premises and any other property of whatever nature located
on the project to their condition existing prior to the appearance of
TENANT'S hazardous materials on the premises. TENANT'S obligations under
this Section 24 will survive the expiration or other termination of this
Lease.
24.3 Certain Insurance Risks. TENANT will not do or permit to be done
any act or thing upon the premises or the project which would (a) jeopardize or
be in conflict with fire insurance policies covering the project and fixtures
and property in the project; (b) increase the rate of fire insurance applicable
to the project to an amount higher than it otherwise would be for general office
use of the project; or (c) subject LANDLORD to any liability or responsibility
for injury to any person or persons or to property by reason of any business or
operation being carried on upon the premises.
25. LANDLORD'S RESERVED RIGHTS. Without liability to TENANT (except for
damages caused by the reckless or willful misconduct of LANDLORD or its agents),
LANDLORD shall have the right at any time or from time to time (a) upon at least
twenty (20) days' prior notice to TENANT, change the name or street address of
the Building; (b) without notice, install and maintain signs on the exterior of
the Building; (c) upon notice to TENANT, enter the Premises and perform any
obligation of TENANT hereunder which TENANT has failed to perform
satisfactorily; (d) without notice, make changes, alterations and additions to
the Building or the Property; (e) exhibit the Premises to prospective tenants,
mortgagees and purchasers upon reasonable notice; and (f) without notice, enter
into the Premises to take such measures as LANDLORD may deem advisable for the
safety, security and welfare of the Building and its Occupants and for such
purposes, to bring into and through the Premises or any part of the Building,
all required tools, equipment and materials and to temporarily suspend the use
of doors, corridors or other facilities of the Building.
26. RULES AND REGULATIONS. The Rules and Regulations set forth on
Exhibit Fare hereby made a part of this Lease. LANDLORD may from time to time
amend, modify, delete or add rules and regulations for the use and care of the
Building and the Land, provided
<PAGE> 28
that changes in the Rules and Regulations shall not unreasonably affect TENANT.
Such amendment, modification, deletion or addition shall be effective upon
notice thereof to TENANT from LANDLORD. TENANT will cause its employees, agents
or any other persons permitted by TENANT to occupy or enter the Premises to at
all times abide by all of such Rules and Regulations. In the event of any breach
of any of such Rules or Regulations, LANDLORD may exercise any or all of the
remedies in this Lease which are provided for in the event of default by TENANT
and may, in addition, exercise any remedies available at law or in equity
including the right to enjoin any breach of such Rules and Regulations. No act
performed by LANDLORD or its agents during the term of the Lease to enforce such
Rules and Regulations shall constitute an eviction of TENANT by LANDLORD, nor
shall it be deemed an acceptance or surrender of the Premises. LANDLORD shall
not be responsible to TENANT for the failure by any other tenant or person to
observe any such Rules and Regulations.
27. MISCELLANEOUS PROVISIONS.
27.1 No Partnership. LANDLORD does not by this Lease, in any way or for
any purpose, become a partner or joint venturer of TENANT in the conduct of its
business or otherwise.
27.2 Force Majeure. LANDLORD shall be excused for the period of any
delay in the performance of any obligations hereunder when prevented from so
doing by cause or causes beyond LANDLORD'S control, including labor disputes,
civil commotion, war, governmental regulations or controls, fire or other
casualty, inability to obtain any material or service or acts of God.
27.3 Modification for Lender. If, in connection with obtaining
construction, interim, or permanent financing for the Building or the Property,
the lender shall request reasonable modifications in this Lease as a condition
to such financing, TENANT will not unreasonably withhold, delay, or defer its
consent thereto, provided that such modifications do not increase the
obligations of TENANT hereunder or materially adversely affect the Leasehold
interest hereby created or TENANT'S rights hereunder. TENANT shall execute any
documentation that LANDLORD or the lender deems reasonably necessary within five
(5) days after written request by LANDLORD.
27.4 No Light, Air or View Easement. Any diminution or shutting off of
light, air or view by any structure which may be erected on lands adjacent to or
in the vicinity of the Building shall in no way affect this Lease or impose any
liability on LANDLORD.
27.5 Holding Over. Because unauthorized holding over after the
expiration of the term hereof or of any renewal term will cause substantial
damage to LANDLORD which cannot be estimated at the time of execution of the
Lease, any such holding over shall be construed to be a tenancy from
month-to-month at two (2) times the Basic Monthly Rent plus all other sums,
rents and charges herein specified (pro-rated on a monthly basis) and shall, so
far as possible, otherwise be on the terms herein specified. The preceding
sentence shall not be construed as LANDLORD's permission for TENANT to hold
over.
<PAGE> 29
27.6 Notices. Any notice, request, demand, consent, approval, or other
communication required or permitted under this lease must be in writing and will
be deemed to have been given when personally delivered, sent by facsimile with
receipt acknowledged, deposited with any nationally recognized overnight carrier
that routinely issues receipts, or deposited in any depository regularly
maintained by the United States Postal Service, postage prepaid, certified mail,
return receipt requested, addressed to the party for whom it is intended. Notice
for LANDLORD shall be addressed and sent to 106TH SOUTH BUSINESS PARK, L.P.,
Attention: Dan Christensen, 10421 South Jordan Gateway, Suite 600, South Jordan,
Utah 84095; The address for TENANT set forth in Section 1, Subsection 1.1 of
this Lease shall be the effective location for notices to TENANT. Either party
may designate such other address as shall be given by written notice.
27.7 Captions; Attachments.
27.7.1 The captions to the Sections and Subsections of this Lease
are for convenience of reference only and shall not be deemed relevant
in resolving questions of construction or interpretation under this
Lease.
27.7.2 Exhibits referred to in this Lease and any addendum,
riders and schedules attached to this Lease shall be deemed to be
incorporated in this Lease as though a part of Lease.
27.8 Recording. TENANT shall not record this Lease or a memorandum
hereof without the written consent of LANDLORD. LANDLORD, at its option and at
any time, may file this Lease or a memorandum hereof for record with the
Recorder of the County in which the Property is located, and LANDLORD shall
notify TENANT of the same.
27.9 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be
invalid, the remainder of this Lease or the application of such provision to
persons or circumstances other than those as to which it is held invalid shall
not be affected thereby and each provision of this Lease shall be valid and
enforced to the fullest extent permitted by law. In lieu of each provision of
this lease that is illegal, invalid, or unenforceable a provision will be added
as a part of this lease as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
27.10 Brokers Commission. Hunter C. Jorgensen acting as an agent of
Prime Commercial, Inc., as the representative of TENANT, shall be entitled to a
Lease commission equal to 3% of the Lease amount calculated as follows: initial
annual Lease payment times 5 (lease years) times 3% = commission $10,034.86.
This amount will be paid by LANDLORD, 1/2 upon execution by LANDLORD and TENANT
to Lease agreement and 1/2 within ten (10) days of TENANT occupying the
Premises.
27.11 TENANT Defined; Use of Pronouns. The word TENANT shall be deemed
to mean each and every person or party executing this document as a TENANT
hereunder. If there is more than one person or organization set forth on the
signature line as TENANT, their liability hereunder shall be joint and several.
If there is more than one TENANT, any notice required or
<PAGE> 30
permitted by the terms of this Lease may be given by or to any one TENANT, and
shall have the same force and effect as if given by or to all TENANTS. The use
of the neuter singular pronoun to refer to LANDLORD or TENANT shall be deemed a
proper reference even though LANDLORD or TENANT may be an individual,
partnership, corporation or a group of two or more individuals, partnerships or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where there is more than one LANDLORD or
TENANT and to corporations, associations, partnerships, individuals, males or
females, shall in all instances be assumed as though in each case fully
expressed.
27.12 Provisions Binding, etc. Except as otherwise provided, all
provisions herein shall be binding upon and shall inure to the benefit of the
parties, their legal representatives, heirs, successors and assigns. Each
provision to be performed by TENANT shall be constructed to be both a covenant
and a condition, and if there shall be more than one TENANT, they shall all be
bound, jointly and severally, by such provisions. In the event of any sale or
assignment (except for purposes of security or collateral) by LANDLORD of the
Building, the Premises or this Lease, LANDLORD shall, from and after the Actual
Commencement Date (irrespective of when such sale or assignment occurs), be
entirely relieved of all of its obligations hereunder and such obligations
shall, as of the time of such sale or assignment or on the Actual Commencement
Date, whichever is later, automatically pass to LANDLORD'S successor in
interest.
27.13 Entire Agreement, etc. This Lease and the Exhibits, Riders and/or
addenda, if any, attached hereto, constitute the entire agreement between the
parties. Any guaranty attached hereto is an integral part of this Lease and
constitutes consideration given to LANDLORD to enter into this Lease. Any prior
conversations or writings are merged herein and extinguished. No subsequent
amendment of this Lease shall be binding upon LANDLORD or TENANT unless reduced
to writing and signed. Submission of this Lease for examination does not
constitute an option for the Premises and this Lease becomes effective as a
Lease only upon execution and delivery thereof by LANDLORD to TENANT. It is
hereby agreed that this Lease contains no restrictive covenants or exclusions in
favor of TENANT.
27.14 Recourse by TENANT. Anything in this Lease to the contrary
notwithstanding, TENANT agrees that it shall look solely to the equity of
LANDLORD in the Building in which the Premises are located and the Land upon
which the Building is situated, subject to prior rights of any mortgagee
(including mortgagees, advancing monies after the date of this Lease), for the
collection of any judgment (or other judicial process) requiring the payment of
money by LANDLORD in the event of any default or breach by LANDLORD with respect
to any of the terms, covenants and conditions of this Lease to be observed
and/or performed by LANDLORD, and no other assets of LANDLORD shall be subject
to levy, execution or other procedures for the satisfaction of TENANT'S
remedies. Nothing herein shall preclude TENANT from seeking injunctive relief or
specific performance or insurance proceeds to which they are entitled. The
amount of any judgement obtained by TENANT against LANDLORD can be used by
TENANT as an offset against unpaid rent.
27.15 Choice of Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Utah.
27.16 Time of Essence. Time is of the essence of this Lease.
<PAGE> 31
27.17 No Waiver. The waiver by LANDLORD of any agreement, condition, or
provision contained in this Lease will not be deemed to be a waiver of any
subsequent breach of the same or any other agreement, condition, or provision
contained in this Lease, nor will any custom or practice that may grow up
between the parties in the administration of the terms of this Lease be
construed to waive or to lessen the right of LANDLORD to insist upon the
performance by TENANT in strict accordance with the terms of this Lease. The
subsequent acceptance of rent by LANDLORD will not be deemed to be a waiver of
any preceding breach by TENANT of any agreement, condition, or provision of this
Lease, other than the failure of TENANT to pay the particular rent so accepted,
regardless of LANDLORD'S knowledge of such preceding breach at the time of
acceptance of such rent.
27.18 Rights and Remedies. The rights and remedies of LANDLORD shall not
be mutually exclusive and the exercise of one or more of the provisions of this
Lease shall not preclude the exercise of any other provisions. TENANT confirms
that damages at law may be an inadequate remedy for a breach or threatened
breach by TENANT of any of the provisions hereof. LANDLORD'S rights and TENANT'S
obligations hereunder shall be enforceable by specific performance, injunction
or any other equitable remedy, but nothing herein contained is intended or shall
limit or affect any rights at law or by statute or otherwise of LANDLORD against
TENANT for a breach or a threatened breach of any provision hereof, it being the
intention by this Section to make clear the agreement of the parties hereto and
the right of LANDLORD and obligations of TENANT hereunder shall be enforceable
in equity as well as at law or otherwise.
27.19 Authorization. Each individual executing this Lease does thereby
represent and warrant to each other so signing (and each other entity for which
another person may be signing) that he has been duly authorized to deliver this
Lease in the capacity and for the entity set forth where he signs.
27.20 No Construction Against Drafting Party. LANDLORD and TENANT
acknowledge that each of them and their counsel have had an opportunity to
review this Lease and that this Lease will not be construed against LANDLORD
merely because LANDLORD has prepared it.
27.21 Waiver of Jury Trial. LANDLORD and TENANT by this Section 27.21
waive trial by jury in any action, proceeding, or counterclaim brought by either
of the parties to this Lease against the other on any matters whatsoever arising
out of or in any way connected with this Lease, the relationship of LANDLORD and
TENANT, TENANT'S use or occupancy of the premises, or any other claims (except
claims for personal injury or property damage), and any emergency statutory or
any other statutory remedy.
27.22 No Merger. The voluntary or other surrender of this Lease by
TENANT or the cancellation of this Lease by mutual agreement of TENANT and
LANDLORD or the termination of this Lease on account of TENANT'S default will
not work a merger, and will, at LANDLORD'S option, (a) terminate all or any
subleases and subtenancies or (b) operate as an assignment to LANDLORD of all or
any subleases or subtenancies. LANDLORD'S option under this Section 27.22 will
be exercised by written notice to TENANT and all known sublessees or subtenants
in the premises or any part of the premises.
<PAGE> 32
27.23 Financial Reports. Within 15 days after LANDLORD'S request, TENANT
will furnish TENANT'S most recent audited financial statements (including any
notes to them) to LANDLORD, or, if no such audited statements have been
prepared, such other financial statements (and notes to them) as may have been
prepared by an independent certified public accountant or, failing those,
TENANT'S internally prepared financial statements. TENANT will discuss its
financial statements with LANDLORD and will give LANDLORD access to TENANT'S
books and records in order to enable LANDLORD to verify the financial
statements. LANDLORD will not disclose any aspect of TENANT'S financial
statements that TENANT designates to LANDLORD as confidential except (a) to
LANDLORD'S lenders or prospective purchasers of the property, (b) in litigation
between LANDLORD and TENANT, and (c) if required by court order.
27.24 LANDLORD'S Fees. Whenever TENANT requests LANDLORD to take any
action or give any consent required or permitted under this Lease, TENANT will
reimburse LANDLORD for all of LANDLORD'S reasonable costs incurred in reviewing
the proposed action or consent, including without limitation reasonable
attorneys', engineers' or architects' fees, within 10 days after LANDLORD'S
delivery to TENANT of a statement of such costs. TENANT will be obligated to
make such reimbursement without regard to whether LANDLORD consents to any such
proposed action.
27.25 Attorney's Fees. In the event that at any time during the term of
this Lease either LANDLORD or TENANT institutes any action or proceeding against
the other relating to the provisions of this Lease or any default hereunder, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for the reasonable expenses of such action including reasonable attorneys'
fees incurred therein by the successful party.
27.26 Successors. LANDLORD shall not be liable to TENANT for any default
or breach under this Lease which occurs after the sale of the Building or
Premises by LANDLORD.
IN WITNESS WHEREOF, LANDLORD and TENANT have executed this Lease on the
day first set forth above.
LANDLORD:
106TH SOUTH BUSINESS PARK, A Utah Limited Partnership
By: /s/James A. Morse, Jr.
Its General Partner
TENANT:
SPORTSNUTS.COM, INC., a Delaware Corporation
By: /s/Kenneth Denos
----------------------------------------
Its: Executive Vice President
----------------------------------------
<PAGE> 33
EXHIBIT A
LEGAL DESCRIPTION
Lots 3 and 4 of, The Towers at South Towne Phase 3 subdivision, located in the
Northwest Quarter of Section 13, Township 3, South, Range 1 West, Salt Lake Base
and Meridian, South Jordan City, Utah, at 10421 South Jordan Gateway, South
Jordan, Utah 84095.
<PAGE> 34
EXHIBIT B
PRELIMINARY PLANS
1. Preliminary Plans. LANDLORD and TENANT have approved the preliminary
plans and outline specifications (Preliminary Plans) for the construction of the
TENANT Improvements to the Premises, said Preliminary Plans are attached to this
Lease as Exhibit E1 and by this reference incorporated herein.
2. Final Plans. At LANDLORD'S cost, LANDLORD shall prepare final plans
and specifications (Final Plans) substantially in conformity with the
Preliminary Plans. LANDLORD shall complete preparation of the Final Plans within
4 weeks or sooner from the date TENANT approves the Preliminary Plans. Both
parties shall initial the Final Plans and attach a copy of the Final Plans to
this Lease as Exhibit E2. TENANT shall not object to any logical development or
refinement of the Preliminary Plans or any changes necessitated by applicable
law. Final Plans shall be subject to approval by LANDLORD and TENANT, which
approval shall not be unreasonably withheld.
3. Construction of Premises. LANDLORD shall construct the TENANT
Improvements to the Premises substantially in accordance with the Final Plans.
All construction work shall be performed by LANDLORD's contractor. LANDLORD
shall use its diligent best efforts to complete the TENANT Improvements and the
Premises shall be Ready for Occupancy, as defined in Subsection 4.1 below, by
the Projected Commencement Date, provided, however, that the Projected
Commencement Date shall be extended for a period equal to the period of any
delay encountered by LANDLORD affecting the work of construction because of
fire, earthquake, inclement weather, acts of God, acts of the public enemy,
riot, insurrection, governmental regulation of the sales of materials or
supplies or the transportation thereof, strikes or boycotts, shortages of
material or labor, TENANT'S early entry to the Premises or, changes in the Final
Plans as provided for in the Lease, or any causes beyond the control of
LANDLORD. Construction shall be in compliance with building safety and fire
codes and the Americans With Disabilities Act at the time building permits are
issued.
4. Failure to Complete Construction.
4.1 LANDLORD Remedies. If, despite LANDLORD'S diligent best
efforts to complete the TENANT Improvements, the Premises are not Ready
for Occupancy within 45 days following the Projected Commencement Date,
the sole remedy of LANDLORD shall be to terminate this Lease by
delivering to TENANT written notice within ten (10) days after the 45
day period following the Projected Commencement Date. Upon termination
of this Lease pursuant to this Subsection 4.1, LANDLORD shall have no
further liability for any damage, costs or claims which arise in
connection with the Premises and this Lease, other than daily liquidated
damages which may arise pursuant to paragraph 4.2.
<PAGE> 35
4.2. TENANT Remedies. If the Premises are not Ready for
Occupancy within 45 days following the Projected Commencement Date,
TENANT shall have the option to terminate this Lease by delivering to
LANDLORD written notice within two (2) business days after the
expiration of the 45 day period following the Projected Commencement
Date, or TENANT may elect to continue the Lease in effect and LANDLORD
shall pay to TENANT daily liquidated damages for every day the Premises
are not Ready for Occupancy after said 45 day period has expired, up to
a maximum of thirty (30) days. Daily liquidated damages shall be
calculated by dividing the Basic Monthly Rent by 30. If the Premises are
not Ready for Occupancy within 75 days from the Projected Commencement
Date, the sole remaining remedy of TENANT shall be to terminate this
Lease by delivering to LANDLORD written notice within ten (10) days
after the 75 day period following the Projected Commencement Date. Upon
termination of this Lease pursuant to this Subsection 4.2, LANDLORD
shall refund to TENANT any construction deposits made by TENANT and the
Security Deposit and TENANT shall have no further liability for any
damage, costs or claims which arise in connection with the Premises and
this Lease.
5. Completion and Delivery. The Premises shall be ready for occupancy
(Ready for Occupancy) when construction is substantially completed in accordance
with the Final Plans, as reasonably determined by LANDLORD and as accepted by
TENANT, which acceptance shall not be unreasonably withheld. LANDLORD shall
prepare, certify by LANDLORD's signature and deliver in duplicate to TENANT a
written statement certifying (i) that the Premises are substantially completed
in accordance with the Final Plans and any properly authorized changes or
amendments thereof; and (ii) the date of such completion. LANDLORD shall
diligently complete any items of work not completed when the Premises are Ready
for Occupancy.
6. Early Entry. With the prior written consent of LANDLORD, TENANT may,
prior to the Actual Commencement Date as defined below, at TENANT'S sole risk,
enter the Premises and install trade fixtures and equipment in the Premises;
provided, however, that (i) TENANT'S early entry shall not interfere with
construction of the Premises or cause labor difficulties, (ii) TENANT shall by
reason of entry therein indemnify and hold harmless LANDLORD from any accident
or injury or any liability therefore that should befall TENANT or any agent or
subcontractor of TENANT. TENANT shall not use the Premises for storage of
inventory or otherwise do business on the Premises prior to the Actual
Commencement Date without the express prior written consent of LANDLORD.
<PAGE> 36
EXHIBIT C
BUILDING FLOOR PLANS
[Attach Building Floor Plans]
<PAGE> 37
EXHIBIT D
TENANT PREMISES
[Attach Tenant Premises]
<PAGE> 38
EXHIBIT E
TENANT IMPROVEMENTS
A. Common Areas.
1. Definition. Common areas are defined to include entry ways,
general access hallways, stairways, elevators, rest rooms,
parking areas, landscaping areas and sidewalks.
a. Restricted common areas. (See rules & regulations)
2. Construction.
a. Entry ways, hallways, elevators and bathrooms will be
finished by LANDLORD with materials and colors
substantially similar to those depicted in the material
and color board which TENANT has previously reviewed.
b. Stairways, parking, landscaping and sidewalks will be
completed by LANDLORD but not according to the material
and color board.
B. Net Usable Areas - TENANT Premises.
1. Standard Improvement - TENANT Matrix.
a. Definition. Standard improvement are defined to include
the following items which will include all related
materials, labor, supervision and overhead to construct
the improvements.
(1) TENANT Standard Improvement - Typical Suite
Walls - metal studs and drywall
Paint - prime and finish coat (per color board)
Lighting Fixture - parabolic 2 x 4
Carpet - 30 oz (per color board)
Ceiling - 2/2 grid
Base - rubber (per color board)
Entry Doors - 3' x 8' oak (stained per color board)
Interior Doors - 3' x 6'8" oak veneer (stained per
color board)
Hardware - bright brass
HVAC service stubbed out to each TENANT'S space
Suspension system for ceiling grid
(2) TENANT Finish Improvements (per 1,000 sf).
<PAGE> 39
Partitions - interior 73 lf/1,000 sf
Doors - Entry 1/3,000 sf
Lighting Fixture 10/1,000 sf
Electrical Outlets 8/1,000 sf
Electrical Light Switches 6/1,000 sf
Telephone Outlets 6/1,000 sf
HVAC Zone 12 zones per floor
b. Construction. LANDLORD shall construct TENANT
Improvements per the Final Plans attached hereto as
Exhibit E2. LANDLORDS cost shall include all items as
referenced in the TENANT Matrix allowance. TENANTS cost
shall be for any improvements in excess of the TENANT
Matrix and shall be paid for by TENANT as provided for in
Optional Improvements below.
2. Optional Improvements.
a. Definition. Optional improvements are defined to be
improvements in excess of common area improvements plus
standard improvements to the net usable area.
b. Request. Optional improvements shall be requested by
TENANT in writing.
c. Construction. LANDLORD may, at LANDLORD'S option,
construct all optional improvements on the Premises.
d. Costs. The cost and expense for optional improvements
installed by LANDLORD shall be paid for by TENANT prior to
commencement of construction of said improvements unless
otherwise agreed to in writing by the parties. LANDLORD
has provided and TENANT has accepted the price of $7,300
as the cost for improvements to TENANT'S Premises in
excess of the TENANT Matrix. Payment of this amount by
TENANT has been deferred by LANDLORD to 90 days after
TENANT'S actual commencement date as defined in the Lease.
Section 18.7 of the Lease shall apply to any amounts not
paid to LANDLORD in the time period provided for herein.
<PAGE> 40
EXHIBIT E1
PRELIMINARY TENANT SPACE PLAN
[Attach Preliminary Space Plan When Complete]
<PAGE> 41
EXHIBIT F
SITE PLAN
[Attach Site Plan]
<PAGE> 42
EXHIBIT F
RULES AND REGULATIONS
<PAGE> 43
EXHIBIT G
CORPORATE GUARANTEE
In consideration of the execution of said Lease by LANDLORD, for the premises
located at 10421 South Jordan Gateway, the undersigned hereby unconditionally
and irrevocably guarantees the full performance of each and all of the terms,
covenants and conditions of said Lease to be kept and performed by said
SPORTSNUTS.COM, INC. (TENANT), including the payment of all rentals and other
charges to accrue. The undersigned further agrees as follows:
1. That this covenant and agreement on its part shall continue in
favor of the LANDLORD notwithstanding any extension, modification or
alteration of said Lease entered into by and between LANDLORD and TENANT,
or their successors and assigns, or notwithstanding any assignment of said
Lease, with or without the consent of LANDLORD, and no extension,
modification, alteration or assignment of the above referred to Lease shall
in any manner release or discharge the undersigned and the undersigned
hereby consents to same.
2. This Guarantee will continue unchanged by any bankruptcy,
reorganization or insolvency of the TENANT or any successor or assignee
thereof or by any disaffirmance or abandonment by a trustee of TENANT.
3. LANDLORD, may, without notice, assign this Guaranty in whole
or in part and no assignment or transfer of the Lease shall operate to
extinguish or diminish the liability of the undersigned.
4. The liability of the undersigned under this Guaranty shall be
primary, and in any right of action which shall accrue to LANDLORD under
the Lease, the LANDLORD may at its option, proceed against the undersigned
without having commenced any action, or having obtained any judgment
against the TENANT.
5. To pay LANDLORD'S reasonably attorneys` fees and all costs and
other expenses incurred in any collection or attempted collection or in any
negotiations relative to the obligations hereby guaranteed or enforcing
this Guarantee against the undersigned, individually and jointly.
6. The undersigned hereby waives notice of any demand by the
LANDLORD, as well as any notice of default in the payment of rent or any
other amount contained or reserved in the Lease.
If Guarantor shall be a Corporation, the authorized officers must sign on
behalf of the corporation and indicate the capacity in which they are signing.
This Guaranty must be executed by the president or vice-president and the
secretary or assistant secretary unless the bylaws or a resolution of the board
of directors shall otherwise provide, in which event the bylaws or a certified
copy of the resolution, as the case may be must be attached to this Lease.
<PAGE> 44
The use of the singular herein shall include the plural. The obligation of
two (2) or more parties shall be joint and several. The terms and provisions of
this Guaranty shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties herein named.
SPORTSNUTS.COM, INC.
By:______________________________________
By:_______________________________________
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment") is entered into as of the 1st
day of May, 1999, between 106th South Business Park, Limited Partnership, a Utah
limited partnership, ("LANDLORD"), and SportsNuts.com, Inc., a Delaware
corporation ("TENANT").
W I T N E S S E T H
WHEREAS, LANDLORD and TENANT entered into a lease dated January 22, 1999,
relating to 3,521 square feet of net rentable area, situated on the fifth floor
of the building located at 10421 South Jordan Gateway, South Jordan, Utah
(hereinafter referred to as "Premises #1"), said building being known as The
Towers at South Towne II, and;
WHEREAS, LANDLORD and TENANT desire to lease additional space situated on
the fifth floor of said building (hereinafter referred to as "Premises #2") to
Tenant, and;
WHEREAS, LANDLORD and TENANT desire to amend the Lease so as to incorporate
the terms and conditions which relate to Premises #2;
NOW, THEREFORE, for and in consideration of the mutual promises and
provisions herein contained and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties mutually
certify and agree to the following terms and conditions:
1. Premises. Paragraph 1.1 of the Lease is hereby deleted in its entirety
and is replaced with the following new Paragraph 1.1:
"1.1. Premises. The Premises shall consist of 3,521 square feet
of net rentable area and 2,993 square feet of net usable area on the fifth
floor of the building (Premises #1), along with 2,315 square feet of net
rentable area and 1,968 square feet of net usable area to the west and
adjacent to Premises #1 on the fifth floor of the building (Premises #2);
the total of Premises #1 and Premises #2 comprising the Premises."
Basic Monthly Rent. Paragraph 1.4 of the Lease is hereby deleted
in its entirety and is replaced with the following new Paragraph 1.4:
1.4 Basic Monthly Rent. The Basic Monthly Rent shall be
Nine Thousand Three Hundred Thirty-Six Dollars and Seventy-Nine
Cents ($9,336.79) computed as follows:
1.4.1 Premises #1. The Basic Monthly Rent for Premises #1
shall be Five Thousand Five Hundred Seventy-Four Dollars and
Ninety-Two Cents ($5,574.92) at $19.00 (annual) per net rentable
square foot.
<PAGE> 2
1.4.2 Premises #2. The Basic Monthly Rent for Premises #2
shall be Three Thousand Seven Hundred Sixty-One Dollars and
Eighty-Eight Cents. ($3,761.88) at $19.50 (annual) per net
rentable square foot.
1.4.3 LANDLORD has agreed to alter the monthly Lease
payment referenced in 1.4.1 above by reducing the monthly payment
amount to $4,574.92 for the first 24 months of the Lease Term and
increasing the monthly payment amount to $6,241.59 for the
remaining 36 months of the Lease Term. This would change the
basic monthly rent referenced in 1.4 above to $8,336.80 for the
first 24 months and $10,003.47 for the remaining 24 months.
Notwithstanding the alteration of the payment schedule provided
in this Section 1.4.3, Consumer Price Index adjustments, if any,
as provided in Section 4.3 or any other adjustments to the rent
payment as provided for in the Lease, shall be based on the basic
monthly rent as provided for in Section 1.4.
1.4.4 Timing. The Basic Monthly Rent for Premises #1 shall
commence in compliance with the terms of the lease dated January
22, 1999. The Basic Monthly Rent for Premises #2 shall commence
on May 15, 1999.
3. Basic Monthly Rent. Paragraph 4.1 of the Lease is hereby deleted in its
entirety and is replaced with the following new Paragraph 4.1:
4.1 Basic Monthly Rent. TENANT agrees to pay LANDLORD, at 10421
South Jordan Gateway, Suite 600, South Jordan, Utah 84095 or at such other
address designated by LANDLORD, the Basic Monthly Rent, without prior demand
therefor, without offset or deduction and in advance before the end of first day
of each calendar month during the Term, commencing on the Actual Commencement
Date. TENANT shall thereafter, subject to any C.P.I. or any other adjustment
contained in the Lease, pay the amounts as provided for in the amended
paragraphs 1.4 through 1.4.4 in monthly lease payments until the expiration of
the Lease term. In the event the Actual Commencement Date occurs on a day other
than the first day of a calendar month, then the Basic Monthly Rent to be paid
on the first day rent is due shall include both the Basic Monthly Rent for the
first full calendar month occurring after the first day rent is due, plus the
Basic Monthly Rent for the initial fractional calendar month prorated on a
per-diem basis (based upon a thirty (30) day month).
4. Tenant improvements and Landlords cost therefore of Premises #2 are
subject to written approval of final plans by Tenant and Landlord.
5. Ratification. Except as expressly set forth in this First Amendment to
Lease, the Lease and each and every provision thereof, is hereby ratified and
affirmed in its entirety.
IN WITNESS WHEREOF, this Second Amendment to Lease is executed by LANDLORD
and TENANT as of the first date set forth above.
<PAGE> 3
LANDLORD: TENANT:
106th South Business Park SportsNuts.com, Inc., a Delaware
Limited Partnership, A Utah corporation
Limited Partnership
BY: /s/James A. Morse, Jr. BY: /s/Kenneth Denos
James A. Morse, Jr., Partner --------------------------------
Managing member for LGM, LC Its: Executive Vice President
General Partner
<PAGE> 1
EXHIBIT 10.5
THREE GATEWAY - OFFICE LEASE
SUMMARY OF SELECTED MATTERS
LANDLORD: DMB PROPERTY VENTURES LIMITED PARTNERSHIP
TENANT: SPORTSNUTS.COM, INC.
The Premises: Suite 140
Area of the Premises: Approximately 2,397 rentable square feet
The Term: Five (5) years
Commencement and
Expiration Dates: July 1, 1999 and June 30, 2004
Tenant's
Proportionate Share: 1.11%
Expense Stop: $8.30 with a 6% cap on controllable expenses
Base Rent: July 1, 1999-June 30, 2001 $24.50 per r.s.f. per year
$4,893.88 per month
July 1, 2001-June 30, 2002 $25.50 per r.s.f. per year
$5,093.63 per month
July 1, 2002-June 30, 2004 $26.50 per r.s.f. per year
$5,293.38 per month
Tenant's address for pre-occupancy notices:
754 North 1890 West
Provo, Utah 84601
Landlord's address for payment of rent:
410 North 44th Street, Suite 230
Phoenix, Arizona 85008
Tenant
Improvement Allowance: See Article 8(b)
Security Deposit: Letter of Credit, See Article 3
Description of Tenant's Business on the Premises:
<PAGE> 2
General Office Purposes
Name of Guarantors: N/A
THIS SUMMARY IS FOR PURPOSES OF CONVENIENCE, AND IS NOT PART OF THE LEASE ITSELF
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. TERM AND POSSESSION ............................................1
2. RENT ...........................................................1
3. SECURITY DEPOSIT AND GUARANTIES ................................1
4. USE ............................................................2
5. TAXES...........................................................3
6. PARKING AND COMMON USE AREAS ...................................3
7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES..............3
8. CONSTRUCTION, DELIVERY, AND CONDITION ..........................4
9. REPAIR AND MAINTENANCE..........................................4
10. ALTERATIONS AND PERSONAL PROPERTY...............................4
11. CERTAIN RIGHTS RESERVED BY LANDLORD ............................5
12. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE................5
13. FIRE AND CASUALTY...............................................5
14. CONDEMNATION....................................................6
15. ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD.....................6
16. ESTOPPEL CERTIFICATE............................................6
17. LANDLORD'S REMEDIES.............................................7
18. NOTICES.........................................................7
19. SUBORDINATION...................................................8
20. BROKERAGE ......................................................8
21. GENERAL PROVISIONS..............................................8
</TABLE>
EXHIBITS
EXHIBIT "A" - Legal Description
<PAGE> 3
EXHIBIT "B" - Premises
EXHIBIT "C" - Tenant Improvements
EXHIBIT "D" - Building Rules and Regulations
THREE GATEWAY OFFICE LEASE
THIS LEASE is made this 12th day of March 1999, by and between DMB
PROPERTY VENTURES LIMITED PARTNERSHIP, a Delaware limited partnership
("Landlord"), and SportsNuts.com, Inc., a Delaware corporation, ("Tenant").
Landlord hereby leases to Tenant and Tenant leases from Landlord for the
term and upon the conditions and agreements set forth in this Lease a portion of
the real property described on Exhibit "A", as illustrated by cross-hatching or
otherwise on the plan attached as Exhibit "B",consisting of approximately 2,397
rentable square feet of space (the "Premises") known as Suite 140 in Three
Gateway (the "Building") on the 1st floor. The address of the Building is 410
North 44th Street, Phoenix, Arizona 85008.
1. TERM AND POSSESSION
(a) The term of this Lease, and Tenant's obligation to pay rent shall commence
July 1, 1999 (the "Commencement Date") and shall expire upon June 30, 2004. Upon
request of either party after the term has commenced, Landlord and Tenant shall
jointly execute a memorandum confirming the Commencement Date.
(b) Upon the termination or expiration of this Lease or upon the termination of
Tenant's right of possession, whether by lapse of time or otherwise, Tenant
shall at once surrender possession of the Premises to Landlord and remove all of
Tenant's property as provided in Article 10.
(c) Tenant shall have no right to hold over after the expiration of the term of
this lease without Landlord's consent. If, with Landlord's consent, Tenant holds
over after the expiration of this Lease, Tenant shall become a tenant from month
to month only, upon all of the terms of this Lease except that the amount of the
Base Rent shall be increased to an amount equal to 150% of the Base Rental Rate
in effect immediately prior to the expiration.
(d) OPTION TO TERMINATE.
Notwithstanding anything to the contrary in this Lease, Tenant shall
have the option to terminate this Lease, effective as of the end of the
thirty-sixth (36th) month of the Lease Term, on the terms set forth in this
Article l(d). To exercise such option, Tenant shall give notice to Landlord of
such termination no later than the end of
<PAGE> 4
the thirtieth (30th) month of the Lease Term, which notice shall be irrevocable.
If such notice is given, Tenant shall pay to Landlord upon giving notice, as
consideration for exercise of this termination right, an amount equal to a) six
(6) months of rent at the effective rate of $25.50, plus b) the unamortized
amount of tenant improvement costs, plus c) the unamortized leasing commissions,
plus d) a return of 12% per annum on such amounts. If Tenant fails to give
timely notice to Landlord of such termination in accordance with this Article
I(d), Tenant shall be conclusively deemed to have forever waived such right to
terminate this Lease.
2. RENT
(a) Base Rent. Tenant shall pay to Landlord during the term of this Lease
at the office of Landlord or at such other place as Landlord may designate,
without notice, demand, deduction or set-off, in equal monthly installments in
advance on the first day of each calendar month, Base Annual Rent in the amount
of:
July 1, 1999 - June 30, 2001 $58,726.56 per year $4,893.88 per month July 1,
2001 - June 30, 2002 $61,123.56 per year $5,093.63 per month July 1, 2002 - June
30, 2004 $63,520.56 per year $5,293.38 per month
In the event the Commencement Date does not occur on the first day of a calendar
month, Tenant shall pay rent on the Commencement Date for the fractional month
on a pro rata basis.
(b) Nature of Payments. All sums required to be paid by Tenant under this
Lease, whether or not so designated, are rent.
(c) Late Charges and Interest. Any amount due from Tenant to Landlord which
is not paid when due shall bear interest at three percent in excess of the prime
rate as established from time to time by Bank One or its successor in interest
from the due date until paid, but the payment of such interest shall not excuse
or cure any default by Tenant under this Lease. In addition, any rent or other
payment not paid within ten days of its due date shall be subject to five
percent late charge representing the additional costs and burdens of special
handling.
/s/KD
INITIALS
3. SECURITY DEPOSIT AND GUARANTIES
Concurrently with the execution of this Lease, Tenant shall guaranty their
performance by posting a Letter of Credit (LOC) from a nationally recognized
financial institution in the amount of $75,000. Said LOC shall be reduced by 20%
on each lease anniversary date, if and only if, Tenant has paid all rent due and
payable under the lease on or before the 1st day of each calendar month for the
twelve (12) months immediately preceding such lease anniversary date. If Tenant
<PAGE> 5
has not paid all rent due and payable under the lease on or before the 1st day
of each calendar month for the twelve (12) months immediately preceding such
lease anniversary date, then the LOC shall not be reduced by 20% for that lease
year only.
4. USE
(a) Tenant shall continuously use and occupy the Premises for General
Office Purposes and shall use them for no other purpose whatsoever without
Landlord's prior written consent. Tenant shall be open for business during
normal business hours at least five days a week (excluding, at Tenant's option,
recognized legal holidays such as Christmas and New Year's Day). Tenant shall
maintain, at all times, an average density no greater than one person for each
two hundred rentable square feet of the Premises.
(b) Tenant shall:
(i) Not use or permit upon the Premises anything that would
invalidate any policies of insurance now or hereafter carried on the Premises or
that will increase the rate of insurance on the Premises or the Building;
(ii) Pay all additional insurance premiums which may be caused by
the use which Tenant shall make of the Premises;
(iii) Not in any manner deface or injure the Premises or overload
any floor of the Premises;
(iv) Not do anything or permit anything to be done upon the Premises
in any way tending to create a nuisance, or tending to disturb any other lessee
in the Building or tending to injure the reputation of the Building, including,
without limitation, the playing of music audible outside the Premises and the
placement of signs in or displayed through any window or door;
(vi) Not use the Premises for lodging or sleeping purposes;
(vii) Not commit or suffer to be committed any waste upon the
Premises;
(viii) Not violate any recorded restriction or covenant affecting
the Building, nor use the Premises for any purpose which would be in violation
of any exclusive rights or use granted to other tenants in the Building.
Landlord shall not grant exclusive rights which would prohibit Tenant from using
the Premises for the purposes stated in Article 4(a) above.
(c) Tenant, at Tenant's expense, shall comply with all present and future
federal, state and local laws, ordinances, orders, rules and regulations
(collectively, "Laws"), and shall procure all permits, certificates, licenses
and other authorizations required by applicable Law relating to Tenant's
business or Tenant's use or occupancy of the Premises or Tenant's activities on
the Premises. Tenant shall make all reports and filings required by applicable
Laws. Tenant shall defend, indemnify and hold harmless Landlord and Landlord's
present and future officers, directors, employees, partners and agents from and
against all claims, demands, liabilities, fines, penalties, losses, costs and
expenses, including but not limited to costs of compliance, remedial costs, and
reasonable attorneys' fees, arising out of or relating to any failure to Tenant
to comply with applicable Laws. Without limiting the foregoing, Tenant shall
comply with all Laws relating to environmental matters, and shall defend,
indemnify and hold harmless Landlord and Landlord's present and future officers,
directors, employees, partners and agents from and against all claims, demands,
<PAGE> 6
liabilities, fines, penalties, losses, costs and expenses, including but not
limited to costs of compliance, remedial costs, clean-up costs and reasonable
attorneys' fees, arising from or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant or hazardous or toxic material, substance or matter from,
on or at the Premises or the Building as a result of any act or omission on the
part of Tenant. Tenant's indemnification obligations shall survive the
expiration or termination of this Lease.
5. TAXES
(a) Tenant shall pay, prior to delinquency, all taxes assessed against or
levied upon Tenant's fixtures, furnishings, equipment and other personal
property located in or upon the Premises. Tenant shall cause the fixtures,
furnishings, equipment and other personal property to be assessed and billed
separately from the real property of
/s/KD
INITIALS
which the Premises form a part. In the event any or all of Tenant's fixtures,
furnishings, equipment and other personal property shall be assessed and taxed
with the real property, Tenant shall pay to Landlord Tenant's share of the taxes
within ten days after delivery to Tenant by Landlord of a statement in writing
setting forth the amount of the taxes applicable to Tenant's personal property.
(b) Tenant shall, simultaneously with the payment of any sums required to
be paid under this Lease as rent, additional rent or otherwise, reimburse
Landlord for any sales, use, rental, transaction privilege or other excise tax
imposed or levied on, or measured by, the amount paid.
6. PARKING AND COMMON USE AREAS
All parking areas, parking structures, access roads, driveways, pedestrian
sidewalks and ramps, landscaped areas, drainage facilities, exterior lighting,
signs, courtyards, corridors, elevators (if any), entryways, public restrooms,
and other areas and improvements provided by Landlord for the general use in
common of tenants, their officers, agents, employees, customers and other
invitees (all of which are referred to as "common facilities") shall at all
times be subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to modify, enlarge or eliminate
common facilities and to establish, modify and enforce reasonable rules and
regulations with respect thereto. Without limiting the foregoing, Landlord may
designate separate or combined parking areas for visitors, tenants and
employees. Tenant shall be entitled to the use of one (1) covered reserved
spaces, five (5) covered unreserved spaces, and four (4) uncovered unreserved
spaces in the parking garage adjacent to the building at a cost of $40.00,
$30.00, and free, respectively, per space per month, except that, all parking
charges will be waived during the first year of the lease term. Landlord to
determine the location of said spaces and may re-assign said spaces from time to
time, as Landlord deems necessary.
7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES
(a) Tenant shall pay Tenant's pro rata share of all of the Building's
operating cost, but only to the extent the Building's operating cost exceeds
$8.30 (the "Expense Stop"). The Building's operating cost consists of those
costs and expenses directly associated with managing, operating, maintaining and
repairing the office building containing the Premises and the associated parking
<PAGE> 7
facilities, grounds and common facilities, including all electrical, heating,
ventilating, air conditioning, plumbing and other building systems; exterior and
interior water features; utilities; fire and extended coverage insurance, and
rent interruption insurance; window cleaning; janitorial services; energy
management costs; real property taxes and general and special assessments;
assessments and other amounts legally payable to the property owners association
created under the restrictive covenants to which the Building is subject; wages,
salaries and employee benefits of persons performing services in connection with
the Building; parking lot and parking structure sweeping, sealing, patching,
restriping, repair and maintenance; public liability and property damage
insurance; supplies, materials, tools, parts, and equipment; equipment rental
charges; bookkeeping, accounting, legal and other professional charges and
expenses; fees for permits and licenses; administrative expenses; taxes other
than real property taxes; service and maintenance contracts; signage; and
landscaping. The Building's operating cost shall not include ground rents, debt
service, depreciation, income taxes, general overhead, tenant improvements,
brokerage commissions, new construction, or replacements outside of normal
maintenance and repair. Any expenditure for an item with a useful life extending
over several years shall, if necessary to avoid material distortion of operating
costs, be amortized over the useful life of the item and the amortization amount
included in each year's operating cost. Increases in Controllable Expenses shall
be limited to six percent (6%) per year. Controllable Expenses are defined as
all Building operating costs defined herein, excluding utilities, insurance and
real property taxes.
On the first day of each month Tenant shall pay a monthly advance charge on
account of Tenant's pro rata share of the Building's operating cost in excess of
the Expense Stop. The amount of the monthly charge shall be established by
Landlord and may be adjusted from time to time by Landlord to reflect Landlord's
estimate of current and anticipated cost. Within 120 days after the end of each
fiscal year as established for the Building by Landlord, Landlord shall provide
to Tenant a reasonably detailed summary of the actual operating costs showing
Tenant's actual share and the amount by which Tenant has overpaid or underpaid.
Any overpayment shall be credited to Tenant's account. Any deficiency shall be
payable within ten days after receipt of the statement. In the alternative,
Landlord may, at its option during all or part of the Lease term, bill Tenant
for its pro rata share of operating cost in excess of the Expense Stop, in
arrears, based on actual costs as they are incurred, in which case Tenant shall
pay the invoice within ten days after receipt.
(b) Tenant's pro rata share of the Building's operating cost shall be that
proportion that the rentable area of the Premises bears to the total rentable
area of all rentable area in the Building. The operating cost for the fiscal
year in which this Lease commences or terminates shall be apportioned so that
Tenant shall not be responsible for costs that relate to periods prior to or
subsequent to the term of this Lease except any period of holding over. Rentable
area shall be measured according to BOMA standards as approved July 31, 1980.
/s/ KD
INITIALS
(c) Tenant shall be solely responsible for the cost of any heating,
ventilation or air conditioning provided to the Premises at Tenant's request
outside of normal business hours, measured at an hourly rate reasonably
established by Landlord and billed to Tenant from time to time by Landlord.
Normal business hours for the Building are from 6:00 a.m. to 6:00 p.m. on Monday
through Friday, and 8:00 a.m. to 12:00 p.m. on Saturday, excluding holidays.
8. CONSTRUCTION, DELIVERY, AND CONDITION
<PAGE> 8
(a) If delivery of possession of the Premises to Tenant is delayed beyond
the anticipated Commencement Date because of a delay in the completion of
construction of the Premises by Landlord or because of a failure of an existing
tenant to surrender possession of the Premises to Landlord, then this Lease
shall remain in full force and effect, Landlord shall not be liable to Tenant
for any damage occasioned by delay, and the Commencement Date shall be changed
to the date actual delivery of possession to Tenant is effected. Notwithstanding
the foregoing, if delivery of possession is delayed more than 90 days after the
anticipated Commencement Date as set forth in Article l(a), Tenant, by written
notice to Landlord, may terminate this Lease prior to taking possession, and
upon such termination any security deposit shall be refunded and both Landlord
and Tenant shall be released of all further obligation.
(b) Landlord shall construct improvements in the Premises in accordance
with the plans and specifications attached as or identified in Exhibit "C".
Landlord has no obligation to design or construct improvements or to make
alterations in the Premises except as specifically set forth in Exhibit "C".
Tenant shall pay to Landlord upon the Delivery Date for any increases in costs
resulting from changes in the approved plans and specifications made at Tenant's
request. The cost of the work performed shall include all aspects of the
improvements, including but not limited to, all architectural (including space
planning), engineering, and permit fees, corridor and directory signage, actual
construction labor and materials, contractors general conditions, overhead and
profit, and Landlord's prestocked materials. Tenant shall make said payment, if
any, to Landlord within ten business days after receipt of Landlord's invoice
for said payment. Any unused allowance will be forfeited. Any changes in the
approved plans and specifications shall be subject to approval by both Landlord
and Tenant. Any defects in construction performed by Landlord shall
automatically be waived unless specified in a written punchlist delivered to
Landlord within ten days after Tenant takes possession. Landlord shall promptly
correct all defects set forth in the punchlist.
9. REPAIR AND MAINTENANCE
(a) Tenant shall maintain the interior of the Premises in good condition
and repair except that Landlord shall provide normal janitorial service five
nights per week. If Tenant does not perform necessary repairs and maintenance,
Landlord may, but need not, make necessary repairs and replacements, and Tenant
shall pay Landlord the cost upon demand.
(b) Subject to the provisions of Article 7, Landlord shall repair and
maintain the common facilities, all building systems (electrical, heating,
ventilation, air conditioning and plumbing), plate glass, and the roof, exterior
and structural elements of the Building, and shall provide normal janitorial
services. Landlord shall not be responsible to make any repairs or perform any
maintenance unless written notice of the need for such repairs or maintenance is
given by Tenant. Except in the case of a fire or casualty as provided in Article
13, there shall be no abatement of rent and no liability of Landlord by reason
of any entry to the Premises, interruption of services or facilities, temporary
closure of common facilities, or interference with Tenant's business arising
from the making of any repairs or maintenance.
10. ALTERATIONS AND PERSONAL PROPERTY
Tenant shall not make or suffer to be made any alterations, additions or
improvements to the Premises, including signs, without the prior written consent
of Landlord, which shall not unreasonably be withheld. Landlord may condition
its consent upon provision of a payment bond, in amount and form reasonably
satisfactory to Landlord, covering the work to be done by Tenant's contractor.
Any
<PAGE> 9
alterations, additions or improvements to the Premises, including signs, but not
including movable furniture and trade fixtures, shall upon installation become a
part of the realty and belong to Landlord. Tenant shall not install any antenna,
satellite dish or other fixture or equipment on the roof or in the common
facilities. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, they shall be made by
Tenant at Tenant's sole cost and expense and any contractor or person selected
by Tenant to perform the work must first be approved in writing by Landlord.
Tenant shall not permit any mechanic's or materialmen's lien to stand against
the Premises for any labor or materials provided to the Premises by any
contractor or other person 'hired or retained by Tenant. Tenant shall cause any
such lien to be discharged (by bonding or otherwise) within ten days after
demand by Landlord, and if it is not discharged within ten days, Landlord may
pay or otherwise discharge the lien and immediately recover all amounts so
expended from Tenant as additional rent. Upon the expiration or sooner
termination of the term of this
/s/KD
INITIALS
Lease or of Tenant's right to possession, Tenant shall remove all of its movable
furniture and trade fixtures, and, if requested by Landlord, at Tenant's sole
cost and expense, forthwith remove any alterations, additions or improvements
made by Tenant which are designated by Landlord to be removed. Tenant shall,
forthwith at its sole cost and expense, repair any damage to the Premises caused
by such removal and restore the Premises to a condition reasonably comparable to
their condition at the commencement of the Lease.
11. CERTAIN RIGHTS RESERVED BY LANDLORD
Landlord shall have the right:
(i) To change the Building's name or street address;
(ii) To enter the Premises either personally or by designated
representative at all reasonable times for the purpose of examining or
inspecting the same, and showing the same to prospective purchasers or lessees;
(iii) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted under Article 4.
12. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE
(a) Tenant shall defend, indemnify and hold Landlord harmless from any and
all claims arising from Tenant's use of the Premises or the conduct of its
business or from any activity, work, or thing done, permitted or suffered by
Tenant in or about the Premises, regardless of fault or negligence which is
imputed to Landlord as the owner of the Building but which involves a condition
of the Premises within the control of Tenant, its employees or contractors.
Tenant shall further defend, indemnify and hold Landlord harmless from any and
all claims arising from any breach or default in the performance of this Lease
by Tenant, or arising from any act or negligence of Tenant, or of its agents or
employees, and from all costs, attorneys' fees, expenses and liabilities
incurred as a result of any such claim. 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
<PAGE> 10
Premises from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, unless caused by active negligence of Landlord, its agents or
employees. Landlord shall not be liable for loss of or damage to any property by
theft or otherwise, or for any injury 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 any building 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
shall not be liable for interference with the natural light. Tenant shall give
immediate notice to Landlord of any fire, accident or defect discovered with the
Premises or the Building. Tenant acknowledges that it can protect itself against
any or all of the foregoing risks by procuring appropriate insurance.
(b) Tenant shall maintain fire and extended coverage insurance throughout
the term of this Lease in an amount equal to one hundred percent of the
replacement value of Tenant's fixtures, equipment and other personal property
located on the Premises together with such other insurance as may be required by
Landlord's lender or by any government agency. All proceeds of Tenant's policy
of fire and extended coverage insurance shall be payable to Tenant, and all
proceeds of policies of insurance procured by Landlord shall be payable to
Landlord. Tenant hereby waives any right to recovery from Landlord and Landlord
hereby waives any right of recovery from Tenant for any loss or damage
(including consequential loss) resulting from any of the perils insured against
in the standard form fire insurance policy with extended coverage endorsement.
During the term of this Lease, the Tenant shall, at Tenant's expense, maintain
general public liability insurance against claims for personal injury, death or
property damage occurring in, upon or about the Premises or in the common areas.
The limitation of liability of such insurance shall be not less than One Million
Dollars in respect to injury or death of one person and to the limit of not less
than One Million Dollars in respect to any one accident and to the limit of not
less than Five Hundred Thousand Dollars in respect to property damage. All of
Tenant's policies of liability insurance shall name Landlord as an additional
insured, and all policies of insurance or copies thereof required to be carried
by Tenant under this Article 12 shall be delivered to Landlord prior to the
Commencement Date and thereafter at least thirty days prior to the expiration of
the then current policies. Each policy shall contain an endorsement prohibiting
cancellation or non-renewal without at least 30 days prior notice to Landlord.
13. FIRE AND CASUALTY
If the Premises are wholly or partially destroyed or damaged by fire or
other casualty, Landlord shall restore the Premises with reasonable diligence;
provided, however, that Landlord shall have no obligation to restore
improvements not originally provided by Landlord or to replace any of Tenant's
fixtures, furnishings, equipment or personal property. Tenant shall promptly
replace and restore all of Tenants fixtures, furnishings and equipment damaged
or destroyed by the casualty. Landlord need not commence repairs until insurance
proceeds are available.
/s/KD
INITIALS
Proceeds of insurance payable with respect to a fire or other casualty shall be
received and held by Landlord. In the event the Premises are destroyed or
damaged by any fire or casualty and in Landlord's reasonable estimation
restoration will require more than ninety days, then either Landlord or Tenant
shall have the option to terminate this Lease by giving notice to the other. If
a fire or casualty occurs within the last three years of the Lease term (as
extended by any renewal or extension options which have been exercised), or if
any portion of the Building other than the Premises is damaged or destroyed by
fire or casualty and restoration is expected to require in excess of 45 days,
then Landlord may by written notice to Tenant terminate this Lease. In any case,
Landlord shall retain all insurance proceeds
<PAGE> 11
paid under Landlord's insurance policies and Tenant shall retain all insurance
proceeds paid under Tenant's insurance policies. If this Lease is not terminated
as provided above, this Lease shall continue in full force and effect, but rent
shall abate until the restoration is substantially complete. The provisions of
this Lease shall govern when this Lease shall be terminable as a result of a
fire or casualty, and no other rule or statute on the subject shall apply.
14. CONDEMNATION
In the event any portion of the Building shall be appropriated or taken
under the power of eminent domain this Lease shall terminate and expire as of
the date Tenant is required to vacate the Premises, or, if no portion of the
Premises is taken, as of the date designated in a notice from Landlord
establishing the date of closure of the Building. If any portion of the common
facilities, excluding the Building, is appropriated or taken under the power of
eminent domain, this Lease shall not terminate. All awards or compensation for
any taking of any part of the Premises or the Building or common facilities,
whether payable to Landlord or Tenant, shall be the sole property of Landlord.
Notwithstanding anything to the contrary in this Article, Tenant shall be
entitled to receive any portion of an award of compensation relating to damage
to or loss of trade fixtures or other personal property belonging to Tenant, and
Landlord shall be under no obligation to restore or replace Tenant's
furnishings, fixtures, equipment and personal property. For the purposes of this
Article 14, a voluntary sale or conveyance in lieu of condemnation shall be
deemed an appropriation or a taking under the power of eminent domain.
15. ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD
(a) Tenant shall not, either voluntarily or by operation of law, assign,
hypothecate or transfer this Lease, or sublet the Premises or any part thereof,
or permit the Premises or any part thereof to be occupied by anyone other than
Tenant or Tenant's employees, without the Landlord's prior written consent,
which shall not be unreasonably withheld provided the proposed assignee or
sublessee is reasonably satisfactory to Landlord as to credit and character and
will occupy the Premises for purposes not inconsistent with Tenant! s purposes
as stated in Article 4 or other purposes approved by Landlord. Landlord shall be
under no obligation to give or withhold consent until all information reasonably
required by Landlord with respect to the identity, background, experience and
financial worth of the proposed assignee, transferee, or subtenant has been
provided. No hypothecation, assignment, sublease or other transfer to which
Landlord has consented shall be effective for any purpose until such time as
fully executed documents of such transaction have been provided to Landlord,
and, in the case of an assignment, the assignee has attorned directly to
Landlord, and in the case of a sublease, the sublessee has acknowledged that the
sublease is subject to all of the terms and conditions of this Lease. Any
assignment, mortgage, transfer or subletting of this Lease which is not in
compliance with the provisions of this Article 15 shall be voidable and shall,
at the option of Landlord, terminate this Lease. The consent by Landlord to an
assignment or subletting shall not relieve Tenant from obtaining the express
written consent of Landlord to any further assignment or subletting or release
Tenant from any liability or obligation, whether or not then accrued. Except as
provided in this Article, this Lease shall be binding upon and inure to the
benefit of the successors and assigns of the parties.
(b) In the event of a sale or conveyance by Landlord of the Premises,
Landlord shall be relieved of all future liability upon any of the covenants or
conditions, express or implied, in favor of Tenant, and Tenant shall to look
solely to Landlord's successor in interest. This Lease shall not be affected by
any sale, and Tenant shall attom to the successor in interest. If any security
deposit has been made by
<PAGE> 12
Tenant, the successor in interest shall be obligated to return it in accordance
with the terms hereof and Landlord shall be discharged from any further
liability in reference thereto.
16. ESTOPPEL CERTIFICATE
(a) Tenant shall at any time and from time to time upon not less then ten
days' prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the dates to which the rental and other charges are paid in
advance, if any; (ii) acknowledging that there are not, to Tenants knowledge,
any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if they are claimed; and (iii) certifying such other matters relating
to this Lease as Landlord may reasonably request. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part.
/s/ KD
INITIALS
(b) Tenant's failure to deliver a statement within the time prescribed
shall constitute a material default by Tenant under this Lease and shall be
conclusive upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rental has been paid in advance.
17. LANDLORD'S REMEDIES
(a) The following shall constitute Events of Default:
(i) Tenant's failure to pay rent or any other amount due under this
Lease within five days after notice of nonpayment.
(ii) Tenant's failure to execute, acknowledge and return an estoppel
certificate under Article 16 or a subordination agreement under Article 19,
within ten days after request.
(iii) Tenant's failure to perform any other obligation under this
Lease within fifteen days after notice of nonperformance; provided, however,
that if the breach is of such a nature that it cannot be cured within fifteen
days, Tenant shall be deemed to have cured if cure is commenced promptly and
diligently pursued to completion; and provided further, that in the event of a
breach involving an imminent threat to health or safety, Landlord may in its
notice of breach reduce the period for cure to such shorter period as may be
reasonable under the circumstances.
(iv) Tenant vacates, abandons, or otherwise ceases to use the Premises
on a substantial continuing basis except temporary absence excused by reason of
fire, casualty, or other cause wholly beyond Tenant's control.
(b) Upon the occurrence of an Event of Default, Landlord, at any time
thereafter without further notice or demand may exercise any one or more of the
following remedies concurrently or in succession:
<PAGE> 13
(i) Terminate Tenants right to possession of the Premises by legal
process or otherwise, with or without terminating this Lease, and retake
exclusive possession of the Premises.
(ii) From time to time relet all or portions of the Premises, using
reasonable efforts to mitigate Landlord's damages. In connection with any
reletting, Landlord may relet for a period extending beyond the term of this
Lease and may make alterations or improvements to the Premises without releasing
Tenant of any liability. Upon a reletting of all or substantially all of the
Premises, Landlord shall be entitled to recover all of its then prospective
damages for the balance of the Lease term measured by the difference between
amounts payable under this Lease and the anticipated net proceeds of reletting.
In no event shall Tenant be entitled to receive any amount representing the
excess of avails of reletting over amounts payable hereunder.
(iii) From time to time recover accrued and unpaid rent and damages
arising from Tenants breach of the Lease, regardless of whether the Lease has
been terminated, together with applicable late charges and interest at the rate
of 18% per annum or the highest lawful rate, whichever is less.
(iv) Enforce the statutory Landlord's lien on Tenants property.
(v) Recover all attorneys' fees and other costs and expenses incurred
by Landlord in connection with enforcing this Lease, recovering possession,
reletting the Premises or collecting amounts owed.
(vi) Perform the obligation on Tenant's behalf and recover from Tenant,
upon demand, the entire amount expended by Landlord plus 20% for special
handling, supervision, and overhead.
(vii) Pursue other remedies available at law or in equity.
(c) Upon a termination of Tenant's right to possession, whether or not this
Lease is terminated, subtenancies and other rights of persons claiming under or
through Tenant: (i) shall be terminated or (ii) Tenant's interest shall be
assigned to Landlord. Landlord may separately elect termination or assignment
with respect to each such subtenancy or other matter.
18. NOTICES
All notices to be given by one party to the other under this Lease shall be
in writing, mailed or delivered to each at the address set forth at the end of
this Lease or at a changed address if notice of the change is given to the other
party in writing. In the case of notice to Tenant after Tenant takes possession
of the Premises, notice shall be sufficient if mailed or delivered to the
address of the Premises as well as to
/s/ KD
INITIALS
SportsNuts.Com.Inc.
Attn: Ken Forrest
754 North 1890 West
Provo, Utah 84601
Fax (801) 377-8183
Mailed notices shall be sent by United States certified or registered mail,
postage prepaid. Such notices shall be deemed to have been given upon posting in
the United States mail. Actual notice shall be no substitute for written notice
under any provision of this Lease.
<PAGE> 14
19. SUBORDINATION
Landlord expressly reserves the right at any time to place liens and
encumbrances on and against the Premises and the Building, superior in lien and
effect to this Lease and the estate created hereby, and Tenant shall attorn to
the purchaser of the Building under any trustee's, sheriffs or foreclosure sale.
The subordination of this Lease shall be self-operative without the necessity of
a written instrument. Tenant shall nevertheless execute within ten days after
request a subordination and attornment agreement on the form customarily used by
the holder of the lien or encumbrance which subordinates this Lease to the lien
or encumbrance, which provides that the holder will recognize Tenant's rights
under this Lease, notwithstanding any foreclosure of the lien or encumbrance,
and which requires Tenant to attorn to the purchaser as provided above.
20. BROKERAGE
If, but only if, this Lease is executed by Landlord and Tenant, and Tenant
takes possession of the Premises as provided herein, Landlord shall pay a
brokerage commission to Ross Brown Partners (to be paid pursuant to separate
agreement). Landlord warrants that Landlord has not dealt with any other broker
in connection with this transaction and Tenant warrants that Tenant has not
dealt with any other broker in connection with this transaction. If any person
shall assert a claim to a finder's fee, brokerage commission or other
compensation on account of alleged employment as a finder or broker or
performance of services as a finder or broker in connection with this
transaction, the party under whom the finder or broker is claiming shall
indemnify, defend and hold harmless the other party for, from and against any
such claim and all costs, expenses and liabilities incurred in connection with
such claim or any action or proceeding brought on such claim, including, but not
limited to, counsel and witness fees and court costs in defending against such
claim. This indemnity shall survive the expiration or termination of this Lease.
21. GENERAL PROVISIONS
(a) This Lease and the obligations of Tenant shall not be affected or
impaired because Landlord is unable to fulfill any of its obligations or is
delayed in doing so if such inability or delay is caused by reason of any
strike, lockout, civil commotion, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, inability to obtain any material, service or financing, Act of God or
other cause beyond the control of the Landlord.
(b) Tenant and its officers, agents, employees, and customers shall comply
with the rules and regulations established by Landlord and with such
modifications and additions as Landlord may hereafter make for the Building;
provided, however, that rules and regulations shall not materially abrogate any
right or privilege expressly granted to Tenant. Any violation of the rules and
regulations shall constitute a breach of this Lease.
(c) The article captions contained in this Lease are for convenience only
and shall not be considered in the construction or interpretation of any
provision.
(d) This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any matter shall be effective for any purpose. No
provision 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.
<PAGE> 15
(e) Submission of this instrument for examination shall not bind Landlord
in any manner, and no Lease or obligations of Landlord shall arise until this
instrument is signed and delivered by Landlord and Tenant.
(f) No rights to light or air over any property, whether belonging to
Landlord or any other persons, are granted to Tenant by this Lease.
(g) No waiver by Landlord of any provision of this Lease or any breach by
Tenant hereunder shall be deemed to be a waiver of any other provision.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act of Tenant, whether or
not similar to the act so consented to or approved. No act or thing done by
Landlord or Landlord's agent during the term of this Lease shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord's agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of the Lease or a
surrender of the Premises.
(h) Time is of the essence of this Lease.
LANDLORD: ADDRESS:
DMB PROPERTY VENTURES LIMITED 4201 N. 24th Street, Suite 120
PARTNERSHIP, a Delaware limited Phoenix, Arizona 85016
partnership
By: DMB G.P., an Arizona corporation
By: /s/ James C. Hoselton
James C. Hoselton
Its: Vice President
TENANT: ADDRESS:
SportsNuts.com, Inc., a Delaware 754 North 1890 West
corporation Provo, Utah 84601
By: /s/ Kenneth I. Denos
Kenneth I. Denos
Its: Vice President/General Counsel
<PAGE> 16
EXHIBIT "A"
Description of Real Property
EXHIBIT "B"
Premises
EXHIBIT "C"
Tenant Improvements
EXHIBIT "D"
BUILDING RULES AND REGULATIONS
<PAGE> 1
EXHIBIT 10.6
SPORTSNUTS.COM, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
this 16th day of November, 1998, by and between SportsNuts.com, Inc., a Utah
corporation (the "Company"), and Kenneth Denos, a resident of the State of Utah
(the "Employee"), collectively referred to hereinafter as the "Parties" or
individually as a "Party."
In consideration of the foregoing and of the promises and mutual
covenants contained herein, the Parties hereto agree as follows:
8. Employment; Location
The Company hereby employs Employee and Employee hereby accepts such
employment in Utah Salt Lake, and Summit Counties, State of Utah, or in such
other location or locations as may be mutually agreed between the Parties.
9. Term
The Company agrees to employ Employee and Employee agrees to accept
employment with the Company for the three-year period beginning November 16,
1998 through November 15, 2001, unless this Agreement is sooner terminated
pursuant to Section 6 below (the "Employment Term").
10. Duties
Employee's employment hereunder shall be in the capacity of the
Executive Vice President and General Counsel of the Company. Employee hereby
agrees to faithfully execute, to the best of his ability, such duties in
connection with such office and to otherwise devote his full time, skills, and
best efforts to such duties. Employee shall perform such duties subject to the
general supervision and control of the Company's President, Chief Executive
Officer, and Board of Directors. Employee agrees that during the Employment
Term, he shall not carry on outside work of any nature (including, without
limitation, charitable work, civic activities, consulting work, or
directorships) that is reasonably determined by the Board of Directors to
substantially interfere with Employee's duties and responsibilities hereunder.
11. Compensation and Benefits
During the Employment Term, the Company shall pay Employee, and
Employee accepts as full compensation for all services to be rendered to the
Company, the following compensation and benefits:
11.1 Salary. The Company shall pay Employee a base salary equal to
One Hundred Ten Thousand ($110,000) per year ("Base Salary") plus such annual
additional compensation or performance bonus as will be determined by the Board
of Directors at the end of
<PAGE> 2
each fiscal year. Such compensation shall be paid to Employee in accordance with
the Company's payroll practices in effect from time to time during the
Employment Term.
11.2 Grant of Option. Effective at the commencement of the
Employment Term, the Company hereby grants to Employee an option ("Option") to
acquire 400,000 shares of its common stock at an exercise price of $1.00 per
share. Effective with the commencement of the Employment Term, the Option shall
vest immediately with respect to 150,000 shares. With respect to the remainder
of the Option, the Option shall vest in three (3) successive annual installments
of 83,333, 83,333, and 83,334 shares each, with the first installment vesting
one (1) year from the date of this Agreement. Notwithstanding the foregoing, if
Employee's employment is terminated by the Company without Cause (as defined
below), the Option shall immediately vest and become exercisable with respect to
all of the shares of Common Stock subject to the Option. The Option or any
portion thereof shall expire if not exercised within five (5) years from the
date hereof. The Option shall be governed by and shall be subject to the
provisions of the Company's 1998 Stock Option Plan. The Company shall prepare
and deliver to Employee a separate grant of the Option in accordance with the
Plan in the form attached hereto as Exhibit "A."
11.3 Vehicle Allowance. The Company shall reimburse Employee for up
to $500 per month for expenses incurred from the operation and maintenance of a
vehicle to be used in connection with Employee's duties herein. Employee hereby
agrees to provide such evidence of expenses as may reasonably be required by the
Company.
11.4 Continuing Education and Legal Association Membership. The
Company shall pay all expenses for Employee to attend two (2) Continuing Legal
Education seminars anywhere within the continental United States, and two
additional (2) Continuing Legal Education seminars within the State of Utah, at
such times and locations as reasonably requested by Employee. The Company shall
also pay any and all fees necessary to maintain Employee's membership in the
Utah State Bar and the American Bar Association.
11.5 Malpractice Insurance. During the Employment Term, the Company
shall pay any and all such premiums to maintain a legal malpractice insurance
policy covering Employee for actions taken as an agent of the Company.
11.6 Additional Benefits. Employee shall be eligible to participate
in the Company's employee benefit plans for employees, including any such
benefits made available to similarly situated executives of the Company, if and
when any such plans may be adopted. Such benefit plans may include, without
limitation, the following: bonus plans, pension or profit sharing plans,
incentive stock plans and those plans covering life, disability, health, and
dental insurance in accordance with the rules established in the discretion of
the Board of Directors for individual participation in any such plans as may be
in effect from time to time.
11.7 Vacation, Sick Leave, and Holidays. During the Employment Term,
Employee shall be entitled to vacation, sick leave and holidays at full pay for
a minimum of two (2) weeks or such other period as established by the Board of
Directors.
11.8 Deductions. During the Employment Term, the Company shall have
the right to deduct from Employee's Base Salary and other compensation due to
Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state,
<PAGE> 3
or local tax or charge which may be hereafter enacted or required by law as a
charge on any such amounts paid to Employee.
12. Business Expenses
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in fulfilling Employee's duties
hereunder, in accordance with the general policy of the Company in effect from
time to time, provided that Employee furnishes to the Company adequate records
and other documentary evidence required by all federal and state statutes and
regulations issued by the appropriate taxing authorities for the substantiation
of each such business expense as a deduction on the federal or state income tax
returns of the Company.
13. Termination
13.1 Generally. During the Employment Term, either the Company or
Employee may terminate Employee's employment with the Company hereunder at any
time, without or without Cause or Good Reason, in its or his sole discretion,
upon thirty (30) days prior written notice. Without limiting the foregoing,
Employee may immediately terminate his employment with the Company at any time
for Good Reason, and the Company may immediately terminate Employee's employment
for Cause. In the event Employee's employment is terminated hereunder, all
obligations of the Company and all obligations of Employee shall cease except as
provided in this Section 6 and in Sections 7-19 below. For purposes of this
Agreement:
(a) "Cause" shall mean (i) Employee's material breach of any
of the terms, covenants, representations, or warranties contained in
this Agreement which continues following not less than two (2) weeks
written notice from the Company of such breach; (ii) the Executive
being guilty of willful misconduct on the Company's premises or
elsewhere, whether during the performance of his duties or not,
which materially and negatively affects the business or reputation
of the Company; (iii) Employee's being found guilty or entering a
plea of guilty or nolo contendre in a criminal court of a felony; or
(iv) Employee's willful breach of duty or habitual neglect of duty,
or refusal to comply with any reasonable or proper direction given
by on behalf of the President, Chief Executive Officer, or Board of
Directors.
(b) "Good Reason" shall mean the termination of employment by
Employee as a result of (i) a material breach of this Agreement by
the Company, or (ii) a relocation of Employee outside Utah, Salt
Lake, and Summit Counties.
(c) "Termination Date" shall mean (i) if this Agreement is
terminated on account of death, the date of death; (ii) if this
Agreement is terminated for Disability (as defined below), the date
on which a notice of termination due to Disability is delivered to
the Employee (or such later date as may be set forth in such
notice); (iii) if this Agreement is terminated by the Company, the
date on which a notice of termination is delivered to the Employee
(or such later date as may be set forth in such notice); (iv) if the
Agreement is terminated by the Employee, the earlier of (x) the date
on which the Employee delivers the notice of termination (or such
later date as may be set forth in such notice) to the Company and
(y) the date he ceases work; or (v) if this Agreement expires by its
terms, on the last day of the term of this Agreement.
<PAGE> 4
(d) "Disability" shall mean the Employee is unable to perform
the essential functions of his job and render services of the
character previously performed in the ordinary course and that such
inability continues for a period of at least three (3) consecutive
months (or for shorter periods totaling more than four (4) months
during any period of twelve (12) consecutive months).
13.2 Severance Pay.
(a) If (i) the Company terminates the employment of the
Employee without Cause, or (ii) the Employee terminates his
employment for Good Reason, the Employee shall be entitled to
receive Base Salary until six (6) months following the Termination
Date, or until such time as the Employee has obtained new employment
at an annual salary equal to or greater than ninety percent (90%) of
Employee's Base Salary hereunder, whichever comes first (such
payment after the Termination Date is referred to as "Severance
Pay"). During this time, the Employee agrees to make a good faith
effort to find new employment. The Severance Pay outlined above
shall be paid in accordance with the Company's regular payroll
schedule in effect at the time that Severance Pay is due.
(b) If (i) the Employee voluntarily terminates his employment
other than for Good Reason, or (ii) the Employee is terminated by
the Company for Cause, then the Employee shall be entitled to
receive Base Salary (excluding any accrued vacation) through the
Termination Date only, and no other compensation shall be payable.
(c) If the Employee's employment is terminated due to death
or Disability, the Employee shall be entitled to receive Base Salary
and accrued vacation through the Termination Date only, and no other
compensation shall be payable.
(d) In addition to the provisions of Section 6.2(a) and
6.2(b) hereof, to the extent COBRA shall be applicable to the
Company, the Employee shall be entitled to continuation of group
health plan benefits for such period as may then be required by law
if the Employee satisfies all applicable conditions to the receipt
of such continuation of benefits, including any required elections
or payments.
(e) Employee acknowledges that, upon termination of his
employment, he is entitled to no other compensation, severance or
other benefits other than those specifically set forth in this
Agreement.
(f) The provisions of this Section 6.2 are intended to be and
are exclusive and in lieu of any other rights or remedies to which
the Employee or the Company may otherwise be entitled, either at
law, tort or contract, in equity, or under this Agreement, as a
result of any termination of the Employee's employment. The Employee
shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment other than those benefits
expressly set forth in this Section 6.2.
13.3 Option to Retain as Consultant. Upon termination of Employee's
employment, other than for reason of Employee's death, the Company shall have an
option to retain
<PAGE> 5
the services of Employee as a consultant for a period of one year from the
Termination Date. The Company shall exercise such option by giving written
notice thereof to Employee within ten (10) days after the Termination Date, and
the obligations of Employee as a consultant upon such exercise shall be
effective from the Termination Date. If the Company elects to exercise such
option, Employee shall make himself available to the Company during the period
of consultancy at least 2 hours during any one-month period. Employee agrees to
accept as consideration for such services as a consultant a fee of $100 per
hour. In addition, the Company shall reimburse Employee for any reasonable
expenses paid or incurred by Employee in connection with the performance of
duties as a consultant of the Company. Employee shall be entitled to no
compensation as a consultant other than the above fees and expenses. Employee
acknowledges and agrees to be bound by the obligation not to compete with the
Company as set forth in Section 7 below during the period for which Employee is
a consultant for the Company.
14. Covenant Not to Compete
14.1 Covenant. Employee acknowledges that his services are of a
special, unique, and extraordinary value to the Company and that he has access
to the Company's trade secrets, Confidential Information, and strategic plans of
the most valuable nature. Accordingly, Employee hereby agrees that, while
employed by the Company as either an employee or as a consultant pursuant to
this Agreement, and, in any event, during the two (2) year period following the
termination of Employee's employment hereunder, Employee will not directly or
indirectly compete (as defined in Section 7.2 below) with the Company in any
geographic area in which the Company does or has done business, and will not (i)
induce or attempt to induce any employee of the Company or any entity controlled
by or in common ownership with the Company ("Affiliates") to leave the employ of
the Company or any of its Affiliates or in any way interfere with the
relationship between the Company or any of its Affiliates and any employee
thereof, (ii) hire directly or through another entity any person who was an
employee of the Company or any of its Affiliates at any time during the six
month period preceding the termination of Employee's employment hereunder, (iii)
induce or attempt to induce any customer, supplier, licensee, or other business
relation of the Company or any of its Affiliates to cease doing business with
the Company or any of its Affiliates, as the case may be, or in any way
interfere with the relationship between any such customer, supplier, licensee,
or business relation and the Company or any of its Affiliates, or (v) authorize
or assist in the taking of any of the foregoing actions by any third party.
14.2 Direct and Indirect Competition. As used herein, the phrase
"directly or indirectly compete" shall include owning, managing, operating or
controlling, or participating in the ownership, management, operation or control
of, or being connected with or having any interest in, as a stockholder,
director, officer, employee, agent, consultant, assistant, advisor, sole
proprietor, partner or otherwise, any business (other than the Company's) which
is the same as or competitive with any business conducted or to be conducted by
the Company or any of the Company's subsidiaries; provided, however, that this
prohibition shall not apply to ownership of less than one percent (1%) of the
voting stock in companies whose stock is traded on a national securities
exchange or in the over-the-counter market.
14.3 Enforceability. If any of the provisions of this Section 7 is
held unenforceable, the remaining provisions shall nevertheless remain
enforceable, and the court making such determination shall modify, among other
things, the scope, duration, or geographic area of this Section to preserve the
enforceability hereof to the maximum extent then permitted by law. In addition,
the enforceability of this Section is also subject to the injunctive and other
equitable powers of a court as described in Section 11 below.
<PAGE> 6
15. Confidential Information
Employee acknowledges that during Employee's employment or
consultancy with the Company, Employee will develop, discovery, have access to,
and become acquainted with technical, financial, marketing, personnel, and other
information relating to the present or contemplated products, services
(including prices, costs, sales, or content), or the conduct of business of the
Company or an Affiliate, computer programs, computer systems, operations,
processes, knowledge of the organization or the industry, research and
development operations, future business plans, customers (including identities
of customers and prospective customers, identities of individual contracts at
business entities which are customers or potential customers), business
relationships, or other information, which is of a confidential and proprietary
nature ("Confidential Information"). Employee agrees that all files, data,
records, reports, documents, and the like relating to such Confidential
Information, whether prepared by him or otherwise coming into Employee's
possession, shall remain the exclusive property of the Company (or its
Affiliates as the case may be), and Employee hereby agrees to promptly disclose
such Confidential Information to the Company upon request and hereby assigns to
the Company any rights which Employee may acquire in any Confidential
Information. Employee further agrees not to disclose or use any Confidential
Information and to use Employee's best efforts to prevent the disclosure or use
of any Confidential Information either during the term of employment or
consultancy or at any time thereafter, except as may be necessary in the
ordinary course of performing Employee's duties under this Agreement. Upon
termination of Employee's employment or consultancy with the Company for any
reason, Employee shall promptly deliver to the Company all materials, documents,
data, equipment, and other physical property of any nature containing or
pertaining to any Confidential Information, and Employee shall not take from the
Company's premises any such material or equipment or any reproduction thereof.
16. Invention Assignment
16.1 Disclosure of Inventions. Employee hereby agrees that if he
conceives, learns, makes, or first reduces to practice, either alone or jointly
with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, sales or marketing techniques, know-how,
or data (hereinafter referred to as "Inventions") relating to the business
and/or technology of the Company while he is employed by the Company, he will
promptly disclose such Inventions to the Company or to any person designated by
the Company.
16.2 Ownership, Assignment, Assistance, and Power of Attorney. All
Inventions relating to the Company's business, operations, or research and
development which result from work performed by Employee for the Company shall
be the sole and exclusive property of the Company, and the Company shall have
the right to use and to apply for patents, copyrights, or other statutory or
common law protections for such Inventions in any country. Employee hereby
assigns to the Company any rights which Employee has acquired or which Employee
may acquire in such Inventions. Furthermore, Employee agrees to assist the
Company in every proper way at the Company's expense to obtain patents,
copyrights, and other statutory or common law protections for such Inventions in
any country and to enforce such rights from time to time. Specifically, Employee
agrees to execute all documents as the Company may use in applying for and in
obtaining or enforcing such patents, copyrights, and other statutory or common
law protections, together with any assignments thereof to the Company or to any
person designated by the Company. Employee's obligations under this paragraph
shall continue beyond the termination of his employment with the Company, but
the Company shall compensate Employee at a reasonable rate after such
termination for the time which Employee actually spends at the Company's request
<PAGE> 7
in rendering such assistance. In the event the Company is unable for any reason
whatsoever to secure Employee's signature to any lawful document required to
apply for or to enforce any patent, copyright, or other statutory or common law
protections for such Inventions, Employee hereby irrevocably and severally
designates and appoints the Company and its duly authorized officers and agents
as Employee's agents and attorneys-in-fact to act in Employee's stead to execute
such documents and to do such other lawful and necessary acts to further the
issuance or prosecution of such patents, copyrights, and other statutory or
common law protections, and Employee hereby declares that such documents or such
acts shall have the same legal force and effect as if such documents were
executed by Employee or such acts were done by Employee.
16.3 Exclusion of Prior Inventions. Employee has identified on
Exhibit B attached hereto a complete list of all Inventions which Employee has
conceived, learned, made or first reduced to practice, either alone or jointly
with others, prior to Employee's employment with the Company and which Employee
desires to exclude from the operation of this Agreement. If no Inventions are
listed on this Exhibit B, Employee represents that he has made no such
Inventions at the time of signing this Agreement.
17. No Conflicts
Employee hereby represents that, to the best of Employee's
knowledge, Employee's performance of all the terms of this Agreement and work as
an employee or consultant of the Company does not breach any oral or written
agreement which Employee has made prior to employment with the Company
hereunder.
18. Equitable Remedies
Employee acknowledges that Employee's obligations hereunder are
special, unique, and extraordinary, and that a breach by Employee of certain
provisions of this Agreement, including without limitation Sections 7 through 9
above, would cause irreparable harm to the Company for which damages at law
would be an inadequate remedy. Accordingly, Employee hereby agrees that in any
such instance the Company shall be entitled to seek injunctive or other
equitable relief in addition to any other remedy to which it may be entitled.
All of the rights of the Company from whatever source derived, shall be
cumulative and not alternative.
19. Assignment
This Agreement is for the unique personal services of Employee and
is not assignable or delegable in whole or in part by Employee without the
consent of the Board of Directors of the Company. This Agreement may be assigned
or delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
20. Waiver or Modification
Any waiver, modification, or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the Parties hereto.
21. Resolution of Disputes
<PAGE> 8
The Parties hereby agree that all disputes concerning this Agreement
shall be subject to binding arbitration by an independent arbitrator to be
jointly selected and agreed upon by the Parties hereto. In the event that the
Parties cannot agree upon an independent arbitrator, the Parties hereby consent
to subject any such dispute to binding arbitration in accordance with the rules
of the American Arbitration Association. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The Parties
agree that the Company and Employee shall equally bear the costs of any such
arbitration under this Section 14.
22. Entire Agreement
This Agreement constitutes the full and complete understanding and
agreement of the Parties hereto with respect to the subject matter covered
herein and supersedes all prior oral or written understandings and agreements
with respect thereto.
23. Employee Acknowledgment.
Employee acknowledges that (i) he was consulted with or has had the
opportunity to consult with independent counsel of his own choice concerning
this Agreement, and has been advised to do so by the Company, and (ii) that he
has read and understands the Agreement, is fully aware of its legal effect, and
has entered into it freely based upon his own judgement.
24. Severability
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
25. Notices
Any notice required hereunder to be given by either party shall be
in writing and shall be delivered personally or sent by certified or registered
mail, postage prepaid, or by private courier, with written verification of
delivery, or by facsimile transmission to the other party to the address or
telephone number set forth below or to such other address or telephone number as
either party may designate from time to time according to this provision. A
notice delivered personally shall be effective upon receipt. A notice sent by
facsimile transmission shall be effective twenty-four hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the third day after the day of mailing.
(a) To Employee at: Kenneth I. Denos
119 South, 500 West
Clearfield, Utah 84015
(b) To the Company at: SportsNuts.com, Inc.
754 North 1890 West
Provo, Utah 84601
Attention: Kenneth Forrest
<PAGE> 9
26. Governing Law; Venue
This Agreement shall be governed by and construed in accordance with
the laws of the State of Utah without regard to the conflict of laws. The
Parties further agree that proper venue and jurisdiction for any dispute under
this agreement shall be the courts in the State of Utah.
IN WITNESS WHEREOF, Employee has signed this Agreement personally
and the Company has caused this Agreement to be executed by its duly authorized
representative to be effective as of the date first given above.
SPORTSNUTS.COM, INC. EMPLOYEE
/s/Kenneth Forrest /s/Kenneth Denos
- ----------------------------------- -----------------------------------
Kenneth Forrest Kenneth Denos
President
<PAGE> 1
EXHIBIT 10.7
SPORTSNUTS.COM, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
this 16th day of November, 1998, by and between SportsNuts.com, Inc., a Utah
corporation (the "Company"), and Rodger Smith, a resident of the State of Utah
(the "Employee"), collectively referred to hereinafter as the "Parties" or
individually as a "Party."
In consideration of the foregoing and of the promises and mutual
covenants contained herein, the Parties hereto agree as follows:
27. Employment; Location
The Company hereby employs Employee and Employee hereby accepts such
employment in Utah, Salt Lake, and Summit Counties, State of Utah, or in such
other location or locations as may be mutually agreed between the Parties.
28. Term
The Company agrees to employ Employee and Employee agrees to accept
employment with the Company for the three-year period beginning November 16,
1998 through November 15, 2001, unless this Agreement is sooner terminated
pursuant to Section 6 below (the "Employment Term").
29. Duties
Employee's employment hereunder shall be in the capacity of the Vice
President of Marketing, Products, and Operations. Employee hereby agrees to
faithfully execute, to the best of his ability, such duties in connection with
such office and to otherwise devote his full time, skills, and best efforts to
such duties. Employee shall perform such duties subject to the general
supervision and control of the Company's President, Chief Executive Officer, and
Board of Directors. Employee agrees that during the Employment Term, he shall
not carry on outside work of any nature (including, without limitation,
charitable work, civic activities, consulting work, or directorships) that is
reasonably determined by the Board of Directors to substantially interfere with
Employee's duties and responsibilities hereunder.
30. Compensation and Benefits
During the Employment Term, the Company shall pay Employee, and
Employee accepts as full compensation for all services to be rendered to the
Company, the following compensation and benefits:
30.1 Salary. The Company shall pay Employee a base salary equal to
One Hundred Thousand ($100,000) per year ("Base Salary") plus such annual
additional compensation or performance bonus as will be determined by the Board
of Directors at the end of each fiscal year. Such compensation shall be paid to
Employee in accordance with the Company's payroll practices in effect from time
to time during the Employment Term.
30.2 Grant of Option. Effective at the commencement of the
Employment Term, the Company hereby grants to Employee an option ("Option") to
acquire 300,000 shares of its common stock at an exercise price of $1.00 per
share. Effective with the commencement of the Employment Term, the
<PAGE> 2
Option shall vest immediately with respect to 150,000 shares. With respect to
the remainder of the Option, the Option shall vest in three (3) successive equal
annual installments of 50,000 shares each, with the first installment vesting
one (1) year from the date of this Agreement. Notwithstanding the foregoing, if
Employee's employment is terminated by the Company without Cause (as defined
below), the Option shall immediately vest and become exercisable with respect to
all of the shares of Common Stock subject to the Option. The Option or any
portion thereof shall expire if not exercised within five (5) years from the
date hereof. The Option shall be governed by and shall be subject to the
provisions of the Company's 1998 Stock Option Plan ("Plan"). The Company shall
prepare and deliver to Employee a separate grant of the Option in accordance
with the Plan in the form attached hereto as Exhibit "A."
30.3 Vehicle Allowance. The Company shall reimburse Employee for up
to $500 per month for expenses incurred from the operation and maintenance of a
vehicle to be used in connection with Employee's duties herein. Employee hereby
agrees to provide such evidence of expenses as may reasonably be required by the
Company.
30.4 Additional Benefits. Employee shall be eligible to participate
in the Company's employee benefit plans for employees, including any such
benefits made available to similarly situated executives of the Company, if and
when any such plans may be adopted. Such benefit plans may include, without
limitation, the following: bonus plans, pension or profit sharing plans,
incentive stock plans and those plans covering life, disability, health, and
dental insurance in accordance with the rules established in the discretion of
the Board of Directors for individual participation in any such plans as may be
in effect from time to time.
30.5 Vacation, Sick Leave, and Holidays. During the Employment Term,
Employee shall be entitled to vacation, sick leave and holidays at full pay for
a minimum of two (2) weeks or such other period as established by the Board of
Directors.
30.6 Deductions. During the Employment Term, the Company shall have
the right to deduct from Employee's Base Salary and other compensation due to
Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state, or local tax or charge which may be
hereafter enacted or required by law as a charge on any such amounts paid to
Employee.
31. Business Expenses
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in fulfilling Employee's duties
hereunder, in accordance with the general policy of the Company in effect from
time to time, provided that Employee furnishes to the Company adequate records
and other documentary evidence required by all federal and state statutes and
regulations issued by the appropriate taxing authorities for the substantiation
of each such business expense as a deduction on the federal or state income tax
returns of the Company.
32. Termination
32.1 Generally. During the Employment Term, either the Company or
Employee may terminate Employee's employment with the Company hereunder at any
time, with or without Cause or Good Reason, in its or his sole discretion, upon
thirty (30) days prior written notice. Without limiting the foregoing, Employee
may immediately terminate his employment with the Company at any time for Good
Reason, and the Company may immediately terminate Employee's employment for
Cause. In the event Employee's employment is terminated hereunder, all
obligations of the Company and all obligations of Employee shall cease except as
provided in this Section 6 and in Sections 7-19 below. For purposes of this
Agreement:
<PAGE> 3
(a) "Cause" shall mean (i) Employee's material breach of any
of the terms, covenants, representations, or warranties contained in
this Agreement which continues following not less than two (2) weeks
written notice from the Company of such breach; (ii) the Executive
being guilty of willful misconduct on the Company's premises or
elsewhere, whether during the performance of his duties or not,
which materially and negatively affects the business or reputation
of the Company; (iii) Employee's being found guilty or entering a
plea of guilty or nolo contendre in a criminal court of a felony; or
(iv) Employee's willful breach of duty or habitual neglect of duty,
or refusal to comply with any reasonable or proper direction given
by on behalf of the President, Chief Executive Officer, or Board of
Directors.
(b) "Good Reason" shall mean the termination of employment
by Employee as a result of (i) a material breach of this Agreement
by the Company, or (ii) a relocation of Employee outside of Utah,
Salt Lake, and Summit Counties.
(c) "Termination Date" shall mean (i) if this Agreement is
terminated on account of death, the date of death; (ii) if this
Agreement is terminated for Disability (as defined below), the date
on which a notice of termination due to Disability is delivered to
the Employee (or such later date as may be set forth in such
notice); (iii) if this Agreement is terminated by the Company, the
date on which a notice of termination is delivered to the Employee
(or such later date as may be set forth in such notice); (iv) if the
Agreement is terminated by the Employee, the earlier of (x) the date
on which the Employee delivers the notice of termination (or such
later date as may be set forth in such notice) to the Company and
(y) the date he ceases work; or (v) if this Agreement expires by its
terms, on the last day of the term of this Agreement.
(d) "Disability" shall mean the Employee is unable to
perform the essential functions of his job and render services of
the character previously performed in the ordinary course and that
such inability continues for a period of at least three (3)
consecutive months (or for shorter periods totaling more than four
(4) months during any period of twelve (12) consecutive months).
32.2 Severance Pay.
(a) If (i) the Company terminates the employment of the
Employee without Cause, or (ii) the Employee terminates his
employment for Good Reason, the Employee shall be entitled to
receive Base Salary until six (6) months following the Termination
Date, or until such time as the Employee has obtained new employment
at an annual salary equal to or greater than ninety percent (90%) of
Employee's Base Salary hereunder, whichever comes first (such
payment after the Termination Date is referred to as "Severance
Pay"). During this time, the Employee agrees to make a good faith
effort to find new employment. The Severance Pay outlined above
shall be paid in accordance with the Company's regular payroll
schedule in effect at the time that Severance Pay is due.
(b) If (i) the Employee voluntarily terminates his
employment other than for Good Reason, or (ii) the Employee is
terminated by the Company for Cause, then the Employee shall be
entitled to receive Base Salary (excluding any accrued vacation)
through the Termination Date only, and no other compensation shall
be payable.
(c) If the Employee's employment is terminated due to death
or Disability, the Employee shall be entitled to receive Base Salary
and accrued vacation through the Termination Date only, and no other
compensation shall be payable.
<PAGE> 4
(d) In addition to the provisions of Section 6.2(a) and
6.2(b) hereof, to the extent COBRA shall be applicable to the
Company, the Employee shall be entitled to continuation of group
health plan benefits for such period as may then be required by law
if the Employee satisfies all applicable conditions to the receipt
of such continuation of benefits, including any required elections
or payments.
(e) Employee acknowledges that, upon termination of his
employment, he is entitled to no other compensation, severance or
other benefits other than those specifically set forth in this
Agreement.
(f) The provisions of this Section 6.2 are intended to be
and are exclusive and in lieu of any other rights or remedies to
which the Employee or the Company may otherwise be entitled, either
at law, tort or contract, in equity, or under this Agreement, as a
result of any termination of the Employee's employment. The Employee
shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment other than those benefits
expressly set forth in this Section 6.2.
32.3 Option to Retain as Consultant. Upon termination of Employee's
employment, other than for reason of Employee's death, the Company shall have an
option to retain the services of Employee as a consultant for a period of one
year from the Termination Date. The Company shall exercise such option by giving
written notice thereof to Employee within ten (10) days after the Termination
Date, and the obligations of Employee as a consultant upon such exercise shall
be effective from the Termination Date. If the Company elects to exercise such
option, Employee shall make himself available to the Company during the period
of consultancy at least 2 hours during any one-month period. Employee agrees to
accept as consideration for such services as a consultant a fee of $100 per
hour. In addition, the Company shall reimburse Employee for any reasonable
expenses paid or incurred by Employee in connection with the performance of
duties as a consultant of the Company. Employee shall be entitled to no
compensation as a consultant other than the above fees and expenses. Employee
acknowledges and agrees to be bound by the obligation not to compete with the
Company as set forth in Section 7 below during the period for which Employee is
a consultant for the Company.
33. Covenant Not to Compete
33.1 Covenant. Employee acknowledges that his services are of a
special, unique, and extraordinary value to the Company and that he has access
to the Company's trade secrets, Confidential Information, and strategic plans of
the most valuable nature. Accordingly, Employee hereby agrees that, while
employed by the Company as either an employee or as a consultant pursuant to
this Agreement, and, in any event, during the two (2) year period following the
termination of Employee's employment hereunder, Employee will not directly or
indirectly compete (as defined in Section 7.2 below) with the Company in any
geographic area in which the Company does or has done business, and will not (i)
induce or attempt to induce any employee of the Company or any entity controlled
by or in common ownership with the Company ("Affiliates") to leave the employ of
the Company or any of its Affiliates or in any way interfere with the
relationship between the Company or any of its Affiliates and any employee
thereof, (ii) hire directly or through another entity any person who was an
employee of the Company or any of its Affiliates at any time during the six
month period preceding the termination of Employee's employment hereunder, (iii)
induce or attempt to induce any customer, supplier, licensee, or other business
relation of the Company or any of its Affiliates to cease doing business with
the Company or any of its Affiliates, as the case may be, or in any way
interfere with the relationship between any such customer, supplier, licensee,
or business relation and the Company or any of its Affiliates, or (v) authorize
or assist in the taking of any of the foregoing actions by any third party.
33.2 Direct and Indirect Competition. As used herein, the phrase
"directly or indirectly compete" shall include owning, managing, operating or
controlling, or participating in the ownership,
<PAGE> 5
management, operation or control of, or being connected with or having any
interest in, as a stockholder, director, officer, employee, agent, consultant,
assistant, advisor, sole proprietor, partner or otherwise, any business (other
than the Company's) which is the same as or competitive with any business
conducted or to be conducted by the Company or any of the Company's
subsidiaries; provided, however, that this prohibition shall not apply to
ownership of less than one percent (1%) of the voting stock in companies whose
stock is traded on a national securities exchange or in the over-the-counter
market.
33.3 Enforceability. If any of the provisions of this Section 7 is
held unenforceable, the remaining provisions shall nevertheless remain
enforceable, and the court making such determination shall modify, among other
things, the scope, duration, or geographic area of this Section to preserve the
enforceability hereof to the maximum extent then permitted by law. In addition,
the enforceability of this Section is also subject to the injunctive and other
equitable powers of a court as described in Section 11 below.
34. Confidential Information
Employee acknowledges that during Employee's employment or
consultancy with the Company, Employee will develop, discovery, have access to,
and become acquainted with technical, financial, marketing, personnel, and other
information relating to the present or contemplated products, services
(including prices, costs, sales, or content), or the conduct of business of the
Company or an Affiliate, computer programs, computer systems, operations,
processes, knowledge of the organization or the industry, research and
development operations, future business plans, customers (including identities
of customers and prospective customers, identities of individual contracts at
business entities which are customers or potential customers), business
relationships, or other information, which is of a confidential and proprietary
nature ("Confidential Information"). Employee agrees that all files, data,
records, reports, documents, and the like relating to such Confidential
Information, whether prepared by him or otherwise coming into Employee's
possession, shall remain the exclusive property of the Company (or its
Affiliates as the case may be), and Employee hereby agrees to promptly disclose
such Confidential Information to the Company upon request and hereby assigns to
the Company any rights which Employee may acquire in any Confidential
Information. Employee further agrees not to disclose or use any Confidential
Information and to use Employee's best efforts to prevent the disclosure or use
of any Confidential Information either during the term of employment or
consultancy or at any time thereafter, except as may be necessary in the
ordinary course of performing Employee's duties under this Agreement. Upon
termination of Employee's employment or consultancy with the Company for any
reason, Employee shall promptly deliver to the Company all materials, documents,
data, equipment, and other physical property of any nature containing or
pertaining to any Confidential Information, and Employee shall not take from the
Company's premises any such material or equipment or any reproduction thereof.
35. Invention Assignment
35.1 Disclosure of Inventions. Employee hereby agrees that if he
conceives, learns, makes, or first reduces to practice, either alone or jointly
with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, sales or marketing techniques, know-how,
or data (hereinafter referred to as "Inventions") relating to the business
and/or technology of the Company while he is employed by the Company, he will
promptly disclose such Inventions to the Company or to any person designated by
the Company.
35.2 Ownership, Assignment, Assistance, and Power of Attorney. All
Inventions relating to the Company's business, operations, or research and
development which result from work performed by Employee for the Company shall
be the sole and exclusive property of the Company, and the Company shall have
the right to use and to apply for patents, copyrights, or other statutory or
common law protections for such Inventions in any country. Employee hereby
assigns to the Company any rights which Employee has acquired or which Employee
may acquire in such Inventions. Furthermore, Employee agrees
<PAGE> 6
to assist the Company in every proper way at the Company's expense to obtain
patents, copyrights, and other statutory or common law protections for such
Inventions in any country and to enforce such rights from time to time.
Specifically, Employee agrees to execute all documents as the Company may use in
applying for and in obtaining or enforcing such patents, copyrights, and other
statutory or common law protections, together with any assignments thereof to
the Company or to any person designated by the Company. Employee's obligations
under this paragraph shall continue beyond the termination of his employment
with the Company, but the Company shall compensate Employee at a reasonable rate
after such termination for the time which Employee actually spends at the
Company's request in rendering such assistance. In the event the Company is
unable for any reason whatsoever to secure Employee's signature to any lawful
document required to apply for or to enforce any patent, copyright, or other
statutory or common law protections for such Inventions, Employee hereby
irrevocably and severally designates and appoints the Company and its duly
authorized officers and agents as Employee's agents and attorneys-in-fact to act
in Employee's stead to execute such documents and to do such other lawful and
necessary acts to further the issuance or prosecution of such patents,
copyrights, and other statutory or common law protections, and Employee hereby
declares that such documents or such acts shall have the same legal force and
effect as if such documents were executed by Employee or such acts were done by
Employee.
35.3 Exclusion of Prior Inventions. Employee has identified on
Exhibit B attached hereto a complete list of all Inventions which Employee has
conceived, learned, made or first reduced to practice, either alone or jointly
with others, prior to Employee's employment with the Company and which Employee
desires to exclude from the operation of this Agreement. If no Inventions are
listed on this Exhibit B, Employee represents that he has made no such
Inventions at the time of signing this Agreement.
36. No Conflicts
Employee hereby represents that, to the best of Employee's
knowledge, Employee's performance of all the terms of this Agreement and work as
an employee or consultant of the Company does not breach any oral or written
agreement which Employee has made prior to employment with the Company
hereunder.
37. Equitable Remedies
Employee acknowledges that Employee's obligations hereunder are
special, unique, and extraordinary, and that a breach by Employee of certain
provisions of this Agreement, including without limitation Sections 7 through 9
above, would cause irreparable harm to the Company for which damages at law
would be an inadequate remedy. Accordingly, Employee hereby agrees that in any
such instance the Company shall be entitled to seek injunctive or other
equitable relief in addition to any other remedy to which it may be entitled.
All of the rights of the Company from whatever source derived, shall be
cumulative and not alternative.
38. Assignment
This Agreement is for the unique personal services of Employee and
is not assignable or delegable in whole or in part by Employee without the
consent of the Board of Directors of the Company. This Agreement may be assigned
or delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
39. Waiver or Modification
Any waiver, modification, or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the Parties hereto.
<PAGE> 7
40. Resolution of Disputes.
The Parties hereby agree that all disputes concerning this Agreement
shall be subject to binding arbitration by an independent arbitrator to be
jointly selected and agreed upon by the Parties hereto. In the event that the
Parties cannot agree upon an independent arbitrator, the Parties hereby consent
to subject any such dispute to binding arbitration in accordance with the rules
of the American Arbitration Association. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The Parties
agree that the Company and Employee shall equally bear the costs of any such
arbitration under this Section 14.
41. Entire Agreement
This Agreement constitutes the full and complete understanding and
agreement of the Parties hereto with respect to the subject matter covered
herein and supersedes all prior oral or written understandings and agreements
with respect thereto.
42. Employee Acknowledgment.
Employee acknowledges that (i) he was consulted with or has had the
opportunity to consult with independent counsel of his own choice concerning
this Agreement, and has been advised to do so by the Company, and (ii) that he
has read and understands the Agreement, is fully aware of its legal effect, and
has entered into it freely based upon his own judgement.
43. Severability
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
44. Notices
Any notice required hereunder to be given by either party shall be
in writing and shall be delivered personally or sent by certified or registered
mail, postage prepaid, or by private courier, with written verification of
delivery, or by facsimile transmission to the other party to the address or
telephone number set forth below or to such other address or telephone number as
either party may designate from time to time according to this provision. A
notice delivered personally shall be effective upon receipt. A notice sent by
facsimile transmission shall be effective twenty-four hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the third day after the day of mailing.
(a) To Employee at: Rodger Smith
374 West, 100 North
Orem, Utah 84057
(b) To the Company at: SportsNuts.com, Inc.
754 North 1890 West
Provo, Utah 84601
Attention: Kenneth I. Denos
45. Governing Law; Venue
This Agreement shall be governed by and construed in accordance with
the laws of the State of Utah without regard to the conflict of laws. The
Parties further agree that proper venue and jurisdiction for any dispute under
this agreement shall be the courts in the State of Utah.
<PAGE> 8
IN WITNESS WHEREOF, Employee has signed this Agreement personally
and the Company has caused this Agreement to be executed by its duly authorized
representative to be effective as of the date first given above.
SPORTSNUTS.COM, INC. EMPLOYEE
/s/Kenneth Forrest /s/Rodger Smith
- ----------------------------------- -----------------------------------
Kenneth Forrest Rodger Smith
President
<PAGE> 9
EXHIBIT A
STOCK OPTION GRANT
<PAGE> 10
EXHIBIT B
LIST OF INVENTIONS
None.
Initialed by Employee:_______________________________
<PAGE> 1
Exhibit 10.8
SUMMARY
ANTHONY MOORE COMPENSATION AGREEMENT
The following agreement was proposed and approved by the Board of
Directors on December 18, 1999:
That in exchange for capital raising services to be provided to the
Company (SportsNuts.com) by Mr. Moore, the Board of Directors approved the grant
of the following compensation for each investment of at least $100,000 to
"accredited investors" as such term is defined in Regulation D of the
Securities Act of 1933:
(i) payment of 9% cash commissions;
(ii) issuance of bonus shares equal to 15% of the gross proceeds received
by the Company; and
(iii) issuance of warrants to acquire shares of Common Stock at an
exercise price of $1.00 per share, equal to 8.5% of the gross proceeds received
by the Company.
That on receipt of the consideration therefor, such bonus shares so issued
shall be duly authorized, issued, fully paid and non-assessable shares of stock
of the Corporation.
<PAGE> 1
Exhibit 10.9
BUSINESS LOAN AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account
$75,000.00 05-04-1999 04-30-2000 6001 512 4200 8662401
Officer Initials
64950 /s/ SC
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: SPORTSNUTS.COM, INC. Lender: ZIONS FIRST NATIONAL BANK
10421 SOUTH 400 WEST, SUITE 650 FIRST SOUTH OFFICE
SOUTH JORDAN, UT 84095 2166 SOUTH 3200 WEST
WEST VALLEY CITY, UT 84119
THIS BUSINESS LOAN AGREEMENT between SPORTSNUTS.COM, INC. ("Borrower") and ZIONS
FIRST NATIONAL BANK ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement Individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) In
granting, renewing, or extending any Loan, Lender Is relying upon Borrower's
representations, warranties, ana agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of May 4, 1999, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means SPORTSNUTS.COM, INC. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates
of Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
<PAGE> 2
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with
others; whether Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such Indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means ZIONS FIRST NATIONAL BANK, its
successors and assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender; (b)
liens for taxes, assessments, or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
<PAGE> 3
course of business and securing obligations which are not yet delinquent; (d)
purchase money liens or purchase money security interests upon or in any
property acquired or held by Borrower in the ordinary course of business to
secure indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and Liens";
(e) liens and security interests which, as of the date of this Agreement, have
been disclosed to and approved by the Lender in writing; and (f) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
05-04-1999 BUSINESS LOAN AGREEMENT Page 2
(Continued)
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d)evidence of insurance as
required below; and (e) any other documents required
under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
<PAGE> 4
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Utah and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to
<PAGE> 5
such properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any other
name for at least the last five (6) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 , et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections and tests as Lender
may deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnity and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release of a hazardous waste or substance on the
properties. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events,
<PAGE> 6
if any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
05-04-1999 BUSINESS LOAN AGREEMENT Page 3
(Continued)
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, (iii) no steps
have been taken to terminate any such plan, and (iv) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 10421 SOUTH 400 WEST, SUITE 550, SOUTH JORDAN, UT 84095.
Unless Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
<PAGE> 7
Survival of Representations and Warranties. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no event
later than forty five (45) days after the end of each fiscal year, Borrower's
balance sheet and income statement for the year ended, prepared by Borrower. All
financial reports required to be provided under this Agreement shall be prepared
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrowers
properties and operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be canceled or diminished without at least ten (10) days' prior written
notice to Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by
any act, omission or default of Borrower or any other person. In connection with
all policies covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with such loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d)the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of
<PAGE> 8
determining those values; and (f) the expiration date of the policy. In
addition, upon request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's
<PAGE> 9
books, accounts, and records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated records and
computer software programs for the generation of such records) in the possession
of a third party, Borrower, upon request of Lender, shall
05-04-1999 BUSINESS LOAN AGREEMENT Page 4
(Continued)
notify such party to permit Lender free access to such records at all reasonable
times and to provide Lender with copies of any records it may request, all at
Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender at
least annually and at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
<PAGE> 10
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock(other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or after or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
WAIVER OF CLAIMS. BORROWER (i) REPRESENTS THAT THEY HAVE NO DEFENSES TO OR
SETOFFS AGAINST ANY INDEBTEDNESS OR OTHER OBLIGATIONS OWING TO LENDER OR ITS
AFFILIATES (THE -OBLIGATIONS-), NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR
ANY MATTER WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS AND (ii) RELEASE
LENDER AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS, IN LAW
OR EQUITY, EXISTING AS OF THE DATE OF THIS AGREEMENT, WHICH BORROWER HAS OR MAY
HAVE BY REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER,
RELATED OR UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT MATTER OF THIS
AGREEMENT. THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF EXPRESS
CONTRACTUAL OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.
TAX RETURNS. BORROWER SHALL PROVIDE LENDER WITH ANNUAL FEDERAL INCOME TAX
RETURNS INCLUDING ALL SCHEDULES WITHIN FIFTEEN (15) DAYS OF FILING AND NO LATER
THAN OCTOBER 15TH OF EACH YEAR.
YEAR 2000 COMPLIANCE COVENANT. An exhibit, titled "YEAR 2000 COMPLIANCE
COVENANT," is attached to this Agreement and by this reference is made a
<PAGE> 11
part of this Agreement just as if all the provisions, terms and conditions of
the Exhibit had been fully set forth in this Agreement.
RIGHT OF SETOFF.- Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement: Default on Indebtedness. Failure of Borrower to make any
payment when due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.
Default In Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time
made or furnished, or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect including failure of any
05-04-1999 BUSINESS LOAN AGREEMENT Page 5
(Continued)
Security Agreement to create a valid and perfected Security Interest) at any
time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
<PAGE> 12
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply if there is
a good faith dispute by Borrower or Grantor, as the case may be, as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding, and if Borrower or Grantor gives Lender written notice of
the creditor or forfeiture proceeding and furnishes reserves or a surety bond
for the creditor or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender, and,
in doing so, cure the Event of Default.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured (and no
Event of Default will have occurred) if Borrower or Grantor, as the case may be,
after receiving written notice from Lender demanding cure of such default: (a)
cures the default within fifteen (15) days; or (b) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems in
Lender's sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to
<PAGE> 13
make expenditures or to take action to perform an obligation of Borrower or of
any Grantor shall not affect Lender's right to declare a default and to exercise
its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Utah. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of SALT LAKE
County, the State of Utah. Subject to the provisions on arbitration, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Utah.
ARBITRATION DISCLOSURES:
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY VERY
LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING
IN THEIR AWARDS. THE RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS AFFILIATED
WITH THE BANKING INDUSTRY.
6. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties and their
assigns, including but not limited to Disputes arising out of or relating to
this agreement, this arbitration provision ("arbitration clause"), or any
related agreements or instruments relating hereto or delivered in connection
herewith ("Related Documents"), and including but not limited to a Dispute based
on or arising from an alleged tort, shall at the request of any party be
resolved by binding arbitration in accordance with the applicable arbitration
rules of the American Arbitration Association (the "Administrator"). The
provisions of this arbitration clause shall survive any termination, amendment,
or expiration of this agreement or Related Documents. The provisions of this
arbitration clause shall supersede any prior arbitration agreement between or
among the parties. If any provision of this arbitration clause should be
determined to be unenforceable, all other provisions of this arbitration clause
shall remain in full force and effect.
<PAGE> 14
(b) The arbitration proceedings shall be conducted in Salt Lake City, Utah, at a
place to be determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to take any
action to require the arbitration proceeding to be completed and the
arbitrator(s)' award issued within one hundred fifty (150) days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the authority
to impose sanctions on any party that fails to comply with time periods imposed
by the Administrator or the arbitrator(s), including the sanction of summarily
dismissing any Dispute or defense with prejudice. The arbitrator(s) shall have
the authority to resolve any Dispute regarding the terms of this agreement, this
arbitration clause or Related Documents, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods applicable
to any Dispute or defense, whether by statute or agreement, shall apply to any
arbitration proceeding hereunder and the arbitrator(s) shall have the authority
to decide whether any Dispute or defense is barred by a limitations period and,
if so, to summarily enter an award dismissing any Dispute or defense on that
basis. The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a party
05-04-1999 BUSINESS LOAN AGREEMENT Page 6
(Continued)
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any party: (1) consolidate in a single
arbitration proceeding any other claim or controversy involving another party
that is substantially related to the Dispute where that other party is bound by
an arbitration clause with the Lender, such as borrowers, guarantors, sureties,
and owners of collateral; (2) consolidate in a single arbitration proceeding any
other claim or controversy that is substantially similar to the Dispute; and (3)
administer multiple arbitration claims or controversies as class actions in
accordance with the provisions of Rule 23 of the Federal Rules of Civil
Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single arbitrator
shall have expertise in the subject matter of the Dispute. Where three
arbitrators conduct an arbitration proceeding, the Dispute shall be decided by a
majority vote of the three arbitrators, at least one of whom must have expertise
in the subject matter of the Dispute and at least one of whom must be a
practicing attorney. The arbitrator(s) shall award to the prevailing party
recovery of all costs and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The arbitrator(s),
either during the pendency of the arbitration proceeding or as part of the
arbitration award, also may grant provisional or ancillary remedies, including
but not limited to an award of injunctive relief, foreclosure, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver.
<PAGE> 15
(d) Judgment upon an arbitration award may be entered in any court having
jurisdiction, subject to the following limitation: the arbitration award is
binding upon the parties only if the amount does not exceed Four Million Dollars
($4,000,000.00); if the award exceeds that limit, either party may demand the
right to a court trial. Such a demand must be filed with the Administrator
within thirty (30) days following the date of the arbitration award; if such a
demand is not made within that time period, the amount of the arbitration award
shall be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any rights
hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
other security; (2) exercise self-help remedies, including but not limited to
repossession and setoff rights; or (3) obtain from a court having jurisdiction
thereover any provisional or ancillary remedies, including but not limited to
injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at
any time, before or during initiation of an arbitration proceeding, except to
the extent such action is contrary to the arbitration award. The exercise of
such rights shall not constitute a waiver of the right to submit any Dispute to
arbitration, and any claim or controversy related to the exercise of such rights
shall be a Dispute to be resolved under the provisions of this arbitration
clause. Any party may initiate arbitration with the Administrator; however, if
any party initiates litigation and another party disputes any allegation in that
litigation, the disputing party-upon the request of the initiating party-must
file a demand for arbitration with the Administrator and pay the Administrator's
filing fee. The parties may serve by mail a notice of an initial motion for an
order of arbitration.
(f) Notwithstanding the applicability of any other law to this agreement, the
arbitration clause, or Related Documents between or among the parties, the
Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall apply to the
construction and interpretation of this arbitration clause.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
<PAGE> 16
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or insolvency
of any holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses,
including without limitation reasonable attorneys' fees, incurred in connection
with the preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's reasonable attorneys' fees and Lender's
legal expenses, whether or not there is a lawsuit, including reasonable
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law. Notices. All notices required to be
given under this Agreement shall be given in writing, may be sent by
telefacsimile (unless otherwise required by law), and shalt be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower, notice to any Borrower will
constitute notice to all Borrowers. For notice purposes, Borrower will keep
Lender informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or
<PAGE> 17
other financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however have the
right to assign its rights under this Agreement or any interest therein without
the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and
05-04-1999 BUSINESS LOAN AGREEMENT Page 7
(Continued)
delivery to Lender of the Related Documents, regardless of any Investigation
made by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
FINAL AGREEMENT. Borrower understands that this Agreement and the related loan
documents are the final expression of the agreement between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND "BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MAY
4, 1999.
BORROWER:
SPORTSNUTS.COM, INC.
By:/s/ J. Kelly Bevan By: /s/ Kenneth I. Denos
KELLY BEVAN, CONTROLLER KENNETH I. DENOS
VICE PRESIDENT
LENDER:
ZIONS FIRST NATIONAL BANK
<PAGE> 18
By:/s/ Susan K. Cannon
Authorized Officer
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.26c (c) 1999 CFl ProServices, Inc.
All rights reserved (UT-C40F3.26b SPORTSNUT.LN C30.OVL)
YEAR 2000 COMPLIANCE COVENANT
Borrower: SPORTSNUTS.COM, INC. Lender: ZIONS FIRST NATIONAL BANK
10421 SOUTH 400 WEST, FIRST SOUTH OFFICE
SUITE 550 2166 SOUTH 3200 WEST
SOUTH JORDAN, UT 84095 WEST VALLEY CITY, UT 84119
This YEAR 2000 COMPLIANCE COVENANT is attached to and by this reference is made
a part of each Business Loan Agreement or Negative Pledge Agreement, dated May
4, 1999, and executed in connection with a loan or other financial
accommodations between ZIONS FIRST NATIONAL BANK and SPORTSNUTS.COM, INC.
"YEAR 2000 COMPLIANT" MEANS, WITH REGARD TO ANY ENTITY, THAT ALL MATERIAL
SOFTWARE UTILIZED BY SUCH ENTITY IS ABLE TO FULLY FUNCTION WITHOUT CAUSING ANY
ERROR TO SUCH ENTITY'S DATE-SENSITIVE DATA. "PROVIDERS" MEANS THE KEY SUPPLIERS,
VENDORS, AND CUSTOMERS OF BORROWER WHOSE BUSINESS FAILURE WOULD, WITH REASONABLE
PROBABILITY, RESULT IN A MATERIAL ADVERSE CHANGE IN THE FINANCIAL CONDITION OR
PROSPECTS OF BORROWER.
BORROWER HAS OR WILL SOON HAVE (i) UNDERTAKEN A DETAILED ASSESSMENT OF ALL AREAS
WITHIN ITS BUSINESS AND OPERATIONS THAT COULD BE ADVERSELY AFFECTED BY THE
FAILURE OF BORROWER TO BE YEAR 2000 COMPLIANT, (ii), DEVELOPED AND IMPLEMENTED A
DETAILED PLAN FOR BECOMING YEAR 2000 COMPLIANT ON A TIMELY BASIS, AND (iii) MADE
WRITTEN INQUIRY OF EACH OF ITS PROVIDERS AS TO WHETHER THE PROVIDERS WILL BE
YEAR 2000 COMPLIANT IN ALL MATERIAL RESPECTS. BORROWER REASONABLY ANTICIPATES
THAT IT AND THE PROVIDERS WILL BE YEAR 2000 COMPLIANT ON A TIMELY BASIS.
BORROWER WILL PROMPTLY ADVISE LENDER IN WRITING UPON THE OCCURRENCE OF ANY OF
THE FOLLOWING: (i) BORROWER DETERMINES OR BORROWER IS ADVISED BY ITS
ACCOUNTANTS, FINANCIAL ADVISERS, CONSULTANTS, OR AUDITORS OR ANY PROVIDER THAT
IT OR ANY PROVIDER WILL NOT BE YEAR 2000 COMPLIANT ON A TIMELY BASIS OR (ii)
BORROWER OR ANY PROVIDER EXPERIENCES DATA OR DATA PROCESSING PROBLEMS DUE TO
FAILURE TO BE YEAR 2000 COMPLIANT.
THIS YEAR 2000 COMPLIANCE COVENANT IS EXECUTED ON MAY 4, 1999.
BORROWER:
SPORTSNUTS.COM, INC.
By: /s/ J. Kelly Bevan
KELLY BEVAN, CONTROLLER
<PAGE> 19
By: /s/ Kenneth I. Denos
KENNETH I. DENOS, VICE PRESIDENT
LENDER:
ZIONS FIRST NATIONAL BANK
By: /s/ Susan K. Cannon
Authorized Officer
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.26c (c)1999 CFI ProServices, Inc.
All rights reserved (UT-G60 F3.26 SPORTSNUT.LN C30.OVL)
ASSIGNMENT OF DEPOSIT ACCOUNT
Principal Loan Date Maturity Date Loan No Call Collateral
$75,000.00 05-04-1999 04-30-2000 6001 512 4200
Account Officer Initials
8662401 64961 /s/ SC
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: SPORTSNUTS.COM, INC. Lender: ZIONS FIRST NATIONAL BANK 10421
SOUTH 400 WEST, SUITE 550 FIRST SOUTH OFFICE
SOUTH JORDAN, UT 84095 2166 SOUTH 3200 WEST
WEST VALLEY CITY, UT 84119
THIS ASSIGNMENT OF DEPOSIT ACCOUNT is entered into between SPORTSNUTS.COM, INC.
(referred to below as "Grantor"); and ZIONS FIRST NATIONAL BANK (referred to
below as "Lender").
ASSIGNMENT. For valuable consideration, Grantor assigns and grants to Lender a
security interest in the Collateral, including without limitation the deposit
accounts described below, to secure the Indebtedness and agrees that Lender
shall have the rights stated in this Agreement with respect to the Collateral,
in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Account. The word "Account" means the deposit account described below in the
definition for "Collateral."
Agreement. The word "Agreement" means this Assignment of Deposit Account, as
this Assignment of Deposit Account may be amended or
<PAGE> 20
modified from time to time, together with all exhibits and schedules attached to
this Assignment of Deposit Account from time to time.
Collateral. The word "Collateral" means the following described deposit account:
ZIONS FIRST NATIONAL BANK TCD #001-93S162-6 issued by Lender in an amount
not less than $75,000.00
together with (a) all interest, whether now accrued or hereafter accruing; (b)
all additional deposits hereafter made to the Account; (c) any and all proceeds
from the Account; and (d) all renewals, replacements and substitutions for any
of the foregoing.
In addition, the word "Collateral" includes all property of Grantor (however
owned if owned by more than one person), in the possession of Lender (or in the
possession of a third party subject to the control of Lender), whether existing
now or later and whether tangible or intangible in character, including without
limitation each and all of the following:
(a) All property to which Lender acquires title or documents of title.
(b) All property assigned to Lender.
(c) All promissory notes, bills of exchange, stock certificates, bonds, savings
passbooks, time certificates of deposit, Insurance policies, and all other
instruments and evidences of an obligation.
(d) All records relating to any of the property described In this Collateral
section, whether in the form of writing, microfilm, microfiche, or electronic
media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means SPORTSNUTS.COM, INC., its successors
and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus interest thereon, of
Grantor, or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether Grantor may be
liable individually or jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise; whether recovery
<PAGE> 21
upon such indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means ZIONS FIRST NATIONAL BANK, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated May 4, 1999, in
the principal amount of $75,000.00 from SPORTSNUTS.COM, INC. to Lender, together
with all renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and warrants to Lender that:
Ownership. Grantor is the lawful owner of the Collateral free and clear of all
loans, liens, encumbrances, and claims except as disclosed to and accepted by
Lender in writing.
Right to Grant Security Interest. Grantor has the full right, power, and
authority to enter into this Agreement and to assign the Collateral to Lender.
No Further Transfer. Grantor will not sell, assign, encumber, or otherwise
dispose of any of Grantor's rights in the Collateral except as provided in this
Agreement.
No Defaults. There are no defaults relating to the Collateral, and there are no
offsets or counterclaims to the same. Grantor will strictly and promptly do
everything required of Grantor under the terms, conditions, promises, and
agreements contained in or relating to the Collateral.
05-04-1999 ASSIGNMENT OF DEPOSIT ACCOUNT Page 2
(Continued)
Proceeds. Any and all replacement or renewal certificates, instruments, or other
benefits or proceeds related to the Collateral that are received by Grantor
shall be held by Grantor in trust for Lender and immediately shall be delivered
by Grantor to Lender to be held as part of the Collateral.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. While this
Agreement is in effect, Lender may retain the rights to possession of the
Collateral, together with any and all evidence of the Collateral, such as
certificates or passbooks. This Agreement will remain in effect until (a) there
no longer is any Indebtedness owing to Lender; (b) all other obligations secured
by this Agreement have been fulfilled; and (c) Grantor, in writing, has
requested from Lender a release of this Agreement.
<PAGE> 22
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care
in the physical preservation and custody of any certificate or passbook for the
Collateral but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility (a) for the collection or protection of any income on the
Collateral, (b) for the preservation of rights against issuers of the Collateral
or against third persons; (c) for ascertaining any maturities, conversions,
exchanges, offers, tenders, or similar matters relating to the Collateral; nor
(d) for informing the Grantor about any of the above, whether or not Lender has
or is deemed to have knowledge of such matters.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on the
Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished. Defective Collateralization. This Agreement or any of
the Related Documents ceases to be in full force and effect (including failure
of
<PAGE> 23
any collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness. This includes
a garnishment of any of Grantees deposit accounts with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure. Right to Cure. If any
default, other than a Default on Indebtedness, is curable and if Grantor has not
been given a prior notice of a breach of the same provision of this Agreement,
it may be cured (and no Event of Default will have occurred) if Grantor, after
Lender sends written notice demanding cure of such default, (a) cures the
default within fifteen (15) days; or (b), if the cure requires more than fifteen
(15) day% immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default, or
at any time thereafter, Lender may exercise any one or more of the following
rights and remedies, in addition to any rights or remedies that may be available
at law, in equity, or otherwise:
Accelerate Indebtedness. Lender may declare all Indebtedness of Grantor to
Lender immediately due and payable, without notice of any kind to Grantor.
Application of Account Proceeds. Lender may obtain all funds in the Account from
the issuer of the Account and apply them to the Indebtedness in the same manner
as if the Account had been issued by Lender. If the Account is subject to an
early withdrawal penalty, that penalty shall be deducted from the Account before
its application to the Indebtedness, whether the Account is with Lender or some
other
<PAGE> 24
institution. Any excess funds remaining after application of the Account
proceeds to the Indebtedness will be paid to Grantor as the interests of Grantor
may appear. Grantor agrees, to the extent permitted by law, to pay any
deficiency after application of the proceeds of the Account to the Indebtedness.
Lender also shall have all the rights of a secured party under the Utah Uniform
Commercial Code, even if the Account is not otherwise subject to such Code
concerning security interests, and the parties to this Agreement agree that the
provisions of the Code giving rights to a secured party shall nonetheless be a
part of this Agreement.
Collect the Collateral. Lender may collect any of the Collateral and, at
Lender's option and to the extent permitted by applicable law, may retain
possession of the Collateral while suing on the Indebtedness.
Se11 the Collateral. Lender may sell the Collateral, at Lender's discretion, as
a unit or in parcels, at one or more public or private sales. Unless the
Collateral is perishable or threatens to decline speedily in value, Lender shall
give or mail to Grantor, or any of them, notice at least ten (10) days in
advance of the time and place of public sale, or of the date after which private
sale may be made. Grantor agrees that any requirement of reasonable notice is
satisfied if Lender mails notice by ordinary mail addressed to Grantor, or any
of them, at the last address Grantor has given
05-04-1999 ASSIGNMENT OF DEPOSIT ACCOUNT Page 3
(Continued)
Lender in writing. If public sale is held, there shall be sufficient compliance
with all requirements of notice to the public by a single publication in any
newspaper of general circulation in the county where the Collateral is located,
setting forth the time and place of sale and a brief description of the property
to be sold. Lender may be a purchaser at any public sale.
Register Securities. Lender may register any securities included in the
Collateral in Lender's name and exercise any rights normally incident to the
ownership of securities.
Sell Securities. Lender may sell any securities included in the Collateral in a
manner consistent with applicable federal and state securities laws,
notwithstanding any other provision of this or any other agreement. If, because
of restrictions under such laws, Lender is or believes it is unable to sell the
securities in an open market transaction, Grantor agrees that (a) Lender shall
have no obligation to delay sale until the securities can be registered, (b)
Lender may make a private sale to a single person or restricted group of
persons, even though such sale may result in a price that is less favorable than
might be obtained in an open market transaction, and (c) such a sale shall be
considered commercially reasonable. If any securities held as Collateral are
"restricted securities" as defined in the Rules of the Securities and Exchange
Commission (such as Regulation D or Rule 144) or state securities departments
under state "Blue Sky" laws, or if Grantor, or any of them (if more than one),
is an affiliate of the issuer of the securities, Grantor agrees that Grantor
will neither sell nor dispose of any securities of such issuer without obtaining
Lenders prior written consent.
<PAGE> 25
Transfer Title. Lender may effect transfer of title upon sale of all or part of
the Collateral. For this purpose, Grantor irrevocably appoints Lender as its
attorney-in-fact to execute endorsements, assignments and instruments in the
name of Grantor and each of them (if more than one) as shall be necessary or
reasonable.
Application of Proceeds. Lender may apply any cash which is part of the
Collateral, or which is received from the collection or sale of the Collateral,
to (a) reimbursement of any expenses, including any costs of any securities
registration, commissions incurred in connection with a sale, attorney fees as
provided below and court costs, whether or not there is a lawsuit and including
any fees on appeal, incurred by Lender in connection with the collection and
sale of such Collateral, and (b) to the payment of the Indebtedness of Grantor
to Lender, with any excess funds to be paid to Grantor as the interests of
Grantor may appear.
Other Rights and Remedies. Lender shall have and may exercise any or all of the
rights and remedies of a secured creditor under the provisions of the Utah
Uniform Commercial Code, at law, in equity, or otherwise.
Deficiency Judgment. If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights provided in
this section.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced by
this Agreement or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Utah. If there is a lawsuit, Grantor agrees upon Lender's
request to submit to the jurisdiction of the courts of SALT LAKE County, State
of Utah. Subject to the provisions on arbitration, this Agreement shall be
governed by and construed in accordance with the laws of the State of Utah.
ARBITRATION DISCLOSURES:
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY VERY
LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
<PAGE> 26
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING
IN THEIR AWARDS. THE RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS AFFILIATED
WITH THE BANKING INDUSTRY.
6. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties and their
assigns, including but not limited to Disputes arising out of or relating to
this agreement, this arbitration provision ("arbitration clause"), or any
related agreements or instruments relating hereto or delivered in connection
herewith ("Related Documents), and including but not limited to a Dispute based
on or arising from an alleged tort, shall at the request of any party be
resolved by binding arbitration in accordance with the applicable arbitration
rules of the American Arbitration Association (the "Administrator"). The
provisions of this arbitration clause shall survive any termination, amendment,
or expiration of this agreement or Related Documents. The provisions of this
arbitration clause shall supersede any prior arbitration agreement between or
among the parties. If any provision of this arbitration clause should be
determined to be unenforceable, all other provisions of this arbitration clause
shall remain in full force and effect.
(b) The arbitration proceedings shall be conducted in Salt Lake City, Utah, at a
place to be determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to take any
action to require the arbitration proceeding to be completed and the
arbitrator(s)' award issued within one hundred fifty (150) days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the authority
to impose sanctions on any party that fails to comply with time periods imposed
by the Administrator or the arbitrator(s), including the sanction of summarily
dismissing any Dispute or defense with prejudice. The arbitrator(s) shall have
the authority to resolve any Dispute regarding the terms of this agreement, this
arbitration clause or Related Documents, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods applicable
to any Dispute or defense, whether by statute or agreement, shall apply to any
arbitration proceeding hereunder and the arbitrator(s) shall have the authority
to decide whether any Dispute or defense is barred by a limitations period and,
if so, to summarily enter an award dismissing any Dispute or defense on that
basis. The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a party
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any party: (1) consolidate in a single
arbitration proceeding any other claim or controversy involving another party
that is substantially related to the Dispute where that other party is bound by
an arbitration clause with the Lender, such as borrowers, guarantors, sureties,
and owners of collateral; (2) consolidate in
<PAGE> 27
05-04-1999 ASSIGNMENT OF DEPOSIT ACCOUNT Page 4
(Continued)
a single arbitration proceeding any other claim or controversy that is
substantially similar to the Dispute; and (3) administer multiple arbitration
claims or controversies as class actions in accordance with the provisions of
Rule 23 of the Federal Rules of Civil Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single arbitrator
shall have expertise in the subject matter of the Dispute. Where three
arbitrators conduct an arbitration proceeding, the Dispute shall be decided by a
majority vote of the three arbitrators, at least one of whom must have expertise
in the subject matter of the Dispute and at least one of whom must be a
practicing attorney. The arbitrator(s) shall award to the prevailing party
recovery of all costs and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The arbitrator(s),
either during the pendency of the arbitration proceeding or as part of the
arbitration award, also may grant provisional or ancillary remedies, including
but not limited to an award of injunctive relief, foreclosure, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver.
(d) Judgment upon an arbitration award may be entered in any court having
jurisdiction, subject to the following limitation: the arbitration award is
binding upon the parties only if the amount does not exceed Four Million Dollars
($4,000,000.00); if the award exceeds that limit, either party may demand the
right to a court trial. Such a demand must be filed with the Administrator
within thirty (30) days following the date of the arbitration award; if such a
demand is not made within that time period, the amount of the arbitration award
shall be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any rights
hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
other security; (2) exercise self-help remedies, including but not limited to
repossession and setoff rights; or (3) obtain from a court having jurisdiction
thereover any provisional or ancillary remedies, including but not limited to
injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at
any time, before or during initiation of an arbitration proceeding, except to
the extent such action is contrary to the arbitration award. The exercise of
such rights shall not constitute a waiver of the right to submit any Dispute to
arbitration, and any claim or controversy related to the exercise of such rights
shall be a Dispute to be resolved under the provisions of this arbitration
clause. Any party may initiate arbitration with the Administrator; however, if
any party initiates litigation and another party disputes any allegation in that
litigation, the disputing party-upon the request of the initiating party-must
file a demand for arbitration with the Administrator and pay the Administrator's
filing fee. The parties may serve by mail a notice of an initial motion for an
order of arbitration.
<PAGE> 28
(f) Notwithstanding the applicability of any other law to this agreement, the
arbitration clause, or Related Documents between or among the parties, the
Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall apply to the
construction and interpretation of this arbitration clause.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including reasonable attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may pay someone else to help enforce this Agreement, and Grantor shall pay the
costs and expenses of such enforcement. Costs and expenses include Lender's
reasonable attorneys' fees and legal expenses whether or not a salaried employee
of Lender and whether or not there is a lawsuit, including reasonable attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile (unless otherwise required by law), and
shall be effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or
<PAGE> 29
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS ASSIGNMENT OF
DEPOSIT ACCOUNT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 4,1999.
GRANTOR:
SPORTSNUTS.COM, INC.
By: /s/ J. Kelly Bevan By: /s/ Kenneth I. Denos
KELLY BEVAN, CONTROLLER KENNETH I. DENOS, VICE PRESIDENT
LASER PRO. Rea. U.S. PaL& T.M. Off.. Ver. 3.26c(c) 1999 CFI ProServices.
Inc. All rights reserved. (UT-E90 F3.26b SPORTSNT.LN C30.OVL]
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (the "Agreement") dated MAY
4,1999 between SPORTSNUTS.COM. INC. (the "Borrower"), and ZIONS FIRST NATIONAL
BANK (the "Bank").
ARTICLE I
AMOUNT AND TERMS OF THE LETTER OF CREDIT
SECTION 1.01. Request. In accordance with the applications, Borrower hereby
requests Bank to issue, execute and deliver an irrevocable letter of credit
substantially in the form attached hereto as Exhibit A and made a part hereof
(the "Letter of Credit"). Subject to
<PAGE> 30
the terms and conditions of this Agreement, Bank agrees to issue the Letter of
Credit.
SECTION 1.02. Reimbursement. Borrower shall pay to Bank on demand (i) on
and after the date on which Bank shall pay any draft presented under any Letter
of Credit a sum equal to the amount so paid under the Letter of Credit, plus
(ii) interest on any amount remaining unpaid by Borrower to Bank under clause
(1) above from and including the date such amount becomes payable on demand
until payment in full, at such fluctuating interest rate per annum as shall be
in effect from time to time which rate per annum shall at all times be equal to
four percent (4%) above the Prime Rate.
Collateral. Borrowers obligations under this Agreement are secured with the
following collateral: ASSIGNMENT OF DEPOSIT ACCOUNT TCD #001-935162-6 DATED MAY
4, 1999. A reference in any collateral documents pledging collateral which
refers to "notes" shall also imply that advances under this Letter of Credit and
Reimbursement Agreement are also secured by subject collateral.
Prime Rate. "Prime Rate" means an index which is determined daily by the
published commercial loan variable rate index held by any two of the following
banks: Chase Manhattan Bank Wells Fargo, and Bank of America N.T. &S.A. In the
event no two of the above banks have the same published rate, the bank having
the median rate will establish Zions prime. If for any reason beyond the control
of Bank, any of the aforementioned banks becomes unacceptable as a reference for
the purpose of determining the Prime Rate, Bank may, five (5) days after posting
notice, substitute another comparable bank for the one determined unacceptable.
Comparable bank shall mean one of the ten largest commercial banks headquartered
in the United States of America. This definition is to be strictly interpreted
and is not intended to serve any purpose other than providing an index to
determine which is the variable interest rate to be used. It is not the lowest
rate at which Bank may make loans to any of its customers, either now or in the
future.
SECTION 1.03. Issuance Fees. Borrower hereby agrees to pay to Bank an
issuance fee in the amount of 1.50% of the amount of any Letter of Credit per
annum, or a minimum of $75.00 payable on the date of issuance of any Letter of
Credit and on any subsequent anniversary of the date of issuance.
SECTION 1.04. Negotiation and Amendment Fees. Borrower hereby agrees to pay
to Bank (i) a negotiation fee in the amount of 1/8% of the amount of each draw
under any Letter of Credit, payable on the date of such drawing, and (ii) an
amendment fee in the amount of $50.00 for each amendment to any Letter of
Credit, payable on the effective date of each such amendment.
SECTION 1.05. Increased Costs. If any law, regulation, guideline or change
in any law or regulation or in the interpretation thereof or any ruling, decree,
judgement or recommendation by any regulatory body, court or any administrative
or governmental authority charged or claiming to be charged with the
administration thereof, shall either (i) impose upon, modify, require, make or
deem applicable to Bank any reserve requirement based upon the determination of
letters of credit to be deposits held by Bank, special deposit requirement,
insurance assessment or similar costs or requirement against or affecting
letters
<PAGE> 31
of credit issued or to be issued hereunder or (ii) subject Bank to any tax,
charge, fee, deduction, withholding or similar costs of any kind whatsoever or
(iii) impose any condition upon or cause in any manner the addition of any
supplement to or increase of any kind to Banks capital or costs base for issuing
such letters of credit which results in an increase in the capital requirement
supporting such letters of credit or (iv) impose upon, modify, require, make or
deem applicable to Bank any capital requirement, increased capital requirement
or similar requirement such as the determination of such letters of credit to be
assets held by Bank for capital calculation or other purposes and the result of
any events referred to in clauses (i), (ii), (iii), or (iv) above shall be to
increase the costs or decrease the benefit in any way to Bank of issuing,
maintaining or participating in such letters of credit; then and in such event
Borrower shall, on the third business day after the mailing of a written
statement to Borrower, which shall be conclusive absent manifest error, pay to
Bank all such additional amounts which in Bank's sole good faith calculation are
allocated to such letters of credit.
SECTION 1.06. Payments and Computations. Borrower shall make each payment
hereunder not later than 12:00 Noon (Salt Lake City time) on the day when due in
lawful money of the United States of America to Bank in same day funds.
Computations of interest hereunder shall be made by Bank on the basis of a year
of 360 days for the actual number of days (including the first day but excluding
the last day) elapsed.
SECTION 1.07. Obligations Absolute. The obligations of Borrower under this
Agreement shall be absolute, unconditional and irrevocable, and shall be paid
and performed strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) any amendment or waiver of or any consent to or departure from any
Letter of Credit;
(iii) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(iv) payment by Bank under any Letter of Credit against presentation of a
draft or certificate which does not comply with the terms of such Letter of
Credit;
(v) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
ARTICLE II
CONDITIONS OF ISSUANCE
SECTION 2.01. Conditions Precedent to the Issuance of any Letter of Credit.
The obligation of Bank to issue any Letter of Credit is subject to the
fulfillment of the following conditions precedent:
<PAGE> 32
(a) If Borrower is a corporation, Borrower shall have taken all necessary
and appropriate action for the execution and delivery of this Agreement, the
form and content of any Letter of Credit, and the taking of all action required
of Borrower by this Agreement, and Borrower shall have furnished to Bank
certified copies of such corporate action, and such other documents as Bank may
reasonably request.
(b) Borrower shall have delivered to Bank such other documents,
instruments, security agreements, UCC financing statements and approvals as Bank
may reasonably request.
ARTICLE III
EVENTS OF DEFAULT
SECTION 3.01. Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) Borrower shall fail to pay any amount payable under any provision of
Article I when due; or
(b) Borrower shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement; or
(c) The filing by or against Borrower of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, relief as debtor or other relief under the bankruptcy, insolvency or
similar laws of the United States or any state or territory thereof or any
foreign jurisdiction, now or hereafter in effect; or
(d) The making of any general assignment by Borrower for the benefit of
creditors; the appointment of a receiver or trustee for Borrower or for any
assets of Borrower including, without limitation, the appointment of or taking
possession by a "custodian", as defined in the federal Bankruptcy Code or
otherwise; the making of any, or sending notice of any intended bulk sale; or
the institution by or against Borrower of any other type of insolvency
proceeding under the federal Bankruptcy Code or otherwise, or of any formal or
informal proceeding for the dissolution or liquidation or settlement of claims
against or winding up of affairs of Borrower; or
(e) Any provision of this Agreement shall at any time for any reason cease
to be valid and binding on Borrower, or shall be declared to be null and void,
or the validity or enforceability thereof shall be contested by Borrower, or a
proceeding shall be commenced by any governmental agency or authority having
jurisdiction over Borrower seeking to establish the invalidity or
unenforceability thereof, or Borrower shall deny that it has any or further
liability or obligation under this Agreement.
SECTION 3.02. Remedies on Default. If any Event of Default shall have
occurred and be continuing, Bank may:
(a) By written notice to Borrower, direct Borrower to pay immediately to
Bank an amount equal to Banks potential liability under any outstanding Letters
of Credit, whether or not a draft shall have been presented thereunder; or
<PAGE> 33
(b) Offset any funds held by Bank; or
(c) Pursue any other remedy available to it under this Agreement or
pursuant to the terms of any other documents executed in accordance herewith.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. No Waiver; Remedies. No failure on the part of Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative.
SECTION 4.02. Indemnification. Borrower hereby indemnifies and holds Bank
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses, which Bank may incur or which may be claimed against Bank by
any person or entity by reason of, or in connection with, the execution and
delivery or transfer of, or payment or failure to make lawful payment under, any
Letter of Credit; provided, however that Borrower shall not be required to
indemnify Bank pursuant to this Section for any claims, damages, losses,
liabilities, costs or expenses caused by (i) the willful misconduct or gross
negligence of Bank in determining whether a draft or documents presented under
any Letter of Credit complied with the terms of any Letter of Credit or (ii)
Bank's willful failure to make lawful payment under such Letter of Credit after
the presentation to it of a draft and documents strictly complying with the
terms and conditions of such Letter of Credit the indemnities and obligations
of Borrower contained in this Section shall survive the payment in full of
amounts payable pursuant to Article I and the termination of the Letters of
Credit.
SECTION 4.03. Liability of Bank. Borrower assumes all risks of the acts or
omissions of any beneficiary or transferee of the Letters of Credit with respect
to its use of the Letters of Credit. Neither Bank nor any of its officers,
employees or directors shall be liable or responsible for: (a) the use which may
be made of any Letter of Credit or any acts or omissions by any beneficiary or
transferee in connection therewith; (b) the validity, sufficiency or genuineness
of documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by Bank against presentation of documents which do riot comply with the
terms of any Letter of Credit, including failure of any document to bear any
reference or adequate reference to any Letter of Credit; or (it) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that Borrower shall have a claim against Bank, and Bank shall
be liable to Borrower, to the extent of any direct, as opposed to consequential,
damages suffered by Borrower which Borrower proves were caused by (i) the
willful misconduct or gross negligence of Bank in determining whether a draft or
documents presented under any Letter of Credit complied with the terms of any
Letter of Credit or (ii) Banks willful failure to make lawful payment under any
Letter of Credit after the presentation to R of a draft and documents strictly
complying with the terms and conditions of such Letter of Credit. In furtherance
of and not in limitation of the foregoing, Bank may accept documents that
<PAGE> 34
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
SECTION 4.04. Costs and Expenses. Borrower agrees to pay on demand all
costs and expenses (including counsel fees and expenses) in connection with (i)
the enforcement of this Agreement or (ii) any action or proceeding relating to a
court order, injunction or other process or decree restraining or seeking to
restrain Bank from paying any amount under any Letter of Credit.
SECTION 4.05. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 4.06. Governing Law. This Agreement and all Letters of Credit shall
be subject to the Uniform Customs and Practice for Documentary Credits published
by the International Chamber of Commerce in effect at the time of issuance of
any Letter of Credit (the "UCP"). The provisions herein and in any Letter of
Credit are supplemental to, and not in substitution of, the UCP. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Utah, without regard to principles of conflicts of law, except to the extent
such laws are inconsistent with the UCP.
SECTION 4.07. Term. This Agreement shall remain in full force and effect
until the later of the payment in full of all sums (including, without
limitation, all principal, accrued interest, fees, costs and expenses) owing by
Borrower to Bank hereunder, or the expiration of all Letters of Credit.
SECTION 4.08. Joint and Severable. If this Agreement is executed by
more than one Borrower, the obligations hereunder shall be joint and
severable.
ARTICLE V
ARBITRATION
SECTION 5.01. ARBITRATION DISCLOSURES:
1. ARBITRATION IS USUALLY FINAL AND BINDING ON THE PARTIES AND SUBJECT
ONLY TO A VERY LIMITED REVIEW BY A COURT.
2. THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT, INCLUDING
THEIR RIGHT TO A JURY TRIAL.
3. PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT FROM
COURT PROCEEDINGS.
4. ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
<PAGE> 35
6. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR THE
AMERICAN ARBITRATION ASSOCIATION.
SECTION 5.02. ARBITRATION PROVISIONS:
(a) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Promissory Note or any
agreements or instruments relating hereto or delivered in connection herewith,
and including but not limited to a claim based on or arising from an alleged
tort, shall at the request of any party be determined by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration proceedings shall be conducted in Salt Lake City,
Utah. The arbitrator(s) shall have the qualifications set forth in subparagraph
(c) hereto. All statutes of limitations which would otherwise be applicable in a
judicial action brought by a party shall apply to any arbitration or reference
proceeding hereunder.
(b) In any judicial action or proceeding arising out of or relating to
this Agreement or any agreements or instruments relating hereto or delivered in
connection herewith, including but not limited to a claim based on or arising
from an alleged tort, if the controversy or claim is not submitted to
arbitration as provided and limited in subparagraph (a) hereto, all decisions of
fact and law shall be determined by a reference in accordance with Rule 53 of
the Federal Rules of Civil Procedure or Rule 53 of the Utah Rules of Civil
Procedures or other comparable, applicable reference procedure. The parties
shall designate to the court the referee(s) selected under the auspices of the
American Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored arbitration proceedings. The referee(s) shall have the
qualifications set forth in subparagraph (c) hereto.
(c) The arbitrator(s) or referee(s) shall be selected in accordance
with the rules of the American Arbitration Association from panels maintained by
the Association. A single arbitrator or referee shall be knowledgeable in the
subject matter of the dispute. Where three arbitrators or referees conduct an
arbitration or reference proceeding, the claim shall be decided by a majority
vote of the three arbitrators or referees, at least one of whom must be
knowledgeable in the subject matter of the dispute and at least one of whom must
be a practicing attorney. The arbitrator(s) or referee(s) shall award recovery
of all costs and fees (including reasonable attorneys' fees, administrative
fees, arbitrators' fees, and court costs). The arbitrator(s) or referee(s) also
may grant provisional or ancillary remedies such as, for example, injunctive
relief, attachment, or the appointment of a receiver, either during the pendency
of the arbitration or reference proceeding or as part of the arbitration or
reference award.
(d) Judgment upon an arbitration or reference award may be entered in
any court having jurisdiction, subject to the following limitation: the
arbitration or reference award is binding upon the parties only if the amount
does not exceed Four Million Dollars ($4,000,000); if the award exceeds that
limit, either party may commence legal action for a court trial de novo. Such
legal action must be filed within thirty (30) days following the date of the
arbitration or reference award; if such legal action is not filed within that
time period, the amount of the arbitration or reference award shall be
<PAGE> 36
binding. The computation of the total amount of an arbitration or reference
award shall include amounts awarded for arbitration fees, attorneys' fees,
Interest, and all other related costs.
(e) At the Banks option, foreclosure under a deed of trust or mortgage
may be accomplished either by exercise of a power of sale under the deed of bust
or by judicial foreclosure. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(f) Notwithstanding the applicability of other law to any other
provision of this Agreement, the Federal Arbitration Act, 9 U.S.C. Section 1 et
seq., shall apply to the construction and interpretation of this arbitration
section.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers or representatives
thereunto duly authorized as of the date first above written.
BORROWER: SPORTSNUTS.COM, INC.
BY: /s/ J. Kelly Bevan
Kelly Bevan, Controller
BY: /s/ Kenneth I. Denos
Kenneth I. Denos, Executive Vice President
ZIONS FIRST NATIONAL BANK
by: /S/ Susan K. Cannon
APPLICATION FOR LETTER OF CREDIT
ZIONS FIRST NATIONAL BANK
Salt Lake City, Utah
SALT LAKE CITY, UTAH MAY 4, 1999
(Place) (Date)
Dear Sirs:
--- Customer Pickup
--- Cable Brief Advice
We request you to establish by --- Cable Full Text an irrevocable
Letter of Credit
--- Airmail
on the following terms and conditions:
In Favor of DMB PROPERTY VENTURES, THREE GATEWAY, 410 NORTH 44TH
STREET. SUITE 230, PHOENIX AZ 85008, ATTN: GEORGE LONG
(Name and Address)
<PAGE> 37
For Account of SPORTSNUTS.COM, INC., 10421 SOUTH 400 WEST, MTE 550.
SOUTH JORDAN UT 84095 (Name and Address)
Amount $75,000.00 Available by drafts at Zions Bank on Sight
Relative to SECURE A ONE YEAR LEASE ON PROPERTY IN ARIZONA
(Brief Description of Project)
Documents required: SEE ATTACHED
Statement Latest
--- Permitted
Partial Drawings --- Not Permitted
Drafts to be drawn and negotiated on or before APRIL 30, 2000
All documents to be forwarded in one cover, by airmail, unless otherwise stated
under Special Instructions.
Special Instructions:
THE OPENING OF THIS CREDIT IS SUBJECT TO THE TERMS AND CONDITIONS AS SET FORTH
IN THE LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT.
8662401-6001 SPORTSNUTS.COM, INC.
Account Number
By: /s/ J.Kelly Bevan
Telephone Number J. Kelly Bevan, Controller
By: /s/ Kenneth I. Denos
Kenneth I. Denos, Executive
Vice President
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<PERIOD-END> MAR-31-1999
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