As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. ____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(g) of
The Securities Exchange Act of 1934
LSI COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0627349
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
112 West Business Park Drive
Draper, Utah 84020
(801) 572-2555
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Copies to:
David Hunt
Wangsgard & Associates, LLC
5252 N. Edgewood, Dr. Ste 210A
Provo, UT 84604
(801) 852-8452
Securities to be registered pursuant to Section 12(g) of the Act:
- - --------------------------------------------------------------------------------
Title of each class Name of each exchange on which
to be registered: each class is to be registered:
----------------- -------------------------------
Common Stock n/a
- - --------------------------------------------------------------------------------
Securities to be registered pursuant to Section 12(b) of the Act: None
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FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements,
including statements regarding, among other items, the availability of supplies,
our ability to retain our competitive position, expected realization of our
business strategy and costs associated therewith, governmental regulation, the
sufficiency of cash flow and other sources of liquidity to fund our debt service
requirements, working capital needs and other significant expenditures and
anticipated trends in our business, including with respect to industry capacity,
product demand and pricing. Forward-looking statements typically are identified
by the words "believe," "expect," "anticipate," "intend," "seek," "estimate,"
"project" and similar expressions. These forward-looking statements involve
risks and uncertainties that are beyond our control. These risks and
uncertainties include unanticipated trends in the software and personal coaching
businesses, and economic, competitive, legal, governmental, and technological
factors. These factors could include global economic conditions, currency
fluctuations, product demand and industry capacity, competitive products and
pricing, manufacturing efficiencies, availability and cost of critical
materials, new product development and commercialization, manufacturing
capacity, facility expansion costs, the effect of regulatory and legal
developments, capital resource and cash flow activities and interest costs.
Actual results could differ from those contemplated by these forward-looking
statements. In light of these risks and uncertainties, there can be no assurance
that the results and events contemplated by the forward-looking information
contained in this Registration Statement will in fact transpire. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates.
BUSINESS
General
LSI Communications, Inc. (OTC Non-BB: LSIM) is a technology
development, sales and training company based in Draper, Utah, just outside of
Salt Lake City. We were incorporated as TPI, Inc., under the laws of the State
of Utah on April 26, 1983. In 1985, the Corporation changed its situs from Utah
to Nevada and changed its name to Connections Marketing Corp. In July, 1992, our
shareholders voted to change our name to LSI Communications, Inc. ("LSI"). We
held mineral properties in Beaver County, Utah; however, no extraction
operations ever commenced and the properties were distributed to the
shareholders through a subsidiary spin-off.
On November 20, 1998, we entered a Plan of Reorganization and
Acquisition agreement with Warever, Inc., a Utah Corporation, wherein we issued
3,000,000 shares of common stock for 85% of Warever's outstanding common stock.
. The acquisition was recorded as a reverse acquisition, with Warever being the
accounting survivor, therefore all historical financial information prior to
November 20, 1998 in this registration statement is that of Warever.
On June 21, 1999, we acquired 85% of Coaching Institute, Inc.,
(hereafter, "Coaching Institute") a Utah corporation. Coaching Institute is a
majority owned subsidiary. The acquisition of Coaching Institute is discussed
further in the section entitled "Merger and Business Combinations."
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Warever Corporation ("Warever") is in the business of developing,
programming, selling, and marketing computer software packages. Its primary
product, Action Plus, is a management assistance software tool. Warever was
organized in the State of Utah on May 13, 1992 under the name of Action Plus
Software, Inc. On January 17, 1995 the name Action Plus Software was changed to
Warever.
We operate two distinct, but complementary subsidiaries, Warever and
Coaching Institute. Warever Corporation primarily on developing sales
automation, personal productivity and Internet-based software products. It is
involved in the contact management industry and has been involved since the
industry's formative years in the late 1980s and early 1990s. The majority of
Warever applications focus on development of sales force automation and personal
productivity.
Coaching Instituteoffers fully integrated "coaching" programs designed
specifically for sales trainers, seminar leaders, motivational speakers and
network marketers who are interested in extending their programs to seminar
attendees through one-on-one training. By implementing an after-market program
such as one-on-one coaching, companies are able to assist clients r personal
development, create additional profits, and increase client loyalty.
We lost money in each of the last fiscal years and our net losses have
been significant. Our continued operations have depended, to some extent, on
loans from a family member of one of our directors. Despite the fact that
revenues from coaching are increasing and we are about to release a new software
program, there is no assurance that we will ever become consistently profitable.
This Registration Statement is being filed on a voluntary basis as a
step to re-establish our real-time quotations on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc., (the "NASD").
NASD OTC Bulletin Board Quotations
Our common stock was formerly quoted on the OTC Bulletin Board of the
NASD under the symbol "LSIM." For information concerning these stock quotations
during the past two years, see the section entitled "Market Price Of And
Dividends On The Registrant's Common Equity And Related Stockholder Matters."
The quotations presented do not represent actual transactions or broker/dealer
markups, markdowns or commissions.
Effective January 4, 1999, the NASD adopted rules and regulations
requiring that prior to any issuer having its securities quoted on the OTC
Bulletin Board of the NASD that such issuer must be a "reporting issuer" which
is required to file reports under Section 13 or 15(d) of the Securities and
Exchange Act of the 1934, as amended (the "1934 Act"). We are not currently a
"reporting issuer," but this Registration Statement is a step in bringing us
into compliance with the listing provision of the OTC Bulletin Board. The NASD
has "delisted" quotations of our common stock. Under the "phase-in" schedule of
the NASD, we had until January 19, 2000, within which to become a "reporting
issuer." We intend for our stock to again be quoted on the OTC Bulletin Board
once we satisfy all comments of the SEC with respect to this Registration
Statement and meet NASD requirements.
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Merger and Business Combinations
Effective November 20, 1998, we entered into an agreement and Plan of
Reorganization with Warever, Inc., a private company. The agreement provided for
our merger into Warever to be treated as a reverse merger, with Warever as the
surviving business. Pursuant to the agreement we issued 3,000,000 shares of
common stock to Warever's shareholders of for 85% of the outstanding shares of
Warever. Our management resigned and the management and board of Warever filled
the vacancy. LSI had no assets or liabilities at the time of the merger, but was
only a public shell. We acquired the remaining 15% of Warever in the first
Quarter of 2000 by exchanging 2,500,000 LSI shares.
During November and December of 1998, we sold 1,000,000 shares of
Common Stock at $.05 per share to "accredited investors" pursuant to Rule 504.
On June 21, 1999, we acquired 85% of Coaching Institute by issuing
2,500,000 shares of common stock for 85,000 shares, 85%, of the outstanding
common stock of Coaching Institute. We valued the acquisition of Coaching
Institute at $1,375,000 which was the market value of its common stock less a
60% discount for the restriction on the stock. The acquisition agreement also
provided for us to receive options to acquire the remaining 15% of Coaching
Institute's issued and outstanding common stock in exchange for 2,045,455 shares
of our common stock. The option can be exercised after January 1, 2001 for a
period of 60 days. After the June 21, 1999 acquisition, Coaching Institute
survived as our majority-owned subsidiary. Its operating activities have been
included in our consolidated financials since June 21, 1999.
Common stock in the Company was issued and delivered to the
shareholders of Coaching Institute as set forth below, such certificates to bear
a restrictive legend in compliance with Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933 as amended:
o Craig R. Hendricks 1,062,500 shares
o Steven E. Carlson 1,062,500 shares
o Lona J. Hendricks 175,000 shares
o Richard A. McAllister 150,000 shares
o Roger G. Williams 50,000 shares
Operations
We are a technology development, sales, and training company comprised
of two subsidiaries, Warever and Coaching Institute. Our two subsidiaries
provide complementary products, services and contacts to each other. Our
products assist personal and business betterment, through organization and
training.
Warever has primarily developed sales force automation and personal
productivity software. Sales force automation software is designed to improve
the efficiency of the sales process by tracking customer information, such as
names and addresses, correspondence,
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and scheduling. Warever intends to expand more heavily into developing software
that interacts more fully with the Internet.
Coaching Institutewas founded in June, 1998. Personal Coaching is an
emerging industry where clients are assisted in reaching goals, implementing
real, long-term change. Our coaches work with individuals one-on-one to:
o facilitate change
o motivate the individual
o promote creativity
o demand accountability
o channel energy and desire
o Implement skills and habits
Industry Background
Warever is in the software development industry, and is primarily
focussed on developing software related to Customer Relations Management
("CRM"). CRM is a comprehensive integration of every area of business touching
the customer, namely marketing, sales, customer service and field support. CRM
software assists sales people in tracking client information, time management,
and facilitating regular client correspondence. The CRM sector of the software
industry is fairly new, but like the bulk of the software industry, there is
intense competition, dangers of rapid technological obsolescence and
intellectual property issues.
Coaching Institute provides personal development coaching services.
Personal development coaching is a new and evolving training methodology that is
growing in popularity and is commonly referred to as "coaching." Coaching is
primarily a service where an individual is assisted in implementing information
learned at the seminar. Normally, the coach telephones the customer at
designated times, such as once a week. During the phone conference the coach
will answer questions, help the customer set goals, assess the customer's
progress in implementing the principles taught at the seminar. The coaching
relationship will commonly continue for 8 to 12 weeks. Coaching may also be used
by purchasers of products, such as durable office equipment and software to
assist the purchaser to effectively implement the products into their business
operations. Coaching supports a variety of topics. Such as:
o Sales
o sales management
o personal development
o professional speaking
o network marketing
o anxiety and stress management
o business growth and development
o real estate sales
o real estate investment; and
o areas where personal change would be a benefit
o areas where use of new products is to be implemented
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Coaching is used as a format of employee training for major businesses
including Fortune 500 Companies such as Ameritech, Merrill Lynch, Amoco,
Northwestern Mutual Life and Arthur Anderson. We do not currently provide
coaching services to any of these companies. Many members of the National
Speakers Association, as well as such notables as Zig Ziglar, Ron LeGrand, A.D.
Kessler, Roger Butcher, Denis Waitley, Tom Hopkins, Brian Tracy, Peter Lowe,
Stephen R. Covey, Les Brown, and Omar Periu have personal coaching programs.
Many more National Speakers Association members are coaches themselves as well
as professional speakers. We do not have a relationship with the National
Speakers Association, but we do have relationships with many of its members. A
list of vendors with whom we have relationships is listed in the section
entitled "Customers."
Competition in the Market
Competition in the software market has increased dramatically in recent
years. Software products are sold through mail, seminars, over the Internet,
through telemarketing and retail. Software is also given away as a promotion to
sell other software programs. Warever faces competition from software
manufacturers offering customer relationship management software related to a
variety of industries ranging from real estate and insurance sales to multilevel
marketing. Hundreds of companies including Act, Goldmine and Top Producer
develop software products. Competitors selling CRM software include companies
such as BT Squared Technologies, Inc., Symantec, ARI Network Services, Inc.,
Industri Matematik Abalon AB, Moss Micro, Inc., Information Management
Associates, Inc., Applix, Inc., Saratoga Systems, Inc., Baan Company,
Brightware, Inc., Sunset Software, Inc., Callback Software, Inc., Clarify, Inc.,
On!contact Software Company, ClientXchange, Epicor Software Corporation, DSI
Management Systems, PowerCerv Technologies, Group 1 Software, Inc.
Our software is tailored to a fairly narrow market. We have attempted
to direct product sales and CRM product development toward businesses in
specific industries, such as real estate. Our market position is turning toward
the Powerbase series which, like our software Action Plus, will consist of
functions that can assist companies and particularly sales people's day to day
operations such as data-base maintenance, marketing using the database, time
management, word processing, correspondence and accounting. However, Powerbase
has not yet been fully tested or released and there can be no assurances as to
its successor ability to compete in its sector of the market.
Coaching Institute faces competition from other businesses offering
coaching services such as Franklin Covey Coaching, and dozens of new companies
which are being formed around the country. Coaching is a form of self-help,
which has traditionally been provided in books, tapes, seminars, and speakers.
Competition in the coaching industry is difficult to assess because of the
infancy of the industry. There is a trend for self-help providers, such as
public speakers, motivators and organizers to expand or modify their services
into the area of coaching. A common method of competition is for self-help
providers to use their existing sales and customer contacts to sell coaching
services. Well known self-help providers have an advantage due to their
familiarity to customers and potential outside vendors. The competition from
self-help providers is intense.
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We are attempting to gain notoriety and to establish relationships with
outside vendors. We do not have a large market share. We currently have
relationships with about a dozen outside vendors. However, there is no assurance
that we will be able to gain notoriety or continue to establish or maintain
relationships with outside vendors.
General Operations
Warever must adjust to the changing nature of the software industry.
There is a shift to more industry specific software applications. Warever is
attempting to tailor software programs to cover all of a small business' needs
for certain particular industries, especially needs related to CRM. For example,
Powerhouse, a software program currently under development for real estate
agents and brokers, has contact management, calendaring, property management,
presentations, and internet marketing. Currently, we are not aware of other
software programs that have all of these functions. A real estate agent would
need to purchase three different software packages to achieve the same function
provided by Powerhouse. Further, Warever Corporation will continue to add
functions to Powerhouse and its mother program, Powerbase, such as, full
accounting, financial analysis, IRS reports, and networking. We intend to
distribute our products through relationships with SDI LeGrand, RE Marketing,
and others. Currently, we have oral agreements with SDI Marketing and RE
Marketing to sell Powerbase and its sister software programs, however, we have
no formal written agreements. We anticipate that they will be paid 30% from the
proceeds of sales that they refer to us. They will likely be paid approximately
50% for sales of our software that they completely facilitate. We anticipate
written agreements with SDI and RE Marketing this year. We anticipate
relationships with other entities that can sell or facilitate sales of our
software. We do not anticipate contracts that will require minimum sales by our
outside vendors. The companies provide us with attendance rosters from their
seminars. In return, when we sell products to the attendees, we give them a
percentage of the revenues. In some cases these companies will sell our software
directly and be paid a percentage of the revenues. These companies are not bound
to provide us with names or sell our products and there is no assurance that
these companies will continue to produce for us.
Coaching Institute must maintain a steady flow of clients because each
coaching arrangement usually lasts only 8-12 weeks. We are actively seeking
referral relationships with professional speakers and seminar companies.
Coaching Institute attends the National Speakers Association convention on an
annual basis for the purpose of acquiring new speakers, and increase the
visibility of Coaching Institute in the speaking and seminar community. We have
also begun to expand into coaching the purchasers of complex products, such as
office equipment. We have formed a relationship with Automation Quest to assist
their customers with implementing newly purchased products. We have no contracts
binding anyone to provide us with coaching leads or to sell our services. Our
agreements focus on outside vendors' compensation for referrals and sales, but
do not create binding assurances that such vendors will perform on our behalf.
Coaching Institute currently actively recruits and trains coaches and sales
professionals. Our management believes that quality coaching personnel are key
to the competitiveness of a coaching services provider, because consumers of
coaching will be unwilling to recommend or purchase coaching services from
coaches with substandard interpersonal and coaching skills.
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Sales and Marketing
Warever has a three tiered sales strategy.
o Direct sales to end users and corporate clients through an
internal sales force.
o Arrangements with outside vendors to sell our software
o Sales through regional distributors.
Warever utilizes outside vendors as our main marketing strategy. For
example, American Greetings has licensed a customized version of our software
called "Pocket-it" Software. Pocket-it Software is a product designed to be the
electronic companion to a paper-based planner called Pocket-it for which
American Greetings has acquired retail distribution rights. The software will
print schedules, notes, and lists onto the patented Pocket-it paper for
insertion into the planner. We delivered the software source codes to American
Greetings which is solely responsible for replication of the software, including
all associated costs. In return for developing the software, Warever will
receive a $5.00 royalty per unit sold by American Greetings. We have not
received any royalties from the sales of "Pocket-it", nor are we aware of any
sales of the software. Moreover, American Greetings has informed us that they
may not distribute Pocket-it. Warever currently has two regional distributors,
both of whom work on straight commission. Their sales are a minor portion of our
software sales.
Coaching Institute's sales are conducted in two ways. Similar to
Warever's software, Coaching Institute's sales are primarily made through
follow-up telephone calls to individuals who have attended a seminar held by an
organization with which we have sales agreements. Our agreements with outside
vendors both for the sale of our software and coaching services do not require
outside vendors to sell our products and services. The arrangements set out a
percentage of the revenue for the sale of the product or service that will be
given to the outside vendor as compensation for selling the product or service.
Secondly, sales are made directly by our outside vendors in a seminar
environment. The outside vendor can pitch our software during a presentation and
have a table set up in the seminar room from which our software is sold.
Coaching Institute's coaching services are marketed primarily through
direct mail followed by an outbound telephone campaign to the direct mail
recipients. Outside vendor seminars are the source of the names, numbers, and
addresses in our direct mailing and outbound telephone campaigns. We intend for
marketing and sales responsibilities to be increasingly performed by outside
vendors. One of our outside vendors, Automation Quest, for example, sells
technology packages to real estate agents. The packages include office
technology items useful to real estate agents, such as a laptop computer,
digital camera, web site, and software. Our coaching services are also sold by
Automation Quest as part of these technology packages. Automation Quest is
compensated for selling our coaching services by payment of approximately half
of the sale price. The total price of Automation Quest's technology package is
about $6,500. Automation Quest sales account for several hundred coaching
programs annually. In addition to outside vendors, Coaching Institute plans to
utilize print media and radio and other traditional forms of marketing and
advertising in the future.
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Customers
Warever's relationship with outside vendors allows mutual profit from
the sale of our products and services to the outside vendor's clients. This
relationship is beneficial because of the outside vendor's distribution channels
and their ability to set up a table and sell products at seminars. Warever has
similar sales relationships with network marketing companies such as SDI /
LeGrand, RE Marketing, and American Greetings.
Over the past several years, Warever Corporation has sold to
approximately 30,000 individuals and businesses, ranging from home-based
businesses to Fortune 1000 companies. Our customers have included:
Radisson Hotels International Franklin Quest Corporation
Bank of New York Blue Cross/Blue Shield
United Technologies (Carrier) Bank One
Nu Skin International Canadian Government
Fruit of the Loom American Home Business Assoc.
Zions Bank Paragon Trade Brands
California Steel SKF
Library of Congress Imall
Coaching Institute has sales arrangements with well known people or
organizations that have distribution channels or that speak in front of large
audiences, such as, motivational speakers, sales trainers, seminar companies,
and network marketing organizations. These people and organizations that act as
outside vendors are not bound to sell our products or services. Pursuant to
written agreements, these people and organizations are paid a pre-designated
percentage of sales that they generate. However, there is no assurance that they
will continue to sell our products. Currently we have sales arrangements with:
Omar Periu A.D. Kessler
RE Marketing Automation Quest
Complete Cyber Solutions SDI Ron LeGrand Publishing
Rory Aplanalp Skin Secrets
Xtax - Jim Burton
Automation Quest is the source of 67% of our coaching customers.
SDI/LeGrand is responsible for 23%, and RE Marketing is the source of 7% or our
coaching customers. The remaining outside vendors supply only 3% of our coaching
customers. A reduction in sales generated by Automation Quest would have a
detrimental impact on our coaching sales.
Products and Services
Warever has several products currently available.
o Action Plus ($395.00) - The flagship product of Warever
Corporation, is a database program for businesses that
includes a time manager, word processor and sales module that
creates sales invoices, tracks inventory and performs certain
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accounting functions. Action Plus has received recognition
from PC Computing Magazine and Portable Computing Magazine.
o Legion ($29.00)- An internet product specifically designed to
increase the speed of your internet connection up to a factor
of 10. It essentially bypasses all intermediary connections,
taking you directly to the URL of the site you specify.
o Powerbase Financial Advisor ($99.00)- This program tracks
personal financial information, including assets, liabilities,
and net worth. It also tracks cash flow and debt, giving
different methods of debt reduction. Financial calculators are
included.
o Idea Bank ($99.00)- This multimedia product is ideal for
motivation speakers and other professional speakers, trainers
or anyone who needs to reference large amounts of text data.
Idea Bank stores, sorts and facilitates the retrieval of
information such as quotes and anecdotes. Users can listen to
audio or watch video presentations of the speaker.
We have sold approximately 30,000 units of Action Plus. Our other
software programs have been used as incentives, promotions and giveaways, and
direct revenues from these programs have been minute as we have sold less than
100 total units. Sales of Action Plus have decreased in recent years leaving
Warever with dramatically reduced revenues. We hope to revive our software sales
with the release of Powerbase and its sister programs.
Warever has several products currently in production:
o Powerbase - In 2000, we plan to release Powerbase, a brand-new
32-bit, internet-enabled business automation product.
Powerbase allows those that market products on the internet to
download customer inquiries directly into their marketing
database for follow-up. Powerbase includes the following:
o powerful, customizable database
o enterprise-wide time management and scheduling system
o full-featured word processor with high-end graphics
capabilities
o Excel(R) compatible spreadsheet for financial
analysis
o Customizable label/envelope and forms generator for
marketing activities
o Integrated e-mail client with "e-merge" capabilities
for internet marketing
After Powerbase is released, we intend to commence development of upgrades of
Powerbase, for release in the future that will include some of the following
features:
o networking capability
o full accounting (see Powerbase Accounting below)
o sales action plans and forecasting
o Powerhouse (under development) - Is a software program for real
estate agents and Brokers that has contact management, calendaring, property
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management, presentations and internet marketing functions. Powerhouse is a
sister program to Powerbase.
o Action Accounting (under development) - Powerbase Accounting, coupled
with the Powerbase base modules, is for small to medium-sized businesses. Action
Accounting includes such standardized accounting modules as general ledger,
accounts payable, accounts receivable, inventory, and sales. It will also
directly integrate with the internet for order placement, fulfillment, and
customer interaction.
o Powerbase Dashboard (under development) - This product gives company
CEOs, presidents and department heads an immediate and real-time view into the
operations of their business through graphs and charts, alerting them to areas
of concern within each department at a moment's notice, whether it be in sales,
accounting, fulfillment, customer service, or web integration.
Coaching Institute provides the following services:
o Personal Coaching - Personal Coaching is conducted over the
telephone, offering the client the greatest opportunity to utilize their own
environment to make needed changes. Sessions last one half hour each over a
period of 8-12 weeks with up to a year of follow up.
o Telesales - Coaching Institute is equipped with advanced phone
systems and provides telesales services to our outside vendors.
o Data Base Management - Utilizing some of Warever Corporation's core
technologies, Coaching Institute is able to manage outside vendor databases. We
use our software and knowledge to operate and organize Omar Periu and RE
Marketing's customer databases. We benefit because they provide us with names in
the database to whom we market our coaching services. Database management is not
currently a source of direct revenues for Warever.
o Seminar Management - Seminars allow Coaching Institute to control
lead flow from start to finish as well as provide needed structure to beginning
speakers and fledgling organizations such as Xtax run by our outside vendor Jim
Burton.
Intellectual Property and Proprietary Rights
We rely on a combination of copyright, trade secret, and trademark law
to protect our technology, although we believe that other factors such as the
technological and creative skills of our personnel, new product developments,
frequent product and feature enhancements, and reliable product support and
maintenance are more essential to maintaining a technology leadership position.
We currently do not have any patents issued or pending.
We generally enter into confidentiality and nondisclosure agreements
with our employees, consultants, prospective customers, licensees, and corporate
partners. In addition, we control access to and distribution of our software,
coaching programs, documentation, and other
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proprietary information. Despite our efforts to protect our intellectual
property and proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Effectively policing the
unauthorized use of their products is time-consuming and costly, and there can
be no assurance that the steps we take will prevent misappropriation of our
technology.
We attempt to avoid infringing known proprietary rights of third
parties in our product development efforts. However, we do not regularly conduct
comprehensive patent searches to determine whether the technology used in our
products infringes on patents held by third parties. There are many issued
patents as well as patent applications in the electronic messaging field.
Because patent applications in the United States are not publicly disclosed
until the patent is issued, applications may have been filed which relate to our
software products. If we were to discover that our products violated or
potentially violated third party proprietary rights, we might not be able to
obtain licenses to continue offering those products without substantial
reengineering. Any reengineering effort may not be successful, nor can we be
certain that any licenses would be available on commercially reasonable terms.
Substantial litigation regarding intellectual property rights exists in
the software industry, and it is expected that software products may be
increasingly subject to third-party infringement claims as the number of
competitors in the industry segments grows and the functionality of software
products in different industry segments overlaps. Any third-party infringement
claims could be time-consuming to defend, result in costly litigation, divert
management's attention and resources, cause product and service delays or
require us to enter into royalty or licensing agreements. Any royalty or
licensing arrangements, if required, may not be available on acceptable terms,
if at all. A successful claim of infringement against us and our failure or
inability to license the infringed or similar technology could have a material
adverse effect on our business, financial condition, and results of operations.
We may find defects in our sales automation and internet-based software
that may require us to incur substantial product liability costs and significant
redesign costs. Warever Corporation's product types often contain errors or
defects, particularly when first introduced or when new versions or enhancements
are released. Defects or errors in Warever Corporation's products could result
in a loss of customers, reduced revenues and higher sales automation and
internet-based software development costs, which would seriously harm our
business.
Acquisitions
We may seek to expand through acquisitions which are not currently
identified and which therefore may entail risks which cannot be evaluated at
this time. We may seek to expand our operations by acquiring companies in
businesses that we believe will complement or enhance our business, particularly
in the seminar or internet-related industries. We cannot be assured that we will
be able to ultimately effect any acquisition, successfully integrate any
acquired business in our operations or otherwise successfully expand our
operations. We have not established any minimum criteria for any acquisition and
our management may have complete discretion in determining the terms of any
acquisition.
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Supplies
The principal materials and components used in our software products
include computer media, including disks and CD-ROMs, and user manuals. For each
product, we prepare a master software disk or CD-ROM, user manuals, which may be
in printed form or distributed on a CD-ROM, and packaging. Substantially all of
our disk and CD-ROM duplication is performed by third-party vendors, using disks
and blank CD-ROMs acquired from various sources. Outside sources print Warever
Corporation's packaging and related materials to its specifications. Portions of
the completed packages are assembled by third-party vendors. To date, Warever
Corporation has not experienced any material difficulties or delays in the
manufacture and assembly of its products, or material returns due to product
defects. We do not have any contracts with our suppliers. We believe that we
could replace our current suppliers without great expense, although such a
replacement may slow down our operation and negatively impact our profits.
Software is not a raw materials intensive product. The floppy disks, computer
disks, and paper for manuals that we produce could be purchased from a number of
suppliers.
R&D
We spent $39,433 in 1998 on salaries for our software development
personnel. In 1999, we spent $76,348 on salaries for personnel and independent
contractors involved in the development of our software. These costs are not
directly borne by our customers.
Employees
We currently have a total of twenty-six full time employees, ten of
whom are in our sales department, six are coaches, four are programmers and six
are in administration. We do not have employment contracts that guarantee a term
or salary or grant stock options. We estimate our number of employees to
increase to about sixty-five by the end of 2000. We cannot be certain of the
number of employees that we will have by this years end, but the increase may
resemble the following:
Warever 1Q Warever 2Q Warever 3Q Warever 4Q
-----------------------------------------------------------------------
Admin: 2 Admin: 3 Admin: 3 Admin: 3
Programming: 3 Program: 4 Program: 5 Program: 6
Sales: 2 Sales: 4 Sales: 6 Sales: 7
Support: 2 Support: 3 Support: 3 Support: 4
Total: 9 14 17 20
Coaching 1Q Coaching 2Q Coaching 3Q Coaching 4Q
-----------------------------------------------------------------------
Officers: 3 Officers: 3 Officers: 3 Officers: 3
Admin Mgmt: 4 Admin Mgmt: 5 Admin Mgmt: 5 Admin Mgmt: 5
Coaches: 8 Coaches: 10 Coaches: 12 Coaches: 15
Sales: 12 Sales: 15 Sales: 18 Sales: 20
Support: 1 Support: 2 Support: 2 Support: 2
Total: 28 35 40 45
-----------------------------------------------------------------------
LSI Total: 37 49 57 65
13
<PAGE>
Offices
We operate from an office building in a business park where we have
leased and occupy approximately 3,100 square feet of usable office space and
1,100 square feet of warehouse space. We own thirty computers, fax, phones and
copiers, printers, typewriters, desks, a conference table, cabinets and other
general office equipment. The monthly rental/lease rate is approximately $4,000
per month. We believe that as we expand the business, and cultivate additional
relationships with outside vendors, we will need to relocate our executive
offices to a nearby location or expand into our connected warehouse space which
is currently part of our lease.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
Our liquidity and capital resources as of December 31, 1998 were
$24,418, and as of December 31, 1999 were $18,393, a decrease of $6,025 or
24.6%. The cause of this decrease was due to expenditures related to the
development of our new software product Powerbase and its derivatives such as
Powerhouse. Our software division's sales were weak during this development
phase. In addition, funds were utilized to acquire and expand new Coaching
accounts such as SDI LeGrand Publishing and A.D. Kessler. Our current assets
exceed current liabilities. Neither Warever nor Coaching Institute has
significant payables balances outstanding.
Coaching Institute's debt payments and liabilities due in the next 12
months arise from three outstanding promissory notes issued to Lona Hendricks
involving principal loans totaling $190,000, with a total balance as of December
31, 1999 of $163,453. Interest and principal due on these notes in the next
twelve months is $145,400. Warever's debt payments and liabilities due in next
12 months arise from three outstanding promissory notes issued to Utah
Technology Finance Corporation involving principal loans totaling $102,000, with
interest and principal due on these notes in the next twelve months of $37,249.
Sale of Karl Malone project in October 1999 netted $378,000 in cash, $226,800 of
which was still due to Coaching Institute as of December 31. The Karl Malone
project, a fitness video hosted by professional basketball player Karl Malone,
was produced by Coaching Institute. During the first two months of 2000, we
received the remaining $226,800 due from the sale of the Karl Malone contract.
The proceeds were used to pay off long term debt.
We had negative cash flow from operations in 1999, due in large part to
investment in Karl Malone Fitness video, which has now been sold, and the
expansion of Coaching Institute. The video project was sold primarily because
Coaching Institute received an offer that would eliminate all project-associated
debt as well as provide money to expand Coaching Institute's primary operations.
We do not have any similar video projects under development, nor do we
anticipate producing any others, because our management has elected to focus
personnel and financial resources to our core business of coaching and software
development and sales. We may, however, produce much smaller scale videos in
conjunction with Coaching Institute's clients for use as promotional tools.
However, these promotional videos would not be sold in
14
<PAGE>
retail stores or similar venues as was anticipated with the Karl Malone project.
We had no material investments in 1999 with the exception of upgrading telephone
system in October 1999 which cost $18,000.
We do not have any financing transactions pending. We plan to explore
financing alternatives during 2000 to fund additional growth. During 2000
Coaching Institute could become self-funding through profits generated.
Warever's potential cash demands may be available from Coaching Institute's
surpluses. There is a seasonal impact on our sales. Generally, the slower months
are during the Summer and during the Christmas Holiday season.
We issued stock on February 1, 2000 in order to purchase the 15% of
Warever not yet owned by LSI. We also intend to purchase the remaining 15% of
Coaching Institute by issuance of stock in the first quarter of 2001.
Results of Operations- Three month Periods Ended March 31, 1999 and 2000
The following discussion and analysis should be read in conjunction
with LSI Communications' Financial Statements and the Notes thereto included
elsewhere in this Registration Form. The results of operations prior to July 1,
1999 are solely based on the operations of Warever. LSI Communications' results
for the three months ended March 31, 1999, as reflected in its unaudited
financial statements for the period then ended, have been compared with its
unaudited, interim results for the three months ended March 31, 2000. The
discussion of results, causes and trends should not be construed to imply any
conclusion that such results or trends will necessarily continue in the future.
Liquidity
Our liquidity and capital resources as of March 31, 2000 were $118,849,
and as of December 31, 1999 were $18,393, an increase of $100,456 or 546.2%. The
cause of this increase was due to the sale of the Karl Malone video.
Sales Revenues
Sale revenues for the three months ended March 31, 2000 were $286,077,
an increase of $234,108, or 450.5% from $51,969 for the three months ended March
30, 1999. Despite our overall sales increase, Warever's software sales, which
prior to 1999 was our only source of revenues, decreased 73.7% to $13,653 from
$51,969 in the first quarter of 1999. The decrease in Warever's software sales
is a trend that began in 1997 as a result of the declining demand for Action
Plus, our primary software product. We expect software sales trend to reverse to
some degree with the release of Powerbase during 2000. However, we have
performed no market tests and have insufficient information to assess the
potential demand, if any, for Powerbase.
The overall increase in our sales was due to $272,424 in revenues from
Coaching Institute during the three months ended March 31, 2000. We hope to
maintain and increase coaching revenues from Coaching Institute. There appears
to be a trend toward stable and possibly increased demand for our coaching
services. Our revenues from coaching have been increasing and Management has
observed an increasing number of speakers requesting coaching
15
<PAGE>
services at events such as the annual National Speakers Association convention.
Moreover, the coaching industry is attracting media coverage, including articles
in Realty Times, Creative Real Estate Magazine, Investor's Business Daily,
Nation's Business, the Salt Lake Tribune, the Orlando Sentinel, Inc. Magazine,
and Cooking Light Magazine. However, despite our increased coaching related
revenues and the increased consumer interest in coaching services perceived by
our management, we cannot ensure that we will be able to maintain or increase
revenues from coaching services.
Cost of Sales
Cost of sales increased by $62,187, or 4,562.5%, to $63,550 in the 1999
three-month period from $1,363 in the comparable 1998 three-month period. The
increase was attributable to the acquisition of Coaching Institute and its
relatively expensive product costs. Coaching services are very labor intensive.
Categorizing coaching related salaries in Cost of Sales resulted in a major Cost
of Sales increase. We expect cost of sales related to coaching services to
mirror coaching sales. Cost of Sales related to software actually decreased by
87.1% due to depleted software sales. We expect cost of sales related to
software sales to increase relative to sales of our new software product
Powerbase, however, we do not have reliable projections regarding consumer
demand for Powerbase.
Selling, General and Administrative Expenses
General and Administrative expenses increased by $64,352, or 173.1%, to
$101,526 in the 2000 three-month period from $37,174 in the 1999 three-month
period. A primary reason for the 2000 three-month period increase is the
acquisition of Coaching Institute in the third quarter of 1999. We now have
General and Administrative expenses for two subsidiaries where we only had one
in the comparable three month period ended March 31, 1999. Causes of increased
General and Administrative related expenses included a $13,000 increase in
telephone expenses, and a $9,000 increase accounting and legal fees.
Selling expenses increased by $99,250, or 1,001.4%, to $109,161 in the
three-month period ended March 31, 2000 from $9,911 in the comparable 1999
three-month period. This increase is the result of Coaching Institute's
salaries, commissions, advertising and general sales expenses that were not
present on our books prior to Coaching Institute's acquisition. Selling expenses
related to software sales actually decreased due to retraction of our software
selling efforts during the development phase of Powerbase. We expect our selling
expenses to increase as we expand coaching services and commence marketing of
the Powerbase software.
Payroll related expenses increased by $44,042, or 255.6%, to $61,276 in
the three-month period ended March 31, 2000 from $17,234 in the comparable 1999
three-month period. The Payroll line item of our Statement of Operations
includes all salaries, primarily administrative, not related to selling,
marketing or actual coaching. This increase is generally attributable to the
expansion of our administration to accommodate Coaching Institute.
16
<PAGE>
Interest Expense
Interest expense increased by $2,144, or 536%, to $2,544 in the 2000
three-month period from $400 in the 1999 three-month period. The increase was
primarily due to interest paid on loans from 1999. The loans were required to
continue our operations.
Net Loss
Our net loss for the 2000 three-month period increased by $23,129, or
112.1%, to a net loss of ($43,764) from a net loss of ($20,635) in the
comparable 1999 period. This increased net loss is due to operating expenses
that increased by 289.3% and Cost of Sales that increased by 4,562.5%, while
gross revenues increase of only 450.5%. Based on current fixed expenses and
profit margins, we would need to increase gross revenues from Coaching by
approximately $100,000 per quarter or increase software revenues by
approximately $60,000 per quarter to become profitable. Such increases are
possible, but uncertain because coaching sales tend to drop during the Summer
months and demand for our new software in the next year remains unclear.
Results of Operations - Twelve month Periods Ended December 31, 1998 and 1999
Discussion of the results of operations for the twelve-month period
ended December 31, 1999 contain financial information for Coaching Institute
from the time of its acquisition on June 21, 1999. The following discussion and
analysis should be read in conjunction with LSI Communications' Financial
Statements and the Notes thereto included elsewhere in this Registration Form.
In addition to LSI Communications' consolidated financial statements for the
Twelve month Periods Ended December 31, 1998 and 1999, a Pro forma statement of
operations at September 30, 1999 is presented later in this registration form
for purposes of additional analysis. The pro forma statement of operations
compares Coaching Institute and Warever through the first three quarters of
1999, despite the fact that Coaching Institute was not acquired until the latter
part of the three month period. Audited financial statements of Coaching
Institute for 1998 have also been included for additional analysis.
Sales Revenues
Sale revenues for the twelve months ended December 31, 1999 were
$533,047, an increase of $119,038, or 28.8% from $414,009 for the twelve months
ended December 31, 1998. Despite our overall sales increase, Warever's software
sales, which prior to 1999 was our only source of revenues, decreased 71.7% to
$117,316 from $414,009 in 1998. The overall increase in sales was due to
$415,731 in revenues from Coaching Institute. The decrease in Warever's software
sales is due to the fact that our limited resources were spent on developing new
software programs rather than marketing and sales efforts that may have
increased sales. Sales of our existing software is decreasing as the products
enter the declining phase of their product life cycle. Action plus was our only
source of meaningful income from software sales. The majority of consumers that
are within reach of our current marketing strategy have either purchased the
software or never will. This downward sales trend caused us to focus on
development of new software. Due to the rapid changes common in technology and
the software market, we intend to introduce new software products with
relatively long life cycles to
17
<PAGE>
reduce the risk of rapid technological obsolescence and to decrease revenue
peaks and valleys. Our management believes that software serving consistent,
ongoing business needs commonly has long life cycles. We believe that Powerbase,
our newest software program to be released the second quarter of 2000, serves
such needs. Powerbase supports salespeople in functions that remain constant in
the sales industry, including tracking client information, time management, and
regular client correspondence.
Increased software sales for Warever in 2000 are possible due to the
release of Powerbase during 2000. However, we have performed no market tests and
have insufficient information to assess the potential demand, if any, for
Powerbase. We also hope to maintain and increase coaching revenues from Coaching
Institute. As discussed, we cannot ensure that we will be able to maintain or
increase revenues from coaching services, but there appears to be a trend toward
stable and possibly increased demand for our coaching services.
Cost of Sales
Cost of sales increased by $147,708, or 10,892.9%, to $149,064 in the
1999 twelve-month period from $1,356 in the 1998 twelve-month period. The
addition of Coaching Institute and salaries related to coaching services causes
the bulk of the $147,708 increase. We expect cost of sales related to coaching
services to remain similar to current levels, increasing or decreasing relative
to the amount of coaching sales. Cost of sales related to software sales
increased by 321.8% or $4,363 to $5,719 in the 1999 twelve-month period from
$1,356 in the 1998 twelve-month period. The dollar amount of the increased cost
of sales related to software was not significant and the reason for the increase
was primarily due to the sale of some computer hardware which had a much higher
cost of goods than our software. The computer hardware sold was primarily laptop
computers. Warever Corporation has accounts with national distributors such as
PC Connection, Midwest Micro, and other computer hardware and software
distributors. In general, the laptop computers were sold to a few select
customers to test the market for hardware and software combination packages. The
costs of sales as a percentage of our software sales reflects that the bulk of
our software sales price is derived from its intellectual property value and not
included in cost of sales. We expect cost of sales related to software sales to
increase relative to sales of our new software products.
Selling, General and Administrative Expenses
General and Administrative expenses increased by $62,642, or 68.9%, to
$153,610 in the 1999 twelve-month period from $90,968 in the 1998 twelve-month
period. A primary reason is the acquisition of Coaching Institute in 1999. We
now have General and Administrative expenses for two subsidiaries where we only
had one in 1998. More specifically, General and Administrative expenses
increased due to additional accounting and auditing costs related to
registration of our securities and $20,000 for telephone expenses and $24,000 in
direct mailing expenses related to Coaching Institute's operations which were
not included in the 1998 twelve-month period. Increased expenses resulting from
the acquisition of Coaching Institute will continue indefinitely.
Selling expenses increased by $167,953, or 110.3%, to $320,242 in the
1999 twelve-month period from $152,289 in the 1998 twelve-month period. This
increase is due to the
18
<PAGE>
addition of Coaching Institute and the accompanying salaries, commissions,
advertising and general sales expenses related to coaching services. Selling
expenses related to software sales actually decreased due to retraction of our
software selling efforts during the development phase of Powerbase. We expect
our selling expenses to increase as we expand coaching services and commence
marketing of the Powerbase software.
Not included in the "Selling Expenses" and "General and Administrative
Expenses" line items were $95,500 in deferred compensation to Craig Hendricks
and Steve Carlson, $135,000 related to consulting agreements with Noble House of
Boston, Inc. and National Capital and $126,100 in production fees for the Karl
Malone project. Noble House agreed to act as a liaison between potential
investors and underwriters. Our management believes that Noble House no longer
provides any services and that we are not bound to pay additional consideration
under our contract. Our agreement with National Capital was related to
registration of our common stock. Our obligations to National Capital have been
satisfied.
Depreciation and Amortization
Depreciation and Amortization remained steady increasing slightly by
$755, or 7.4%, to $10,964in the 1999 twelve-month period from $10,209 in the
1998 twelve-month period.
Interest Expense
Interest expense increased by $7,452, or 90.9%, to $14,230 in the 1999
twelve-month period from $6,778 in the 1998 twelve-month period. The increase
was primarily due to new loans totaling $190,000 in 1999.
Net Loss
Our net loss for the 1999 twelve-month period increased by $314,230, or
1,745.8%, to a net loss of ($332,229) in the 1999 twelve-month period from a net
loss of ($17,999) in the 1998 period. This increased net loss is due to
operating expenses that increased by 96.9%, as discussed above, coupled with a
gross revenue increase of only 28.8%. We do not expect significant reductions in
our operating costs during 2000.
DESCRIPTION OF PROPERTY
Our corporate headquarters are located in Draper, Utah where we have a
lease for approximately 3,100 square feet of office space and 1,100 square feet
of warehouse space in a typical business park. We believe that as we expand the
business, we will need to lease additional space or add to the currently leased
square footage. We believe that suitable additional or substitute space will be
available on commercially reasonable terms.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this registration
statement, the aggregate number of shares of common stock owned of record or
beneficially by each person who owned of record, or is known by us to own
beneficially, more than 5% of our common stock, and the name and holdings of
each officer and director and all officers and directors as a group:
<TABLE>
<CAPTION>
- - -------------------- ------------------------------------------- -------------------------------- ---------------------
Title of Class Name and Amount and Percent of Class
Address of Beneficial Owner Nature Beneficial Owner
- - -------------------- ------------------------------------------- -------------------------------- ---------------------
Officers and Directors:
<S> <C> <C> <C>
Common Stock Craig R. Hendricks 2,894,604 26.1%
112 W. Business Park Drive
Draper, Utah 84020
Common Stock Steven E. Carlson 2,894,604 26.1%
112 W. Business Park Drive
Draper, Utah 84020
5% Shareholders:
Common Stock Lona Hendricks 1,186,340 10.7%
4103 205th Ave. S.E.
Issaquah, WA 98029
- - -------------------- ------------------------------------------- -------------------------------- ---------------------
</TABLE>
The following table sets forth, as of the date of this registration
statement, the aggregate number of shares of common stock warrants held by each
person who owned of record, or is known by us to own beneficially, more than 5%
of our common stock, and the name and holdings of each officer and director.
20
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------- ---------------------------------- ---------------------------- --------------------------
Name of Warrant Holder Title and Amount of Securities Exercise Price Date of Exercise
Called for by Warrants
- - ----------------------------- ---------------------------------- ---------------------------- --------------------------
<S> <C> <C> <C>
Craig R. Hendricks 869,318 shares of common stock. .0073 shares of Coaching For a period of 60 days
112 W. Business Park Drive Institute, Inc stock per after January 1, 2001.
Draper, Utah 84020 share.
Steven E. Carlson 869,318 shares of common stock. .0073 shares of Coaching For a period of 60 days
112 W. Business Park Drive Institute, Inc stock per after January 1, 2001.
Draper, Utah 84020 share.
Lona Hendricks 143,182 shares of common stock. .0073 shares of Coaching For a period of 60 days
4103 205th Ave. S.E. Institute, Inc stock per after January 1, 2001.
Issaquah, WA 98029 share.
- - ----------------------------- ---------------------------------- ---------------------------- --------------------------
</TABLE>
DIRECTORS, EXECUTIVE OFFICERS
PROMOTERS AND CONTROL PERSONS
Officers and Directors
The following table sets forth the names, age, and position of each of
our directors and executive officers.
Name Age Position and Office Held
---- --- ------------------------
Craig R. Hendricks 33 President, Chief Executive Officer
Chief Accounting Officer,
Chief Financial Officer, Director
Steven E. Carlson 30 Vice President, Director
Each of the above individuals became an officer and director in
connection with our re-organization on December 8, 1998. The term of office of
each officer and director is until his successor is elected and qualified.
Biographical Information
Set forth below is biographical information for each officer and
director. No person other than officers and directors will currently perform any
of our management functions.
21
<PAGE>
Craig R. Hendricks
Mr. Craig R. Hendricks has been with Warever Corporation since 1992. In
1993, he orchestrated and led the buyout of Warever Corporation from its
founding owners. Prior to joining Warever Corporation in 1992, Mr. Hendricks
began his career at WordPerfect Corporation. He served on the Board of CMS
Casuals, Inc., a manufacturing company based in Bellevue, Washington with
approximately 40 employees, which was sold to a group of Microsoft employees in
1990. He received a Bachelor of Science in accounting and a Master of Business
Administration Degree, graduating with distinction from Brigham Young University
in 1992.
Steven E. Carlson
Mr. Steven E. Carlson helped create Warever Corporation as one of the
original founders while attending the University of Utah. Mr. Carlson has been a
member of the board of directors since Warever's inception and the vice
president of sales and marketing since 1995. Mr. Carlson has been involved in
the productivity and sales automation industries since the late 1980's. For the
past five years, Mr. Carlson has focused on day to day operations related to
Warever's software sales and on-site implementation of Warever's automation
system software.
EXECUTIVE COMPENSATION
We have no written employment agreements with any officer or director.
The President and Vice President do not have set compensation and defer their
compensation from time to time. Commencing January 1, 2000, the President and
Vice President will be paid annual salaries of $100,000 each.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- - -------------------------------------------------------------------------------------------------------------------------------
Name and Principal
Position (a) Year
(b) Long-Term Compensation
- - ----------------------- -------- ------------------------------------------ ------------------------------------- -------------
Annual Compensation Awards Payouts
------------------------------------------ ------------ ------------------------ -------------
Salary (c) Bonus (d) Other Restricted Securities LTIP All
Annual Stock Under- Payouts Other
Compen- Award (f) Lying (h) Compen-
sation (e) Options/ sation (i)
SARs (g)
- - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Craig Hendricks 1998 $ 50,250 $0.0 $0.0 $0.0 0 $0.0 $0.0
Chairman, CEO,
President
- - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- -------------
Steven Carlson 1998 $ 50,250 $0.0 $0.0 $0.0 0 $0.0 $0.0
Vice President
- - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- -------------
</TABLE>
There are no other agreements or arrangements, express or implied,
between us and any other officer or director, regarding any other form of
compensation, including stock options, warrants, employment incentives, or the
like.
No deferred compensation or long-term incentive plan awards were issued
or granted to our management during the year ended December 31, 1998. Deferred
compensation totaling
22
<PAGE>
$90,000, or $45,500 for each Steve Carlson and Craig Hendricks was booked for
the year ended December 31, 1999.
Compensation of Directors.
There are no standard arrangements pursuant to which our directors are
compensated for any services provided as a director. No additional amounts are
payable to our directors for committee participation or special assignments.
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from us, with respect to any of our directors
or executive officers which would in any way result in payments to any such
person because of his or her resignation, retirement or other termination of
employment with us, any change in control of our organization, or a change in
the person's responsibilities following a change in control of our organization.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Loan From 5% Stockholder
There have been several transactions between members of management,
nominees to become a director or executive officer, 5% stockholders or
promoters. During 1995, Lona Hendricks, an immediate family member of Craig
Hendricks, one or our officers and directors, advanced $39,000 for working
capital. As of December 31, 1999 $35,866 in payments were made to him with a
balance due at December 31, 1999 and 1998, of $3,134 and $3,593, respectively.
During 1999, Craig Hendricks also advanced $5,000 for working capital. As of
December 31, 1999, $5,000 in payments were made to him removing the balance due
from our books. During 1999, Lona Hendricks loaned us a total of $190,000 in a
series of three similar transactions. As of December 31, 1999, $26,547 was paid
to her with a balance due at December 31, 1999 of $163,453. The loans and terms
are as follows:
<TABLE>
<CAPTION>
-------------------- -------------------- -------------- -------------- ----------------------------------------------
Date of Loan Principal Amount Interest Rate Term Payment Terms
-------------------- -------------------- -------------- -------------- ----------------------------------------------
<S> <C> <C> <C> <C>
April 1, 1999 $40,000 9.75% 3 years Monthly payments of principal and interest
amortized over 36 months
-------------------- -------------------- -------------- -------------- ----------------------------------------------
July 1, 1999 $50,000 9.75% 1 year Monthly payments of interest only with
balloon payment due on or before month 12.
-------------------- -------------------- -------------- -------------- ----------------------------------------------
August 1, 1999 $100,000 9.75% 1 year Monthly payments of interest only with
balloon payment due on or before month 12.
-------------------- -------------------- -------------- -------------- ----------------------------------------------
</TABLE>
DESCRIPTION OF SECURITIES
General
23
<PAGE>
LSI Communications is authorized to issue 50,000,000 shares of common
stock, par value $0.01 per share, of which 11,096,054 shares are issued and
outstanding. We have no preferred stock.
Common Stock
Holders of common stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of stockholders. Shares of common
stock do not carry cumulative voting rights and, therefore, holders of a
majority of the outstanding shares of common stock will be able to elect the
entire board of directors, and, if they do so, minority stockholders would not
be able to elect any members to the board of directors. Our board of directors
has authority, without action by the stockholders, to issue all or any portion
of the authorized but unissued shares of common stock, which would reduce the
percentage ownership of the stockholders and which may dilute the book value of
the common stock.
Shareholders have no pre-emptive rights to acquire additional shares of
common stock. The common stock is not subject to redemption and carries no
subscription or conversion rights. In the event of liquidation, the shares of
common stock are entitled to share equally in corporate assets after
satisfaction of all liabilities.
Holders of common stock are entitled to receive dividends as the board
of directors may from time to time declare out of funds legally available for
the payment of dividends. We have not paid dividends on common stock and do not
anticipate that we will pay dividends in the foreseeable future.
PART II
MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information.
Our common stock is quoted on the OTC Bulletin Board of the NASD. No
assurance can be given that any established market for our common stock will
develop or be maintained. For any market that develops for our common stock, the
sale of "restricted securities" (common stock) pursuant to Rule 144 of the
Securities and Exchange Commission by members of management or any other person
to whom any such securities may be issued in the future may have a substantial
adverse impact on any such public market. Information about the date when
current holders' holding period of "restricted securities" commenced can be
found under the caption "Recent Sales of Unregistered Securities." A minimum
holding period of one year is required for resales under Rule 144, along with
other pertinent provisions, including publicly available information concerning
our operations (this requirement will be satisfied by the filing and
effectiveness of this Registration Statement), limitations on the volume of
"restricted securities" which can be sold in any 90 day period; the requirement
of unsolicited broker's transactions; and the filing of a Notice of Sale on Form
144. We have 11,415,632 shares of common stock outstanding of which all but
5,668,284 are freely traded or can be currently sold
24
<PAGE>
under Rule 144, subject to its limitations. There are currently outstanding
options to purchase 2,045,455 shares of our common stock. The majority of these
options are held by our two directors and will require issuance of new stock
which will dilute the ownership interest of our shareholders.
Our common stock can be defined as a "penny stock" pursuant to Rule
3a51-1 under the Securities and Exchange Act of 1934 because our shares are
traded at a price less than $5 per share, we do not yet meet certain financial
size and volume levels, and our shares are not registered on a national
securities exchange or quoted on the NASDAQ system. A "penny stock" is subject
to rules 15g-1 through 15g-10 of the Securities and Exchange Commission. Those
rules require securities broker-dealers, before effecting transactions in any
"penny stock," to (a) deliver to the customer and obtain a written receipt for a
disclosure document set forth in Rule 15g-10 (Rule 15g-2), (b) disclose certain
price information about the stock (Rule 15g-3), (c) disclose the amount of
compensation received by the broker-dealer (Rule 15g-4) or any "associated
person" of the broker-dealer (Rule 15g-5), and (d) send monthly statements to
customers with market and price information about the "penny stock" (Rule
15g-6). Our common stock could also become subject to Rule 15g-9, which requires
the broker-dealer, in some circumstances, to approve the "penny stock"
purchaser's account under certain standards and deliver written statements to
the customer with information specified in the rules. (Rule 15g-9) These
requirements discourage broker-dealers form effecting transactions in "penny
stocks" and may limit the ability of our shareholders to sell their shares into
any secondary market for our common stock.
The following quotations were provided by Dreyfus Brokerage Services,
Inc. and represent historical pricing of our common stock by quarter over the
past two years on the over the counter bulletin board, but do not represent
actual transactions; these quotations do not reflect dealer markups, markdowns
or commissions.
Stock Quotations
CLOSING BID
December 31, 1998 4 3/4 25/32
March 31, 1999 4 3/4 1 /78
June 30, 1999 3 5/16 1 3/8
September 30, 1999 1 7/8 7/8
December 31, 1999 1 3/4 7/16
March 31, 1999 1/2 3/32
Holders.
25
<PAGE>
The number of record holders of our securities as of the date of this
Registration Statement is approximately 125.
Dividends.
We have not declared any cash dividends with respect to our common and
do not intend to declare dividends in the foreseeable future. Our future
dividend policy cannot be ascertained with any certainty, and if and until we
become profitable, no such policy will be formulated. There are no material
restrictions limiting, or that are likely to limit, our ability to pay dividends
on our securities.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, or governmental
agency proceedings, and no such action by or, to the best of our knowledge,
against us has been threatened.
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS
None.
RECENT SALES OF
UNREGISTERED SECURITIES
Common Stock
<TABLE>
<CAPTION>
--------------------------------------- ------------- ------------------ ---------------------------------------------
Name Date Number of Shares Aggregate Consideration
Acquired
--------------------------------------- ------------- ------------------ ---------------------------------------------
<S> <C> <C> <C>
Bismark Mining 6/11/98 96,000 80,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Steven E. Carlson 12/8/98 999,330 85,000 shares of Warever, Inc. stock.(2)
Steven E. Carlson 6/28/99 1,062,500 36,125 shares of Coaching Institute
Steven E. Carlson 2/1/00 832,775 stock.(3)
15,000 shares of Warever, Inc. stock.(9)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Chartlight Corp. 12/2/98 10,000 $500 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
DFT Consultants, LTD 12/2/98 243,600 $121,800 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Eastern Forest Resources, Inc. 12/2/98 20,000 $11,000 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Helena Silver Mines, Inc. 6/11/98 132,000 110,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Craig R. Hendricks 12/8/96 999,330 85,000 shares of Warever, Inc. stock.(2)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Lona Hendricks 12/8/98 551,640 46,921 shares of Warever, Inc. stock. (2)
Lona Hendricks 6/28/99 175,000 5,950 shares of Coaching Institute (3)
Lona Hendricks 2/1/00 459,700 8,280 shares of Warever, Inc. stock.(9)
--------------------------------------- ------------- ------------------ ---------------------------------------------
26
<PAGE>
--------------------------------------- ------------- ------------------ ---------------------------------------------
Hercules Extension, Inc. 6/11/98 108,000 90,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Karl A. Malone 10/7/99 137,931 Services(5)
--------------------------------------- ------------- ------------------ ---------------------------------------------
M.B. Resources, Inc. 6/11/98 120,000 100,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Richard A. McAllister 6/28/99 150,000 6,000 shares of Coaching Institute stock.
(3)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Mark McKown 8/30/99 5,519 Services(5)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Northpost Operating Co. 6/11/98 120,000 100,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Don Robinson 12/8/98 299,800 25,500 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Savoy Industries, Inc. 6/11/98 96,000 80,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Scejon Investments, Inc. 12/2/98 225,000 $11,250 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Starboard Financial Corp. 12/2/98 310,000 $15,500 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Washington Mining Corp. 6/29/98 120,000 100,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Roger G. Williams 6/28/99 50,000 2,000 shares of Coaching Institute stock.
(3)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Wide West, Inc. 6/11/98 144,000 120,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Windlass Investments, Inc. 12/2/98 191,400 $9,570 in 1998 private placement(4)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Ross Wolfley 12/6/98 149,900 12,750 shares of Warever, Inc. stock. (2)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Security Insurers, Inc. 6/11/98 144,000 120,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Silverton Mines, Inc. 6/11/98 120,000 100,000 shares of Ferber stock.(1)
--------------------------------------- ------------- ------------------ ---------------------------------------------
Noble House of Boston, Inc. 4/99 200,000 Services(6)
--------------------------------------- ------------- ------------------ ---------------------------------------------
National Capital 4/99 35,000 Services(7)
--------------------------------------- ------------- ------------------ ---------------------------------------------
National Capital 4/99 50,000 Exercise of Options(8)
--------------------------------------- ------------- ------------------ ---------------------------------------------
</TABLE>
(1) LSI Communications, Inc., acquired all of the shares of Ferber
Corporation in June 1997 where the shareholders of Ferber exchanged
1,000,000 Ferber shares for 1,200,000 shares of LSI Communications,
Inc.
(2) Warever, Inc. merged into LSI Communications, Inc., which acquired 85%
of the shares of Warever, Inc. by issuing 2,500,000 shares of its stock
in exchange for 85%, or 255,171, shares of Warever, Inc. stock pursuant
to a November 20, 1998 transaction. LSI Communications, Inc., acquired
85% of the shares of
(3) Coaching Institute by issuing 2,500,000 shares of stock in exchange for
85%, or 85,000, of the shares of Coaching Institute stock pursuant to a
June 21, 1999 transaction.
(4) In November and December 1998 the company raised $50,000 in a private
offering pursuant to a Regulation D, Rule 504 exemption.
(5) Services related to the production of a fitness video project.
(6) Payment in stock for services related to public relations and funding.
(7) Payment in stock for services related to registration of securities.
(8) Payment for services related to funding.
(9) LSI Communications, Inc., acquired the remaining 15% of Coaching
Institute by issuing 2,500,000 shares of stock in exchange for 15%, or
15,000, of the shares of Coaching Institute stock in a February 1, 2000
transaction.
We believe that each of the foregoing persons or entities was either an
"accredited investor," or "sophisticated investor" as defined in Rule 506 of
Regulation D of the Securities and Exchange Commission. Each had access to all
material information regarding LSI Communications prior to the offer, sale or
issuance of these "restricted securities." We believe these shares were exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "1933 Act"), pursuant to Section 4(2) and applicable exemptions thereunder.
27
<PAGE>
We have taken the following factors into account in determining the
valuations of the above-referenced shares:
o the fact that the shares are "restricted"
o our history of limited revenues
o the limited market for our common stock on the OTC Bulletin
Board of the NASD
o the low book value per share
Transfer and Warrant Agent
Our transfer agent is Interwest Transfer Company, Inc., 1981 East
Murray-Holladay Road, Holladay, UT 84117.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.7502 of the Nevada Revised Statutes provides in relevant part as
follows:
1.A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2.A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction
28
<PAGE>
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense. Our articles of incorporation do not contain a
specific indemnification provision for its officers, directors and employees.
Insofar as indemnification by LSI Communications for liabilities
arising under the Securities Act may be permitted to our officers and directors
we are aware that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by LSI Communications of
expenses incurred or paid by an officer or director in the successful defense of
any action, suit, or proceeding) is asserted by such officer or director in
connection with the securities being registered hereby, LSI Communications will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
29
<PAGE>
LSI Communications, Inc.
Interim Financial Statements
March 31, 2000 and 1999
UNAUDITED
30
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Operations
Unaudited
For the Period Ended
March 31, 2000 March 31, 1999
--------------- ---------------
REVENUES
<S> <C> <C>
Software Sales $13,653 $51,969
Training Sales 272,424 -
--------------- ---------------
TOTAL REVENUES 286,077 51,969
--------------- ---------------
COST OF SALES
Software 176 1,363
Training 63,374 -
--------------- ---------------
TOTAL COST OF GOODS SOLD 63,550 1,363
--------------- ---------------
GROSS PROFIT 222,527 50,606
--------------- ---------------
SELLING EXPENSES 109,161 9,911
PAYROLL 61,276 17,234
RESEARCH & DEVELOPMENT 1,705 5,975
GENERAL & ADMINISTRATIVE EXPENSES 101,526 37,174
--------------- ---------------
TOTAL OPERATING EXPENSES 273,668 70,294
--------------- ---------------
OPERATING INCOME (LOSS) (51,141) (19,688)
--------------- ---------------
OTHER INCOME AND (EXPENSES)
Forgiveness of Debt 13,368
Miscellaneous income (expense) (3,447) (547)
Interest expense (2,544) (400)
--------------- ---------------
Total Other Income and (Expenses) 7,377 (947)
--------------- ---------------
NET INCOME (LOSS) BEFORE INCOME TAXES (43,764) (20,635)
--------------- ---------------
PROVISION FOR INCOME TAXES - -
NET INCOME (LOSS) (43,764) (20,635)
=============== ===============
NET INCOME (LOSS) PER SHARE (0.004) (0.003)
=============== ===============
WEIGHTED AVERAGE OUTSTANDING SHARES 10,563,984 5,968,248
=============== ===============
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Balance Sheet
Unaudited
ASSETS
March 31, December 31,
2000 1999
--------------- ---------------
CURRENT ASSETS
<S> <C> <C>
Cash & Cash Equivalents $118,849 $18,393
Inventory 4,371 4,546
Accounts Receivable (Net of allowance
of $7,000 and 13,000, respectively) 132,728 157,829
Notes & Employee Receivable 200 226,800
--------------- ---------------
Total Current Assets 256,148 407,568
--------------- ---------------
PROPERTY & EQUIPMENT
(Net of Accumulated Depreciation) 28,579 26,135
--------------- ---------------
OTHER ASSETS
Deposits & Prepaids 6,076 6,076
--------------- ---------------
Total Other Assets 6,076 6,076
--------------- ---------------
TOTAL ASSETS $290,803 $439,779
=============== ===============
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Balance Sheet
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
--------------- ---------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $22,382 $22,858
Accrued expenses 18,562 34,410
Current portion of long-term liabilities 95,700 195,081
Deferred Revenue 1,472 1,962
Deferred Compensation 91,000 91,000
--------------- ---------------
Total Current Liabilities 229,116 345,311
--------------- ---------------
LONG TERM LIABILITIES
Notes payable - 37,368
Notes payable-related party 113,055 166,587
Less current portion (95,700) (195,081)
--------------- ---------------
Total long term Liabilities 17,355 8,874
--------------- ---------------
TOTAL LIABILITIES 246,471 354,185
--------------- ---------------
Minority Interest - -
--------------- ---------------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000 shares
of $.001 par value, issued and outstanding
11,415,632 and 8,915,632 shares, respectively 11,416 8,916
Additional Paid-in capital 731,598 731,598
Retained Earnings (698,682) (654,920)
--------------- ---------------
Total Stockholders' Equity 44,332 85,594
--------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $290,803 $439,779
=============== ===============
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Cash Flows
Unaudited
For the Period Ended
March 31, 2000 March 31, 1999
--------------- ---------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) ($43,764) ($20,635)
Non-cash items:
Depreciation 3,958 2,431
Bad Debt 7,000
Issuance of stock for remaining 15% Warever shares 2,500
Recognition of Deferred Revenue (490) -
(Increase)/decrease in currents assets:
Accounts receivable 30,901 (28,739)
Inventory 176 172
Increase/(decrease) in currents liabilities:
Accounts payable (475) 6,789
Accrued expense (15,848) 2,097
--------------- ---------------
Net Cash Provided (Used) by Operating Activities (16,042) (37,885)
--------------- ---------------
Cash Flows From Investing Activities
Cash received in sale of contract 226,800 -
Cash paid for property, equipment and software technology (6,402) -
--------------- ---------------
Net Cash Provided (Used) by Investing Activities 220,398 -
--------------- ---------------
Cash Flows From Financing Activities
Factoring Fees (13,000) -
Increase in long-term debt - 15,500
Principal payments on long-term debt (90,900) (1,727)
--------------- ---------------
Net Cash Provided (Used) by Financing Activities (103,900) 13,773
--------------- ---------------
Increase/(decrease) in Cash 100,456 (24,112)
Cash and Cash Equivalents at Beginning of Period 18,393 24,418
Cash and Cash Equivalents at End of Period $118,849 $306
Supplemental Cash Flow Information:
Cash paid for interest $2,544 $400
Cash paid for income taxes - -
</TABLE>
34
<PAGE>
LSI Communications, Inc.
Consolidated Financial Statements
December 31, 1999 and 1998
C O N T E N T S
Accountants' Report .................................................. 36
Consolidated Balance Sheets .......................................... 37
Consolidated Statements of Operations ................................ 39
Consolidated Statements of Stockholders' Equity....................... 40
Consolidated Statements of Cash Flows ................................ 41
Notes to the Consolidated Financial Statements ....................... 43
Proforma Consolidated Statements of Operations ....................... 53
35
<PAGE>
[letterhead of Crouch Bierwolf & Chisholm]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of LSI Communications, Inc.
We have audited the accompanying consolidated balance sheets of LSI
Communications, Inc. as of December 31, 1999 and 1998 and the related statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LSI Communications,
Inc. as of December 31, 1999 and 1998 and the results of its consolidated
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
Salt Lake City, Utah
January 28, 2000
36
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Balance Sheets
ASSETS
December 31,
1999 1998
------------------------------------------
CURRENT ASSETS
<S> <C> <C>
Cash & Cash Equivalents (Note 1) $ 18,393 $ 24,418
Inventory 4,546 5,286
Accounts Receivable (Net of allowance
of $13,000 and $8,500, respectively) 157,829 7,252
Notes Receivable (Note 3) 226,800 -
------------------ ------------------
Total Current Assets 407,568 36,956
------------------ ------------------
PROPERTY & EQUIPMENT (Note 2) 26,135 15,093
------------------ ------------------
OTHER ASSETS
Deposits & Prepaids 6,076 6,076
------------------ ------------------
Total Other Assets 6,076 6,076
------------------ ------------------
TOTAL ASSETS $ 439,779 $ 58,125
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
37
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
CURRENT LIABILITIES 1999 1998
------------------------------------------
<S> <C> <C>
Accounts payable $ 22,858 $ 13,891
Accrued expenses 34,410 5,216
Current portion of long-term
liabilities (Note 4) 195,081 23,392
Deferred Revenues (Note 1) 1,962 5,000
Deferred Compensation 91,000 -
------------------ ------------------
Total Current Liabilities 345,311 47,499
------------------ ------------------
LONG TERM LIABILITIES (Note 4)
Notes payable 37,368 37,121
Notes payable-related party 166,587 3,593
Capital lease obligations - -
Less current portion (195,081) (23,392)
------------------ ------------------
Total long term Liabilities 8,874 17,322
------------------ ------------------
TOTAL LIABILITIES 354,185 64,821
------------------ ------------------
MINORITY INTEREST - -
------------------ ------------------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000 shares of
$.001 par value, issued and outstanding
8,915,632, and 5,959,697 shares,
respectively 8,916 5,960
Additional Paid-in capital 731,598 310,035
Retained earnings (654,920) (322,691)
------------------ ------------------
Total Stockholders' Equity 85,594 (6,696)
------------------ ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 439,779 $ 58,125
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
38
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Operations
For the Year ended
December 31,
1999 1998
------------------ ------------------
REVENUES
<S> <C> <C>
Software Sales $ 117,316 $ 414,009
Training Revenues 415,731 -
------------------ ------------------
TOTAL REVENUES 533,047 414,009
------------------ ------------------
COST OF SALES
Software 5,719 1,356
Training 143,345 -
------------------ ------------------
TOTAL COST OF SALES 149,064 1,356
------------------ ------------------
GROSS PROFIT 383,983 412,563
------------------ ------------------
SELLING EXPENSES 320,242 152,289
DEPRECIATION & AMORTIZATION 10,964 10,209
PRODUCTION FEES 126,100 -
CONSULTING FEES 135,000 -
PAYROLL 68,277 138,000
GENERAL &
ADMINISTRATIVE EXPENSES 153,610 90,968
RESEARCH & DEVELOPMENT 27,200 35,800
------------------ ------------------
TOTAL OPERATING EXPENSES 841,393 427,266
------------------ ------------------
OPERATING LOSS (457,410) (14,613)
------------------ ------------------
OTHER INCOME AND (EXPENSES)
Minority interest (5,209) -
Miscellaneous income 1,620 3,392
Interest expense (14,230) (6,778)
Gain on sale of contract 143,000 -
------------------ ------------------
Total Other Income and (Expenses) 125,181 (3,386)
------------------ ------------------
LOSS BEFORE INCOME TAXES (332,229) (17,999)
PROVISION FOR INCOME TAXES (Note 1) - -
------------------ ------------------
NET INCOME/(LOSS) $ (332,229) $ (17,999)
================== ==================
NET INCOME/(LOSS) PER SHARE $ (.05) $ (.01)
================== ==================
WEIGHTED AVERAGE OUTSTANDING SHARES 7,444,168 3,246,641
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
39
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Stockholders' Equity
From December 31, 1997 through December 31, 1999
Common Stock Additional Retained
---------------------- Paid-in Treasury Earnings
Shares Amount Capital Stock (Deficit)
------------ -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance on December 31, 1997 3,000,000 3,000 297,495 (29,000) (304,692)
October 12, 1998 - Purchase
of Treasury Stock - - - (500) -
November 98 - Reverse acquisition
and reorganization adjustment
(Note 1) 1,959,697 1,960 (31,460) 29,500 -
November 98 - Stock issued for
cash at $.05 per share 1,000,000 1,000 49,000 - -
Offering Costs - - (5,000) - -
Net Loss for the year
ended December 31, 1998 - - - (17,999)
----------- -------- ---------- -------- ----------
Balance on December 31, 1998 5,959,697 5,960 310,035 - (322,691)
March 3, 1999 - shares issued in
Shareholder settlement at
$.001 per share 27,485 27 (27) - -
April 1, 1999 - shares issued for
consulting agreement at
$1.00 per share 85,000 85 84,915 - -
June 28, 1999 - shares issued in
acquisition of Coaching Institute,
Inc. 2,500,000 2,500 27,019 - -
July 1, 1999 - shares issued for
consulting agreement at
$.25 per share 200,000 200 49,800 - -
August 30, 1999 - shares issued for
royalty agreement at $1.825
per share 143,450 144 259,856 - -
Net Loss for the year ended
December 31, 1999 - - - - (332,229)
----------- -------- ---------- -------- ----------
Balance on December 31, 1999 8,915,632 $ 8,916 $ 731,598 $ - $ (654,920)
=========== ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
40
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Cash Flows
Year Ended
December 31,
1999 1998
------------- -------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) $ (332,229) $ (17,999)
Non-cash items:
Consulting fee paid with stock issues 135,000 -
Depreciation & amortization 10,964 10,209
Account payable forgiveness 25,000 -
Bad Debt 17,593 4,400
Minority Interest 5,209 -
Gain on sale of contract (143,000) -
(Increase)/decrease in current assets:(net of acquisition)
Accounts receivable (43,023) 46,814
Inventory 740 2,442
Increase/(decrease) in current liabilities:
Accounts payable (7,752) (18,784)
Accrued expenses 19,277 (5,548)
Deferred revenues (3,038) 5,000
Deferred compensation 91,000 5,000
------------- -------------
Net Cash Provided (Used)
by Operating Activities (224,259) 26,534
------------- -------------
Cash Flows from Investing Activities
Cash from acquisition of
Coaching Institute, Inc. 14,448 -
Cash paid for property, equipment
and software technology (19,902) (1,769)
Cash paid for Treasury Stock - (500)
Cash received from sale of contract 151,200 -
------------- -------------
Net Cash Provided (Used)
by Investing Activities 145,746 (2,269)
------------- -------------
Cash Flows from Financing Activities
Proceeds from long term debt 120,000 -
Cash received from stock issuance - 45,000
Principal payments on long-term debt (47,512) (67,512)
------------- -------------
Net Cash Provided (Used)
by Financing Activities 72,488 (22,512)
------------- -------------
Increase/(decrease) in Cash (6,025) 1,753
Cash and Cash Equivalents
at Beginning of Period 24,418 22,665
------------- -------------
Cash and Cash Equivalents
at End of Period $ 18,393 $ 24,418
============= =============
(continued)
</TABLE>
The accompanying notes are an integral part of these financial statements
41
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Consolidated Statements of Cash Flows
(continued)
Supplemental Cash Flow Information:
<S> <C> <C>
Cash paid for interest $ 14,230 $ 21,697
Cash paid for income taxes $ - $ -
Non-Cash Investing Activities:
In 1999, the Company issued 2,500,000 shares of common stock for 85,000 shares (85%) of common stock
of Coaching Institute, Inc.
In 1998, the Company issued 3,000,000 shares of common stock for 85% of the outstanding common stock of
Warever.
Non-Cash Financing Activities:
In 1999, the Company issued 285,000 shares of common stock for services valued at $135,000.
In 1999, the Company issued 143,450 shares of common stock for a royalty agreement valued at $260,000.
</TABLE>
The accompanying notes are an integral part of these financial statements
42
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
The Company was incorporated as TPI, Inc., under the laws of
the State of Utah on April 26, 1983. In 1985, the Corporation changed
its situs from Utah to Nevada and its name to Connections Marketing
Corp. In July, 1992, the shareholders of the Corporation voted to
change the name to LSI Communications, Inc. (LSI). The Company held
mineral properties in Beaver County, Utah; however, no extraction
operations ever commenced and the properties were distributed to the
shareholders through a subsidiary spin-off.
On November 20, 1998, the Company entered a Plan of
Reorganization and Acquisition agreement with Warever, Inc. (Warever) a
Utah Corporation, wherein the Company issued 3,000,000 shares of common
stock for 85% of the outstanding common stock of Warever. The agreement
provides for the Company to acquire the remaining 15% of Warever for
2,500,000 shares of LSI through option agreements which are exercisable
for a period of 60 days following January 1, 2000 for no consideration.
Warever was organized in the State of Utah on May 13, 1992
under the name of Action Plus Software, Inc. On January 17,1995 the
company changed the name of the company to Warever, Inc.
Warever is in the business of developing, programming, selling
and marketing a computer software package named Action Plus, a
management assistance software tool.
The acquisition is recorded as a reverse acquisition, with
Warever being the accounting survivor, therefore all historical
financial information prior to November 20, 1998 in these statements
are those of Warever.
On June 21, 1999, the Company entered into a Plan of
Acquisition with Coaching Institute, Inc., a Utah corporation, wherein
the Company issued 2,500,000 shares of common stock for 85,000 shares,
85%, of the outstanding common stock of Coaching Institute, Inc. The
agreement provides for the Company to receive options to acquire the
remaining 15% of the issued and outstanding common stock of Coaching
Institute, Inc. in exchange for 2,045,455 shares of the Company's
common stock. After the acquisition, both companies are surviving with
Coaching Institute, Inc. being a majority-owned subsidiary of LSI
Communications, Inc.
43
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
a. Organization (continued)
The acquisition of Coaching Institute, Inc. has been recorded
using the purchase method of a business combination. Operating
activities have been included from Coaching Institute in the
consolidated financials since June 21, 1999. Due to the common
ownership of Coaching Institute and LSI, the Company valued the
acquisition of Coaching Institute at historical cost which was $34,728.
b. Recognition of Revenue/Deferred Revenue
The Company recognizes income and expense on the accrual basis
of accounting. The Company receives revenues from services provided for
custom program conversions and training. Pursuant to SOP 97-2, revenue
is recorded when the services are completed. The Company also generates
revenues from the sale of their Action Plus software technology. This
product is sold separately without future performance such as upgrades
or maintenance, and is not sold with PCS services, therefore according
to SOP 97-2 revenue is recorded upon the sale and delivery of the
product once an agreement exists, the price is fixed and collectability
is probable.
The Company sells post contract support services separately
for one year. The Company defers the revenue and recognizes it over the
contract term as required by SOP 97-2. The deferred revenue at December
31, 1999 and 1998 on contracts sold during 1999 and 1998 total $1,962
and $5,000, respectively.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based
on the weighted average number of shares outstanding at the date of the
financial statements.
d. Provision for Income Taxes
In 1997, Warever, Inc. elected to file federal and state
income taxes under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income during that period of
time. Instead, the stockholders are liable for individual income taxes
on their respective shares of the Company's net operating income in
their individual income tax returns. Effective December 1, 1998, the
Company will file a consolidated return with it's parent and will lose
it's S-Corp status.
No provision for income taxes has been recorded due to net
operating loss carry forwards totaling approximately $654,000 that will
be offset against future taxable income. These NOL carry forwards begin
to expire in 2013. No tax benefit has been reported in the financial
statements because the Company has not yet proven it can generate
taxable income.
44
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
d. Provision for Income Taxes (continued)
Deferred tax assets and the valuation account is as follows at
December 31, 1999 and 1998:
December 31
1999 1998
----------------------------
Deferred tax asset:
NOL carry forward $ 222,000 $ 6,800
Valuation allowance (222,000) (6,800)
----------- ------------
Total $ - $ -
=========== ============
e. Cash and Cash Equivalents
The company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
f. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life of
assets or convert the assets to a new use, are capitalized at cost.
Expenditures for maintenance, repairs and other renewals of items are
charged to expenses. When items are disposed of, the cost and
accumulated depreciation are eliminated from the accounts, and any gain
or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the period ended December 31, 1999 and 1998 is
$9,586 and $10,209, respectively.
45
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
h. Inventory
Inventory consists primarily of software manuals and disks.
i. Advertising Costs
Advertising costs are charged to operations when incurred. The
cost for direct response advertising is also expensed because the
future benefit is only three days, therefore capitalization is
ineffective.
j. Consolidation Policy
These financial statements include the books of LSI
Communications, Inc., a public shell company, Warever Corporation, a
software sales and marketing company, and Coaching Institute, Inc.
(December 31, 1999 only), a training and consulting firm. All
intercompany accounts and transactions have been eliminated in the
consolidation.
NOTE 2 - Property & Equipment
Property and equipment consists of the following at December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Computer equipment $ 41,002 $ 20,195
Leased equipment 15,075 15,075
Furniture and fixtures 1,769 6,769
Software technology 916 2,847
--------- ---------
58,762 44,886
Less: Accumulated depreciation - equipment (18,557) (18,738)
Accumulated depreciation - leased equipment (14,070) (11,055)
--------- ---------
Total Property & Equipment $ 26,135 $ 15,093
========= =========
</TABLE>
NOTE 3 - Contract
In 1999, the Company acquired a contract for a video
production. The amount capitalized as the cost of the contract is the
value of the participation in the video by Karl Malone and others. For
their participation, 143,450 shares of common stock were issued at a
valuation of $1.825 per share or $260,000. The stock was valued at the
average market price at the time of issue. This cost is to be amortized
over three years.
46
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - Contract (Continued)
On October 26, 1999, the contract for the video series
featuring Karl Malone was sold. On the date of the sale, the buyer
executed a $100,000 promissory note to the production company in order
to terminate the agreement with Coaching Institute, Inc. In addition,
the buyer executed an agreement with the production company to forgive
the $25,000 principal balance due from Coaching Institute, Inc.
Besides the above agreements, the buyer agreed to pay cash in
the amount of $378,000 to Coaching Institute, Inc. according to the
following schedule:
At Closing $ 75,600
November 15, 1999 75,600
December 15, 1999 75,600
January 15, 2000 75,600
February 15, 2000 75,600
--------
$378,000
========
At December 31, 1999, the balance due Coaching Institute was
$226,800.
NOTE 4 - Long-Term Liabilities
Long Term Liabilities are detailed in the following schedules
as of December 31, 1999 and 1998:
Note payable-related party is detailed as follows:
December 31
1999 1998
---------- ----------
Note payable to a relative of
an officer of the Company,
bears interest at 12%, with
principal due April 1999,
unsecured note $ 3,134 $ 3,593
Note payable to a relative of
an officer of the Company,
bears interest at 9.75%
payments due monthly of $1,286
through April 1, 2002,
unsecured 33,453 -
47
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 4 - Long-Term Liabilities (Continued)
Note Payable to a relative of
an officer of the Company,
bears interest at 9.75% with
principal due of $50,000 at
July 1, 2000, unsecured 50,000 -
Note Payable to a relative of
an officer of the Company,
bears interest at 9.75% with
principal of $100,000 due at
August 1, 2000, unsecured 80,000 -
--------- --------
Total notes payable - related
party 166,587 3,593
--------- --------
Notes payable are detailed as
follows:
Note payable to a corporation
for working capital, payments
due monthly of $698 through
June 2000, bears interest at
11%, uncolateralized. $ 10,821 $ 11,531
Note payable to a corporation
for working capital, payments
due monthly of $830 through
October 1998, bears interest at
12%, unsecured. 118 105
Note payable to a corporation
for working capital, payments
due monthly of $1,087 through
January 2000, bears interest at
11%, unsecured. 26,429 25,485
--------- --------
Total Note Payable 37,368 37,121
--------- --------
Total long term liabilities 203,955 40,714
--------- --------
Less current portion of:
Notes payable - related party 158,567 3,593
Notes payable 36,514 19,799
--------- --------
Total current portion 195,081 23,392
--------- --------
Net Long Term Liabilities $ 8,874 $ 17,322
========= ========
48
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
Future minimum principal payments on notes payable are as follows:
2000 $ 195,081
2001 8,874
---------------
Total $ 203,955
===============
49
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. In these financial statements, assets and liabilities
involve reliance on management's estimates. Actual results could differ
from those estimates.
NOTE 6 - Commitments and Contingencies
The Company is committed for their office facilities. Monthly
lease payments are due of $4,000 for a 24 month period beginning May 1,
1999.
Future minimum lease payments are as follows at December 31,
1999:
2000 $ 48,000
2001 20,000
------------
$ 68,000
============
NOTE 7 - Related Party Transactions
During 1995, a shareholder relative of Craig Hendricks, an
officer and director of the Company, advanced $39,000 for working
capital. As of December 31, 1999 $35,866 in payments were made to this
related party with a balance due at December 31, 1999 and 1998, of $
3,134 and $3,593, respectively.
During 1999, a shareholder relative of Craig Hendricks, an
officer and director of the Company, advanced $190,000 for working
capital. As of December 31, 1999 $26,547, was paid to this related
party with a balance due at December 31, 1999 of $163,453.
During 1999, Craig Hendricks, an officer and director of the
Company, advanced $5,000 for working capital. As of December 31, 1999
$5,000 in payments were made to this related party removing the balance
due from the Company's books.
50
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 8 - Software Technology
Pursuant to FASB 86, the Company expensed all costs associated
with the development of its software product until technological
feasibility is reached. At such time the Company capitalizes costs
associated with producing the master files. The Company also
capitalizes software purchased for internal use.
NOTE 9 - Reverse Merger
Effective November 20, 1998, LSI Communications, Inc. (a
public company) entered into an agreement and Plan of Reorganization
with Warever, Inc., (a private company). The agreement provides for the
merger of the Company into Warever to be treated as a reverse merger,
thus making Warever the accounting survivor. Pursuant to the agreement
the Company issued 3,000,000 shares of common stock to the shareholders
of Warever for 85% of the shares of their Company. Because the
historical financial information in these financial statements prior to
the reverse merger (November 20, 1998) is that of the accounting
acquirer (Warever), the 3,000,000 shares have been shown as if they
were issued at inception and a reorganization adjustment is shown for
the 1,959,697 shares held by the minority shareholders. The management
of the Company resigned and the management and board of Warever filled
the vacancy. LSI Communications, Inc. had no assets or liabilities at
the time of the merger, but was only a public shell.
NOTE 10 - Subsequent Event
During the first two months of 2000, the Company received the
remaining $226,800 due from the sale of the Karl Malone contract. The
proceeds were used to pay off long term debt.
51
<PAGE>
LSI Communications, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 11 - Segment Data
For the year ended December 31, 1999, the Company had two
reportable industry segments: (i) Software Sales and (ii) Training
Services.
Sales (Net of Accounts)
Software $ 117,316
Training 415,731
----------------
Consolidated $ 533,047
================
Operating Income (Loss)
Software $ (411,703)
Training (112,981)
--------------
Consolidated (524,684)
Other Income/(expense) (3,589)
Gain on Sale of Contract 143,000
Interest expense (14,230)
--------------
Net (Loss) before Income Taxes $ (399,50)
==============
Accounts Receivable
Software $ 3,240
Training 154,389
--------------
Consolidated $ 157,629
==============
Identifiable Assets
Software $ 248,782
Training 190,997
--------------
Consolidated 439,779
Goodwill 1,278,207
--------------
Total $ 1,717,986
==============
NOTE 12 - Fair Value of Financial Statements
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments (none of
which are held for trading purposes) approximate the carrying values of
such instruments.
52
<PAGE>
LSI Communications, Inc.
Pro Forma Consolidated Statement of Operations
September 30, 1999
(unaudited)
53
<PAGE>
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Board of Directors and Shareholders
of LSI Communications, Inc.
Our report on our audit of the basic financial statements of LSI Communications,
Inc. for December 31, 1999 appears on page 3. This audit was conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The pro forma statement of operations for LSI Communications, Inc. at
September 30, 1999 is presented for purposes of additional analysis and are not
a required part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we express no opinion on it.
Salt Lake City, Utah
January 28, 2000
54
<PAGE>
<TABLE>
<CAPTION>
LSI Communications, Inc.
Notes to Pro Forma Consolidated Statement of Operations
September 30, 1999
LSI Communications Warever Coaching Institute Pro forma
For the nine For the nine For the nine Consolidated
months ended months ended months ended Pro forma Balance
September 30, September 30, September 30, Adjustments September 30,
1999 1999 1999 dr cr 1999
-------------- ------------- --------------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues - 96,792 281,899 - - 378,691
-------------- ------------- --------------- --------- -------- ------------
Cost of Good Sold - 874 28,045 - - 28,919
-------------- ------------- --------------- --------- -------- ------------
Gross Profit - 95,918 253,854 - - 349,772
-------------- ------------- --------------- --------- -------- ------------
Selling expenses - 11,218 288,103 - - 299,321
General & Administrative - 388,092 225,989 - - 614,081
-------------- ------------- --------------- --------- -------- ------------
Total Operating Expenses - 399,310 514,092 - - 913,402
-------------- ------------- --------------- --------- -------- ------------
Income/ (Loss) from Operations - (303,392) (260,238) - - (563,630)
-------------- ------------- --------------- --------- -------- -------------
Other income/(expenses) - (2,900) (6,023) - - (8,923)
-------------- ------------- --------------- --------- -------- -------------
Net (Loss) - (306,292) (266,261) - - (572,553)
============== ============= =============== ========= ======== =============
Earnings/(Loss) Per Share (Pro Forma) (.07)
============
Weighted Average Outstanding
Shares (Pro Forma) 8,620,346
============
</TABLE>
55
<PAGE>
LSI Communications, Inc.
Notes to Pro Forma Consolidated Statement of Operations
September 30, 1999
NOTE 1 - Summary of Transaction
On June 21, 1999, the Company entered into a Plan of Acquisition with
Coaching Institute, Inc., a Utah Corporation, wherein the Company issued
2,500,000 shares of common stock for 85,000 shares (85%) of the outstanding
common stock of Coaching Institute, Inc. The acquisition was a merger of
entities under common control and therefore was recorded at historical cost.
After the acquisition, both companies are surviving with Coaching Institute,
Inc. being a majority-owned subsidiary of LSI Communications, Inc.
NOTE 2 -Management Assumptions
The pro forma consolidated statement of operations assumes that the
entities were together as of January 1, 1999 and no adjustments are necessary to
reflect a full year of activity.
56
<PAGE>
Coaching Institute, Inc.
Financial Statements
June 30, 1999
C O N T E N T S
Accountants' Report ..................................................... 58
Balance Sheet............................................................ 59
Statements of Operations ................................................ 60
Statements of Stockholders' Equity ...................................... 61
Statements of Cash Flows ................................................ 62
Notes to the Financial Statements ....................................... 63
57
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Coaching Institute, Inc.
We have audited the accompanying balance sheet of Coaching Institute, Inc. as of
June 30, 1999 and the related statements of operations, stockholders' equity and
cash flows for the six months ended June 30, 1999 and from inception on June 11,
1998 through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coaching Institute, Inc. as of
June 30, 1999 and the results of its operations and cash flows for the six
months ended June 30, 1999 and from inception on June 11, 1998 through December
31, 1998 in conformity with generally accepted accounting principles.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
January 28, 2000
58
<PAGE>
Coaching Institute, Inc.
Balance Sheet
ASSETS
June 30,
1999
---------
CURRENT ASSETS
Cash & Cash Equivalents (Note 1) $ 14,449
Accounts Receivable (Net of allowance
of $10,000) 102,054
Notes Receivable (Note 6) 23,500
---------
Total Current Assets 140,003
---------
PROPERTY & EQUIPMENT (Note 2) 726
---------
TOTAL ASSETS $ 140,729
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 16,719
Accrued expenses 9,917
Current portion of long-term liabilities (Note 3) 62,906
---------
Total Current Liabilities 89,542
---------
LONG TERM LIABILITIES (Note 3)
Notes payable-related party 89,364
Less current portion (62,906)
---------
Total long term Liabilities 26,458
---------
TOTAL LIABILITIES 116,000
---------
STOCKHOLDERS' EQUITY
Common stock, authorized 1,000,000 shares
of no par, issued and outstanding 100,000 shares 1,000
Retained earnings 23,729
---------
Total Stockholders' Equity 24,729
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 140,729
=========
The accompanying notes are an integral part of these financial statements
59
<PAGE>
Coaching Institute, Inc.
Statements of Operations
For the Six From inception
Months Ended June 11, 1998
Through Through
June 30, December 31,
1999 1998
--------- --------
REVENUES $177,865 $260,137
COST OF SALES 9,844 7,079
--------- --------
GROSS PROFIT 168,021 253,058
--------- --------
SELLING EXPENSES 165,388 75,325
GENERAL & ADMINISTRATIVE
EXPENSES 118,786 37,824
--------- --------
TOTAL OPERATING EXPENSES 284,174 113,149
--------- --------
OPERATING INCOME / (LOSS) (116,153) 139,909
--------- --------
OTHER INCOME AND (EXPENSES)
Miscellaneous income 630 -
Interest expense (657) -
--------- --------
Total Other Income and (Expenses) (27) -
--------- --------
LOSS BEFORE INCOME TAXES (116,180) 139,909
PROVISION FOR INCOME TAXES (Note 1) - -
--------- --------
NET INCOME/(LOSS) $(116,180) $139,909
========= ========
NET INCOME/(LOSS) PER SHARE $ (4.65) $ 13.99
========= ========
WEIGHTED AVERAGE OUTSTANDING SHARES 25,000 10,000
========= ========
60
<PAGE>
<TABLE>
<CAPTION>
Coaching Institute, Inc.
Statements of Stockholders' Equity
From inception on June 11, 1998 through June 30, 1999
Common Stock Additional Retained
----------------------------- Paid-in Earnings
Shares Amount Capital (Deficit)
------------ ------------ ---------- ---------
<S> <C> <C> <C> <C>
Balance on June 11, 1998 - $ - $ - $ -
June 98 - Stock issued at formation
at $.01 per share 10,000 100 - -
Net Income (Loss) for the year ended
December 31, 1998 - - - 139,909
------- ------ ------- ---------
Balance on December 31, 1998 10,000 100 - 139,909
June 1, 1999 - shares issued for
services at $.01 per share 90,000 900 - -
Net Income (Loss) for the period
ended June 30, 1999 - - - (116,180)
------- ------ ------- ---------
Balance on June 30, 1999 100,000 $1,000 $ - $ 23,729
======= ====== ======= =========
</TABLE>
61
<PAGE>
Coaching Institute, Inc.
Statements of Cash Flows
For the Six From inception
Months Ended June 11, 1998
Through Through
June 30, December 31,
1999 1998
------- -------
Cash Flows From Operating Activities
Net income (loss) $(116,180) $139,909
Non-cash items:
Shares issued for services 900 -
Depreciation & amortization 167 110
Bad Debt 10,000 -
(Increase)/decrease in current assets:
Accounts receivable 9,020 (121,074)
Increase/(decrease) in current liabilities:
Accounts payable 11,717 5,002
Accrued expenses 6,101 3,916
------- -------
Net Cash Provided (Used) by
Operating Activities (78,275) 27,863
------- -------
Cash Flows from Investing Activities
Cash paid for property, equipment and
software technology - (1,003)
Cash paid for Note receivable (23,500) -
------- -------
Net Cash Provided (Used) by
Investing Activities (23,500) (1,003)
------- -------
Cash Flows from Financing Activities
Proceeds from long term debt 90,000 -
Principal payments on long-term debt (636) -
------- -------
Net Cash Provided (Used) by Financing
Activities 89,364 -
------- -------
Increase/(decrease) in Cash (12,411) 26,860
Cash and Cash Equivalents at Beginning
of Period 26,860 -
------- -------
Cash and Cash Equivalents at End
of Period $14,449 $26,860
Supplemental Cash Flow Information:
Cash paid for interest $ 657 $ -
Cash paid for income taxes $ - $ -
Non-Cash Financing Activities:
In 1999, the Company issued 90,000 shares of common stock for services valued at
$900.
62
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Coaching Institute, Inc. (the Company) was incorporated under
the laws of the State of Utah on June 11, 1998. The Company is
currently engaged in providing coaching services to businesses and
individuals.
On June 21, 1999, the Company entered into a Plan of
Acquisition with L.S.I. Communications, Inc., a Utah corporation,
wherein L.S.I. issued 2,500,000 shares of common stock for 85,000
shares, 85%, of the outstanding common stock of the Company. The
agreement provides for L.S.I. to receive options to acquire the
remaining 15% of the issued and outstanding common stock of the Company
in exchange for 2,045,455 shares of L.S.I. common stock. After the
acquisition, both companies are surviving with Coaching Institute, Inc.
being a majority-owned subsidiary of L.S.I. Communications, Inc.
b. Recognition of Revenue/Deferred Revenue
The Company recognizes income and expense on the accrual basis
of accounting. The Company receives revenues from services provided for
custom program conversions and training. Pursuant to SOP 97-2, revenue
is recorded when the services are completed.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based
on the weighted average number of shares outstanding at the date of the
financial statements.
d. Provision for Income Taxes
In 1998, the Company elected to file federal and state income
taxes under the provisions of Subchapter S of the Internal Revenue
Code. Under those provisions, the Company does not pay corporate income
taxes on its taxable income during that period of time. Instead, the
stockholders are liable for individual income taxes on their respective
shares of the Company's net operating income in their individual income
tax returns. Effective June 21, 1999, the Company will file a return
with its parent and will lose its S-Corp status.
e. Cash and Cash Equivalents
The company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
63
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (continued)
f. Property and Equipment
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life of
assets or convert the assets to a new use, are capitalized at cost.
Expenditures for maintenance, repairs and other renewals of
items are charged to expenses. When items are disposed of, the cost and
accumulated depreciation are eliminated from the accounts, and any gain
or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the periods ended June 30, 1999 and December
31, 1998 is $167 and $110, respectively.
g. Advertising Costs
Advertising costs are charged to operations when incurred. The
cost for direct response advertising is also expensed because the
future benefit is only three days, therefore capitalization is
ineffective.
NOTE 2 - Property & Equipment
Property and equipment consists of the following at June 30, 1999:
Computer equipment $ 1,003
--------------
1,003
Less: Accumulated depreciation - equipment (277)
--------------
Total Property & Equipment $ 726
==============
NOTE 3 - Long-Term Liabilities
Long Term Liabilities are detailed in the following schedules
as of June 30, 1999:
Note payable-related party is detailed as follows: 1999
----------
Note payable to a relative of an officer of the
Company, bears interest at 9.75% payments due
monthly of $1,286 through April 1, 2002, unsecured $ 39,364
Note Payable to a relative of an officer of the
Company, bears interest at 9.75% with principal due
of $50,000 at July 1, 2000, unsecured 50,000
----------
64
<PAGE>
NOTE 3 - Long-Term Liabilities (continued)
Total notes payable - related party 89,364
----------
Total long term liabilities 89,364
----------
Less current portion of:
Notes payable - related party 62,906
----------
Total current portion 62,906
----------
Net Long Term Liabilities $ 26,458
=========
Future minimum principal payments on notes payable are as follows:
1999 $ 6,453
2000 62,906
2001 15,020
2002 4,985
---------------
Total $ 89,364
===============
NOTE 4 - Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period.
In these financial statements, assets and liabilities involve
reliance on management's estimates. Actual results could differ from
those estimates.
NOTE 5 - Commitments and Contingencies
The Company sub-leases office space from Warever Corporation,
a Company under common ownership. The agreement is month-to-month and
requires a monthly rent payment of $1,000.
NOTE 6 - Related Party Transactions
The Company advanced Warever Corporation, a company under
common ownership, $23,500 during the six months ended June 30, 1999.
The balance receivable at June 30, 1999 is $23,500.
During the six months ended June 30, 1999, a shareholder
relative of Craig Hendricks, an officer and director of the Company,
advanced $90,000 for working capital. The balance due at June 30, 1999
is $89,364.
65
<PAGE>
NOTE 7 - Subsequent Event
In 1999, the Company acquired a contract for a video
production. The amount capitalized as the cost of the contract is the
value of the participation in the video by Karl Malone and others. For
their participation, 143,450 shares of common stock were issued at a
valuation of $1.825 per share or $260,000. The stock was valued at the
average market price at the time of issue. This cost is to be amortized
over three years.
On October 26, 1999, the contract for the video series
featuring Karl Malone was sold. On the date of the sale, the buyer
executed a $100,000 promissory note to the production company in order
to terminate the agreement with Coaching Institute, Inc. In addition,
the buyer executed an agreement with the production company to forgive
the $25,000 principal balance due from Coaching Institute, Inc.
Besides the above agreements, the buyer agreed to pay cash in
the amount of $378,000 to Coaching Institute, Inc. according to the
following schedule:
At Closing $ 75,600
November 15, 1999 75,600
December 15, 1999 75,600
January 15, 2000 75,600
February 15, 2000 75,600
-------
$378,000
NOTE 8 - Fair Value of Financial Statements
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such instruments.
ITEM 1. INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this Registration
Statement pursuant to Item Part III of Form I-A and Item 6 of Part II.
66
<PAGE>
- - ----------- --------------------- ----------------------------------------------
Exhibit No. SEC Reference No. Title of Document
- - ----------- --------------------- ----------------------------------------------
2.1 Plan of Acquisition by which LSI
Communications, Inc. shall acquire Warever,
Inc.
- - ----------- --------------------- ----------------------------------------------
2.2 Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching
Institute, Inc.
- - ----------- --------------------- ----------------------------------------------
3.1 Articles of Incorporation of Connections
Marketing Corp.
- - ----------- --------------------- ----------------------------------------------
3.2 Articles of Amendment to the Articles of
Incorporation of Connections Marketing Corp.
- - ----------- --------------------- ----------------------------------------------
3.3 Bylaws of Connections Marketing Corp.
- - ----------- --------------------- ----------------------------------------------
10.1 Promissory Note to Lona J. Hendricks
($100,000)
- - ----------- --------------------- ----------------------------------------------
10.2 Promissory Note to Lona J. Hendricks
($40,000)
- - ----------- --------------------- ----------------------------------------------
10.3 Promissory Note to Lona J. Hendricks
($50,000)
- - ----------- --------------------- ----------------------------------------------
10.4 Coaching and Strategic Agreement-8/25/99
- - ----------- --------------------- ----------------------------------------------
10.5 Coaching and Strategic Agreement-1/6/99
- - ----------- --------------------- ----------------------------------------------
10.6 Coaching and Strategic Agreement-6/5/99
- - ----------- --------------------- ----------------------------------------------
10.7 Standard Distribution Provisions--Columbia
House Co., and Warever, Inc.
- - ----------- --------------------- ----------------------------------------------
10.8 License Agreement
- - ----------- --------------------- ----------------------------------------------
21.1 Subsidiaries of the Company
- - ----------- --------------------- ----------------------------------------------
67
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the company has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT:
By: /s/ Craig Hendricks
----------------------------------
Craig Hendricks
Chief Executive Officer, President
Date 5/19/00
68
PLAN OF REORGANIZATION AND ACQUISITION
BY WHICH
LSI Communications, Inc.
(A NEVADA CORPORATION)
SHALL ACQUIRE
Warever, Inc.
(A UTAH CORPORATION)
This Plan of Reorganization and Acquisition is made and dated this 20th day
of November 1998, by and between the Parties, as identified hereinafter,
respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Warever, Inc. ("Warever") is a private Utah Corporation.
II. RECITALS
A. The Capital of the Parties:
1. The Capital of LSI consists of 50,000,000 shares of common
voting stock of $001 par value authorized, of which
approximately 1,959,579 shall be issued or outstanding at
closing.
2. The Capital of Warever consists of 1,000,000 shares of
common voting stock of no par value authorized, of which
300,201 shares are issued and outstanding.
B. The Background for the Reorganization:
1. Warever has certain software that generates significant
annual revenue. Significant interest has been shown concerning
the use of this software for distribution by numerous
companies and other significant parties.
2. Warever has an interest to be acquired/merged with a public
corporation, and
3. LSI wishes to acquire these assets and maintain Warever,
Inc., a Utah Corporation, as a majority owned subsidiary to
generate revenue for these companies and other significant
parties. As required by law, the vote for approval of this
definitive Agreement and Reorganization shall be approved by a
vote of the holders of a majority of the issued and
outstanding shares of LSI, and
4. The Parties contemplate and intend that the acquisition
will be a stock for stock transaction; that 85% of the issued
and outstanding capital stock of WAREVER shall be acquired by
LSI in exchange solely for 3,000,000 shares of LSI voting
stock (Exhibit A); that the remaining 15% of the issued and
<PAGE>
outstanding capital stock of WAREVER shall be available to be
acquired by LSI in exchange solely for 2,500,000 shares of LSI
voting stock through option agreements (Exhibits B-F); that
this transaction qualify as a tax-free reorganization under
Section 368(a)(l)(B) of the Internal Revenue Code of 1954, as
amended, and related sections thereunder.
III. PLAN OF REORGANIZATION
A. Reorganization and Acquisition: (1) LSI shall acquire a majority of
the Assets, Businesses and Capital Stock of WAREVER, and WAREVER shall
become and be a majority-owned subsidiary of LSI, on the terms and
conditions which follow and are provided in this Agreement; (2) LSI
shall issue to the shareholders of WAREVER, as WAREVER shall direct, an
aggregate of 3,000,000 (three million) shares of the common stock of
LSI for 85% of the issued and outstanding capital stock of WAREVER
(Exhibit A); (3) WAREVER shall issue to LSI options (Exhibits B-F) to
acquire the remaining 15% of the issued and outstanding capital stock
of WAREVER in exchange solely for 2,500,000 shares of LSI voting stock.
B. Transfer of control: The Existing Directors of WAREVER shall remain
as the Officers and Directors of the corporation.
C. Surviving Corporations: Both Companies shall survive the
Reorganization as indicated above, such that after Reorganization,
WAREVER shall be a majority- owned subsidiary of LSI.
D. Closing/Effective Date: This Plan of Reorganization shall become
effective immediately upon approval and adoption by Corporate parties
hereto, in the manner provided by the law of its place of incorporation
and its constituent corporate documents.
E. Further Assurance, Good Faith and Fair Dealing: The directors of
each Company shall and will execute and deliver any and all necessary
documents, acknowledgements and assurances and to do all things proper
to confirm or acknowledge any and all rights, titles and interests
created or confirmed herein; and both companies covenant hereby to deal
fairly and in good faith with each other and each others shareholders.
F. Construction: This Plan of Reorganization and the resulting legal
relations between the parties hereto shall be governed by and construed
in accordance with the laws of the State of Nevada.
G. Representations & Undertakings by WAREVER:
WAREVER represents and warrants as follows:
(1) The assets held by WAREVER are with liabilities that are reflected
in statements to be provided; any obligations are in the usual course
of business; and no such contracts or obligations in the usual course
of business are liens or other liabilities which, if disclosed, would
alter substantially the financial condition of this proposed
acquisition herein.
(2) There have not been, and prior to the closing date there will not
be, any material adverse changes in the financial position of these
contracts, except changes arising in the ordinary course of business.
(3) WAREVER is not involved in any pending or threatened litigation or
governmental investigation or proceeding not reflected in such
financial statement or otherwise disclosed in writing to LSI and, to
the knowledge of WAREVER, or its holders, no litigation, is pending or
threatened against WAREVER.
II. REPRESENTATIONS AND UNDERTAKINGS BY LSI:
LSI represents and warrants as follows:
(1) As of the closing date, the LSI shares to be delivered to the
Stockholders will constitute valid and legally issued shares of LSI,
fully paid and nonassessable, and will be legally equivalent in all
respects to the common stock of LSI issued and outstanding as of the
date hereof.
<PAGE>
(2) The officers of LSI are duly authorized to execute this agreement
pursuant to authorization of its Board of Directors.
(3) The financial statements of LSI, are true and complete statements,
as of that date, of its financial condition, and fairly present the
results of its operations for such period; there are no substantial
liabilities, either fixed or contingent, not reflected in such
financial statements other than contracts or obligations in the usual
course of business are liens or other liabilities, which if disclosed,
would alter substantially the financial condition of LSI, as reflected
in such financial statements. Within 12 months after the reorganization
and acquisition takes place, if it is found that there are material
liabilities if LSI which were not previously disclosed, which may cause
the directors, officers, and/or shareholders to be liable or at risk
for liability, or that could adversely affect the performance of the
company, Warever will have the option to rescind the acquisition
agreement. If recision take place, Warever shareholders will forfeit
all shares of LSI stock, and LSI will forfeit all shares of Warever
stock.
(4) There have not been, and prior to the closing date there will not
be, any material adverse changes in the financial position of LSI,
except changes arising in the ordinary course of business and this
proposed reorganization.
(5) To the best knowledge of LSI, its Officers, Directors or Principal
Shareholder, LSI is not involved in any pending or threatened
litigation or governmental investigation or proceeding not reflected in
such financial statements or otherwise disclosed in writing to WAREVER.
(6) As of the closing date, LSI will be in good standing as a Nevada
corporation with total authorized capital consisting of Fifty Million
shares of $0.001 par value common shares.
I. Confidentiality: The Parties hereto agree that the information which
each intends to impart to the other subsequent to the execution thereof
shall not be disclosed to any other third party and each person shall
take reasonable precautions to prevent disclosure of any information
and know-how to any entity for any use, including but not limited to,
commercial use. The parties hereto further agree to keep confidential
all proprietary information. The parties furthermore agree to keep
confidential any and all names, telephone or telex numbers, and any
other matters considered confidential arising from this Agreement.
J. Counterpart: This Agreement may be signed by facsimile. Counterpart
originals will also be signed by both parties.
This Reorganization Agreement is executed on behalf of each company by its
duly authorized representatives, and attested to, pursuant to the laws of its
respective places of incorporation and in accordance with its constituent
documents.
LSI Communications, Inc. Warever, Inc.
/s/ W.L. Campbell /s/ Craig R. Hendricks
----------------- ----------------------
W.L. Campbell Craig R. Hendricks
President and Director President and Director
/s/ Fred C. Rahn
-----------------
Fred C. Rahn
Secretary and Director
<PAGE>
<TABLE>
<CAPTION>
Warever, Inc.
3,000,000 2,500,000 5,500,000
Shares Options Shares
Allocation of Stock Total 85% of Stock 15% of Stock of Stock
& Options Stock Sold From LSI Optioned From LSI From LSI
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ross Wolfley 15,000 12,750 149,900 2,250 124,916 274,816
Don Robinson 30,000 25,500 299,800 4,500 249,834 549,634
Steve Carlson 100,000 85,000 999,330 15,000 832,775 1,832,105
Craig Hendricks 100,000 85,000 999,330 15,000 832,775 1,832,105
Lona Hendricks 55,201 46,921 551,640 8,280 459,700 1,011,340
- - -----------------------------------------------------------------------------------------------
Total 300,201 255,171 3,000,000 45,030 2,500,000 5,500,000
======= ======= ========= ====== ========= =========
</TABLE>
<PAGE>
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 20th day of November 1998,
by and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Craig R. Hendricks ("Stockholder") is an individual.
C. Warever, Inc. ("Warever") is a private Utah Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation,
having its principal place of business in Draper, Utah. The only class
of stock of Warever, Inc. is common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Warever. Stockholder has made no
representations or warranties concerning the future value of Warever
stock, future earnings of Warever stock, or any other representations
concerning Warever, except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 100,000 shares of
common stock of Warever. Stockholder will not transfer or assign any of
such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquistion by which LSI
Communications, Inc. shall acquire Warever, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2000, Stockholder grants LSI an exclusive right to acquire the
remaining 15,000 shares of common stock of Warever, representing all of
those shares identified in paragraph II.C. not being part of the 85%
exchanged in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Warever, Inc., above. The
acquisition price of the 15,000 shares shall be for 832,775 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advice of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Warever; (b) any representatives,
agents, officers, employees, or directors of LSI or Warever; or (c )
any person other than his retained legal attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines
Road, Suite A, Spokane, WA 99206. All notices shall be delivered by
certified mail with a return receipt requested, by overnight courier,
or by facsimile. All notices shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its
<PAGE>
rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph 11.6., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon the delivery
of any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This Agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ W.L. Campbell /s/ Craig R. Hendricks
----------------- ----------------------
W L Campbell Craig R. Hendricks
President and Director
<PAGE>
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 20th day of November 1998,
by and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Steve Carlson ("Stockholder") is an individual.
C. Warever, Inc. ("Warever") is a private Utah Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation,
having its principal place of business in Draper, Utah. The only class
of stock of Warever, Inc. is common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Warever. Stockholder has made no
representations or warranties concerning the future value of Warever
stock, future earnings of Warever stock, or any other representations
concerning Warever, except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 100,000 shares of
common stock of Warever. Stockholder will not transfer or assign any of
such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquistion by which LSI
Communications, Inc. shall acquire Warever, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2000, Stockholder grants LSI an exclusive right to acquire the
remaining 15,000 shares of common stock of Warever, representing all of
those shares identified in paragraph 11.C. not being part of the 85%
exchanged in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Warever, Inc., above. The
acquisition price of the 15,000 shares shall be for 832,775 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof; this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advice of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Warever; (b) any representatives,
agents, officers, employees, or directors of LSI or Warever; or (c) any
person other than his retained legal attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines
Road, Suite A, Spokane, WA 99206. All notices shall be delivered by
certified mail with a return receipt requested, by overnight courier,
or by facsimile. All notices shall be complete upon delivery.
<PAGE>
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph 11.6., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon the delivery
of any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This Agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ W.L. Campbell /s/ Steve Carlson
----------------- -----------------
W. L. Campbell Steve Carlson
President and Director
<PAGE>
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 20th day of November 1998,
by and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Lona Hendricks ("Stockholder") is an individual.
C. Warever, Inc. ("Warever") is a private Utah Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation,
having its principal place of business in Draper, Utah. The only class
of stock of Warever, Inc. is common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Warever. Stockholder has made no
representations or warranties concerning the future value of Warever
stock, future earnings of Warever stock, or any other representations
concerning Warever, except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 55,201 shares of common
stock of Warever. Stockholder will not transfer or assign any of such
stock until expiration of this option agreement, except as directed in
the Plan of Reorganization and Acquisition by which LSI Communications,
Inc. shall acquire Warever, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2000, Stockholder grants LSI an exclusive right to acquire the
remaining 8,280 shares of common stock of Warever, representing all of
those shares identified in paragraph II.C. not being part of the 85%
exchanged in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Warever, Inc., above. The
acquisition price of the 8,280 shares shall be for 459,700 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof; this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advice of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Warever; (b) any representatives,
agents, officers, employees, or directors of LSI or Warever or (c) any
person other than his retained legal attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines
Road, Suite A, Spokane, WA 99206. All notices shall be delivered by
certified mail with a return receipt requested, by overnight courier,
or by facsimile. All notices shall be complete upon delivery.
<PAGE>
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph 11.6., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon the delivery
of any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This Agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ W. L. Campbell /s/ Lona Hendricks
------------------ ------------------
W. L. Campbell Lona Hendricks
President and Director
<PAGE>
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 20th day of November l998,
by and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada
Corporation.
B. Don Robinson ("Stockholder") is an individual.
C. Warever, Inc. ("Warever") is a private Utah Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation,
having its principal place of business in Draper, Utah. The only class
of stock of Warever, Inc. is common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Warever. Stockholder has made no
representations or warranties concerning the future value of Warever
stock, future earnings of Warever stock, or any other representations
concerning Warever, except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 30,000 shares of common
stock of Warever. Stockholder will not transfer or assign any of such
stock until expiration of this option agreement, except as directed in
the Plan of Reorganization and Acquistion by which LSI Communications,
Inc. shall acquire Warever, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2000, Stockholder grants LSI an exclusive right to acquire the
remaining 4,500 shares of common stock of Warever, representing all of
those shares identified in paragraph 11.C. not being part of the 85%
exchanged in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Warever, Inc., above. The
acquisition price of the 4,500 shares shall be for 249,834 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof; this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advice of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the
<PAGE>
advisability of entering this Agreement. In entering this Agreement,
Stockholder is not relying upon any statements, representations, or
opinions of: (a) any attorneys or counsel for or of LSI or Warever;
(',)any representatives, agents, officers, employees, or directors of
LSI or Warever; or (c) any person other than his retained legal
attorney.
G. Notices. Notices to Stockholder shall be delivered to 2815 S.
Highland Drive, Salt Lake City, UT 84106. Notices to LSI shall be
delivered to W.L. Campbell, 905 North Pines Road, Suite A, Spokane, WA
99206. All notices shall be delivered by certified mail with a return
receipt requested, by overnight courier, or by facsimile. All notices
shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph 11.6., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon the delivery
of any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars (S 100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This Agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ W.L. Campbell /s/ Don Robinson
----------------- ----------------
W.L. Campbell Don Robinson
President and Director
<PAGE>
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 20th day of November 1998,
by and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("L SI") is a public Nevada Corporation.
B. Ross Wolfley ("Stockholder") is an individual.
C. Warever, Inc. ("Warever") is a private Utah Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation,
having its principal place of business in Draper, Utah. The only class
of stock of Warever, Inc. is common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Warever. Stockholder has made no
representations or warranties concerning the future value of Warever
stock, future earnings of Warever stock, or any other representations
concerning Warever, except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 15,000 shares of common
stock of Warever. Stockholder will not transfer or assign any of such
stock until expiration of this option agreement, except as directed in
the Plan of Reorganization and Acquistion by which LSI Communications,
Inc. shall acquire Warever, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2000, Stockholder grants LSI an exclusive right to acquire the
remaining 2,250 shares of common stock of Warever, representing all of
those shares identified in paragraph 11.C. not being part of the 35%
exchanged in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Warever, Inc., above. The
acquisition price of the 2,250 shares shall be for 124,916 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advice of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Warever; (0) any representatives,
agents, officers, employees, or directors of LSI or Warever; or (c) any
person other than his retained legal attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines
Road, Suite A, Spokane, WA 99206. All notices shall be delivered by
certified mail with a return receipt requested, by overnight courier,
or by facsimile. All notices shall be complete upon delivery.
<PAGE>
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph 11.6., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon the delivery
of any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This Agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS THEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ W.L. Campbell /s/ Ross Wolfley
----------------- ----------------
W.L. Campbell Ross Wolfley
President and Director
PLAN OF ACQUISITION
BY WHICH
LSI Communications, Inc.
(A NEVADA CORPORATION)
SHALL ACQUIRE
Coaching Institute, Inc.
(A UTAH CORPORATION)
This Plan of Acquisition is made and dated this 21st day of June 1999, by
and between the Parties, as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation
II. RECITALS
A. The Capital of the Parties:
1. The Capital of LSI consists of 50,000,000 shares of common
voting stock of $.001 par value authorized, of which
approximately 6,072,182 shall be issued or outstanding at
closing.
2. The Capital of Coaching Institute consists of 1,000,000
shares of common voting stock of no par value authorized, of
which 100,000 shares are issued and outstanding.
B. The Background for the Acquisition:
1. Coaching Institute has certain intellectual property and
contracts in place that generate significant annual revenue,
including a contract to produce a fitness video series with
the MVP of the NBA, Karl Malone. Significant interest has been
shown concerning the use of Coaching's services by numerous
companies and other significant parties.
2. Coaching Institute has an interest to be acquired/merged
with a public corporation, and
3. LSI wishes to acquire these assets and maintain Coaching
Institute, Inc., a Utah Corporation, as a majority owned
subsidiary to generate revenue for these companies and other
significant parties. As required by law, the vote for the
approval of this definitive Agreement and Reorganization shall
be approved by a vote of the holders of a majority of the
issued and outstanding share of LSI and
4. The Parties contemplate and intend that the acquisition
will be a stock for stock transaction; that 85% of the issued
and outstanding capital stock of COACHING INSITUTE shall be
acquired by LSI in exchange solely for 2,500,000 shares of LSI
voting stock (Exhibit A); that the remaining 15% of the issued
and outstanding capital stock of COACHING INSTITUTE shall be
available to be acquired by LSI in exchange solely for
2,045,455 shares of LSI voting stock through option
<PAGE>
agreements (Exhibits B-F); that this transaction qualify as a
tax-free reorganization under Section 368(a)(1)(13) of the
Internal Revenue Code of 1954, as amended, and related
sections thereunder.
III. PLAN OF REORGANIZATION
A. Reorganization and Acquisition: (1) LSI shall acquire the Assets,
Businesses and Capital Stock of COACHING INSTITUTE, and COACHING
INSTITUTE shall become and be a majority-owned subsidiary of LSI, on
the terms and conditions which follow and are provided in this
Agreement; (2) LSI shall issue to the shareholders of COACHING
INSTITUTE, as COACHING INSTITUTE shall direct, an aggregate of
2,500,000 (two million five hundred thousand) shares of the common
stock of LSI for 85% of the issued and outstanding capital stock of
COACHING INSTITUTE (Exhibit A); (3) COACHING INSTITUTE shall issue to
LSI options (Exhibits B-F) to acquire the remaining 15% of the issued
and outstanding capital stock of COACHING INSTITUTE in exchange solely
for 2,045,455 shares of LSI voting stock;
B. Transfer of control: The Existing Directors of COACHING INSTITUTE
shall remain as the Officers and Directors of the corporation.
C. Surviving Corporations: Both Companies shall survive the acquisition
as indicated above, such that after acquisition, COACHING INSTITUTE
shall be a majority owned subsidiary of LSI.
D. Closing/Effective Date: This Plan of Reorganization shall become
effective immediately upon approval and adoption by Corporate parties
hereto, in the manner provided by the law of its place of incorporation
and its constituent corporate documents.
E. Further Assurance, Good Faith and Fair Dealing: The directors of
each Company shall and will execute and deliver any and all necessary
documents, acknowledgements and assurances and to do all things proper
to confirm or acknowledge any and all rights, titles and interests
created or confirmed herein; and both companies covenant to hereby to
deal fairly and in good faith with each other and each others
shareholders.
F. Construction: This Plan of Reorganization and the resulting legal
relations between the parties hereto shall be governed by and construed
in accordance with the laws of the State of Nevada.
G. Representations & Undertakings by COACHING INSTITUTE:
COACHING INSTITUTE represents and warrants as follows:
(1) The assets held by COACHING INSTITUTE are with
liabilities that are reflected in statements to be
provided; any obligations are in the usual course of
business; and no such contracts or obligations in the
usual course of business are liens or other liabilities
which, if disclosed, would alter substantially the
financial condition of this proposed acquisition herein.
(2) There have not been, and prior to the closing date
there will not be, any material adverse changes in the
financial position of these contracts, except changes
arising in the ordinary course of business.
(3) COACHING INSTITUTE is not involved in any pending or
threatened litigation or governmental investigation or
proceeding not reflected in such financial statement or
otherwise disclosed in writing to LSI and, to the
knowledge of COACHING
<PAGE>
INSTITUTE, or its holders, no litigation, is pending or
threatened against COACHING INSTITUTE.
H. REPRESENTIONS AND UNDERTAKINGS BY LSI:
LSI represents and warrants as follows.
(1) As of the closing date, the LSI shares to be delivered to
the Stockholders will constitute valid and legally issued
shares of LSI, fully paid and nonassessable, and will be
legally equivalent in all respects to the common stock of LSI
issued and outstanding as of the date hereof.
(2) The officers of LSI are duly authorized to execute this
agreement pursuant to authorization of its Board of Directors.
(3) The financial statements of LSI, are true and complete
statements, as of that date, of its financial condition, and
fairly present the results of its operations for such period;
there are no substantial liabilities, either fixed or
contingent, not reflected in such financial statements other
than contracts or obligations in the usual course of business
are liens or other liabilities, which if disclosed, would
alter substantially the financial condition of LSI, as
reflected in such financial statements. Within 12 months after
the reorganization and acquisition takes place, if it is found
that there are material liabilities of LSI which were not
previously disclosed, which may cause the directors, officers,
and/or shareholders to be liable or at risk for liability, or
that could adversely affect the performance of the company,
Coaching Institute will have the option to rescind the
acquisition agreement if recision takes place, Coaching
Institute shareholders will forfeit all shares of LSI stock,
and LSI will forfeit all shares of Coaching Institute stock.
(4) There have not been, and prior to the closing date there
will not be, any material adverse changes in the financial
position of LSI, except changes arising in the ordinary course
of business and this proposed reorganization.
(5) To the best knowledge of LSI, its Officers, Directors or
Principal Shareholder, LSI is not involved in any pending or
threatened litigation or governmental investigation or
proceeding not reflected in such financial statements or
otherwise disclosed in writing to COACHING INSTITUTE.
I. Confidentiality: The Parties hereto agree that the
information which each intends to impart to the other
subsequent to the execution thereof shall not be disclosed to
any other third party and each person shall take reasonable
precautions to prevent disclosure of any information and
know-how to any entity for any use, including but not limited
to, commercial use. The parties hereto further agree to keep
confidential all proprietary information. The parties
furthermore agree to keep confidential any and all names,
telephone or telex numbers, and any other matters considered
confidential arising from this Agreement.
J. Counterpart: This Agreement may be signed by facsimile.
Counterpart originals will also be signed by both parties.
This Reorganization Agreement is executed on behalf of each company by its
duly authorized representatives, and attested to, pursuant to the laws of its
respective places of incorporation and in accordance with its constituent
documents.
<PAGE>
LSI Communications, Inc. Coaching Institute, Inc.
/s/ Craig R. Hendricks /s/ Steven E. Carlson
- - ---------------------- ---------------------
Craig R. Hendricks Steven E. Carlson
President and Director Vice-President and Director
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
85% PURCHASE 15% PURCHASE
15-Jun-99 1-Jan-01
LSI Shares LSI Shares Tot. Min
Name Total Shares Percentage Issued Issued LSI Shares
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Craig R. Hendricks 42,500 42.50% 1.062,500 869,318 1,931,818
Steven E. Carlson 42,500 42.50% 1.062,500 869,318 1,931,818
Lona J. Hendricks 7,000 7.00% 175,000 143,182 318,182
Rick McAllister 6,000 6.00% 150,000 122,727 272,727
Roger Williams 2,000 2.00% 50,000 40,909 90,909
100,000 2,500,000 2,045,455 4,545,455
</TABLE>
<PAGE>
EXHIBIT B
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this l5th day of June 1999, by
and between the Parties as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. Craig R. Hendricks ("Stockholder") is an individual.
C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Coaching Institute, Inc. Coaching Institute, Inc.
is a Utah Corporation, having its principal place of business in
Draper, Utah. The only class of stock of Coaching Institute, Inc. is
common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Coaching Institute. Stockholder
has made no representations or warranties concerning the future value
of Coaching Institute stock, future earnings of Coaching Institute
stock, or any other representations concerning Coaching Institute,
except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 42,500 shares of common
stock of Coaching Institute. Stockholder will not transfer or assign
any of such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2001. Stockholder grants LSI an exclusive right to acquire the
remaining 6,375 shares of common stock of Coaching Institute,
representing all of those shares identified in paragraph II.C. not
being part of the 85% exchanged in the Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc., above. The
acquisition price of the 6,375 shares shall be for 869,318 shares of
the common stock of LSI.
F. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principle
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advise of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Coaching Institute; (b) any
representatives, agents, officers, employees, or directors of LSI or
Coaching Institute; or (c) any person other than his retained legal
attorney.
<PAGE>
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: 112 West Business Park Drive,
Draper, UT 84020. All notices shall be delivered by certified mail with
a return receipt requested, by overnight courier, or by facsimile. All
notices shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in Paragraph II. G. above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon delivery of
any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement
L. Complete Agreement. This agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ Craig R. Hendricks /s/ Craig R. Hendricks
---------------------- ----------------------
Craig R. Hendricks Craig R. Hendricks
President and Director
<PAGE>
EXHIBIT C
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 15th day of June 1999, by
and between the Parties as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI') is a public Nevada Corporation.
B. STEVEN E. CARLSON ("Stockholder") is an individual.
C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Coaching Institute, Inc. Coaching Institute, Inc.
is a Utah Corporation, having its principal place of business in
Draper, Utah. The only class of stock of Coaching Institute, Inc. is
common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Coaching Institute. Stockholder
has made no representations or warranties concerning the future value
of Coaching Institute stock, future earnings of Coaching Institute
stock, or any other representations concerning Coaching Institute,
except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 42,500 shares of common
stock of Coaching Institute. Stockholder will not transfer or assign
any of such stock until expiration of this option agreement, except as
dictated in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2001. Stockholder grants LSI an exclusive right to acquire the
remaining 6,375 shares of common stock of Coaching Institute,
representing all of those shares identified in paragraph ll.C. not
being part of the 85% exchanged in the Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc., above. The
acquisition price of the 6,375 shares shall be for 869,318 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statues of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advise of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Coaching Institute; (1,) any
representatives, agents, officers, employees, or directors of LSI or
Coaching Institute; or (c) any person other thin his retained legal
attorney.
<PAGE>
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: 112 West Business Park Drive,
Draper, UT 84020. All notices shall be delivered by certified mail with
a return receipt requested, by overnight courier, or by facsimile. All
notices shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph II. G., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon delivery of
any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement
L. Complete Agreement. This agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ Craig R. Hendricks /s/ Steven E. Carlson
---------------------- ---------------------
Craig R. Hendricks Steven E. Carlson
President and Director
<PAGE>
EXHIBIT D
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 15th day of June 1999, by
and between the Parties as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("ISP") is a public Nevada Corporation.
B. LONA J. HENDRICKS ("Stockholder") is an individual.
C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Coaching Institute, Inc. Coaching Institute, Inc.
is a Utah Corporation, having its principal place of business in
Draper, Utah. The only class of stock of Coaching Institute, Inc. is
common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Coaching Institute. Stockholder
has made no representations or warranties concerning the future value
of Coaching Institute stock, future earnings of Coaching Institute
stock, or any other representations concerning Coaching Institute,
except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 7,000 shares of common
stock of Coaching Institute. Stockholder will not transfer or assign
any of such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2001. Stockholder grants LSI an exclusive right to acquire the
remaining 1,050 shares of common stock of Coaching Institute,
representing all of those shares identified in paragraph ILC. not being
part of the 85% exchanged in the Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc., above. The
acquisition price of the 1,050 shares shall be for 143,182 shares of
the common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statutes of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advise of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Coaching Institute; (b) any
representatives, agents, officers, employees, or directors of LSI or
Coaching Institute; or (c) any person other than his retained legal
attorney.
<PAGE>
Notices. Notices to Stockholder shall be delivered to _________________
_______________________________________________________________________
Notices to LSI shall be delivered to: 112 West Business Park Drive,
Draper, UT 84020. All notices shall he delivered by certified mail with
a return receipt requested, by overnight courier, or by facsimile. All
notices shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph II.G., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon delivery of
any or all shares from stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ Craig R. Hendricks /s/ Lona J. Hendricks
---------------------- ---------------------
Craig R. Hendricks Lona J. Hendricks
President and Director
<PAGE>
EXHIBIT E
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this 15~ day of June 1999, by
and between the Parties as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. RICRARD McALLISTER ("Stockholder") is an individual.
C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Coaching Institute, Inc. Coaching Institute, Inc.
is a Utah Corporation, having its principal place of business in
Draper, Utah. The only class of stock of Coaching Institute, Inc. is
common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Coaching Institute. Stockholder
has made no representations or warranties concerning the future value
of Coaching Institute stock, future earnings of Coaching Institute
stock, or any other representations concerning Coaching Institute,
except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 6,000 shares of common
stock of Coaching Institute. Stockholder will not transfer or assign
any of such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc.
D. Option Grant to LSI. For a period of sixty days after January 1,
2001. Stockholder grants LSI an exclusive right to acquire the
remaining 900 shares of common stock of Coaching Institute,
representing all of those shares identified in paragraph ILC. not being
part of the 83% exchanged in the Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc., above. The
acquisition price of the 900 shares shall be for 122,727 shares of the
common stock of LSL
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statues of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advise of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Coaching Institute; (b) any
representatives, agents, officers, employees, or directors of LSI or
<PAGE>
Coaching Institute; or (c) any person other than his retained legal
attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: 112 West Business Park Drive,
Draper, UT 84020. All notices shall be delivered by certified mail with
a return receipt requested, by overnight courier; or by facsimile. All
notices shall be complete upon delivery
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement.
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement.
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph IIG., above. Such written notice shall be
in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall be due upon delivery of
any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement.
L. Complete Agreement. This agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ Craig R. Hendricks /s/ Richard McAllister
---------------------- ----------------------
Craig R. Hendricks Richard McAllister
President and Director
<PAGE>
EXHIBIT F
OPTION AGREEMENT
This AGREEMENT IS made and entered into on this l5th day of June 1999, by
and between the Parties as identified hereinafter, respectively.
I. THE PARTIES
A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation.
B. ROGER G. WILLIAMS ("Stockholder") is an individual.
C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah
Corporation.
II. IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
A. Identification of Coaching Institute, Inc. Coaching Institute, Inc.
is a Utah Corporation, haying its principal place of business in
Draper; Utah The only class of stock of Coaching Institute, Inc. is
common stock.
B. Representations. Stockholder has made no representations to LSI
concerning the financial condition of Coaching Institute. Stockholder
has made no representations or warranties concerning the future value
of Coaching Institute stock, future earnings of Coaching Institute
stock, or any other representations concerning Coaching Institute
except as are identified herein.
C. Stock Ownership. Stockholder is the owner of 2,000 shares of common
stock of Coaching Institute. Stockholder will not transfer or assign
any of such stock until expiration of this option agreement, except as
directed in the Plan of Reorganization and Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute, Inc.
D. Option Grant to LSI. For a period of sixty days alter January 1,
2001. Stockholder grants LSI an exclusive right to acquire the
remaining 300 shares of common stock of Coaching Institute,
representing all of those shares identified in paragraph II.C. not
being part of the 8% exchanged in the Plan of Acquisition by which LSI
Communications, Inc. shall acquire Coaching Institute Inc., above. The
acquisition price of the 300 shares shall be for 40,909 shares of the
common stock of LSI.
E. Construction. This agreement shall be liberally construed in favor
of granting an exclusive option upon the terms specified herein. In
furtherance thereof, this Agreement shall be construed in accordance
with the laws and statues of the State of Nevada, being the principal
place of business of LSI.
F. Advise to Seek Legal Counsel. Stockholder has sought and obtained
the advise of counsel prior to entering this Agreement or has been
strongly advised to obtain legal counsel concerning the advisability of
entering this Agreement. In entering this Agreement, Stockholder is not
relying upon any statements, representations, or opinions of: (a) any
attorneys or counsel for or of LSI or Coaching Institute; (b) any
representatives, agents, officers, employees, or directors of LSI or
<PAGE>
Coaching Institute; or (c) any person other than his retained legal
attorney.
G. Notices. Notices to Stockholder shall be delivered to ______________
_______________________________________________________________________
Notices to LSI shall be delivered to: 112 West Business Park Drive,
Draper, UT 84020. All notices shall be delivered by certified mail with
a return receipt requested, by overnight courier, or by facsimile. All
notices shall be complete upon delivery.
H. Cooperation. Stockholder agrees to fully cooperate with LSI in the
event that LSI elects to exercise any rights under this Agreement
Stockholder shall take no action which would obstruct the ability of
LSI to exercise its rights under this Agreement
I. Procedure for Exercising Option. LSI may exercise its rights under
this Agreement by giving written notice to the Shareholder in the
manner specified in paragraph II.G., above. Such written notice shall
be in any reasonable form sufficient to notify Stockholder of the
exercising of the option. Full payment shall he due upon delivery of
any or all shares from Stockholder to LSI. Upon exercising of any
options, Stockholder shall arrange for delivery of existing shares, if
any, to LSI within five business days.
J. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder
shall be severable, valid, and effective as if such invalid, unlawful,
or unenforceable section or paragraph was not contained herein.
K. Consideration. In consideration of the Agreements contained herein,
LSI is providing the sum of One Hundred Dollars ($100.00) to
Stockholder. Stockholder accepts such amount as full and complete
consideration for this Agreement
L. Complete Agreement. This agreement is the full and complete
agreement between the parties. There are no agreements or
understandings between the parties which are not contained herein.
M. Binding Effect. This Option Agreement shall inure to the benefit of;
and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. Stockholder
may not assign its rights or obligations hereunder without the prior
express written consent of LSI in each instance.
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and
year first above written.
LSI Communications, Inc. Stockholder
/s/ Craig R. Hendricks /s/ Richard McAllister
---------------------- ----------------------
Craig R. Hendricks Richard McAllister
President and Director
ARTICLES OF INCORPORATION
OF
CONNECTIONS MARKETING CORP.
WHEREAS, the undersigned natural persons acting as incorporators of the
corporation under the Nevada Business Corporations Act adopt the following
Articles of Incorporation for such corporation.
ARTICLE I
Name. The name of the corporation (hereinafter called "Corporation") is
CONNECTIONS MARKETING CORP.
ARTICLE II
Period of Duration. The period of duration of the Corporation is
perpetual.
ARTICLE III
Purposes and Powers. The purpose for which this Corporation is
organized is to engage in the business of investing in, participating in, and
joint venturing in, and acquiring of all forms of investment and businesses and
to engage in any and all other lawful business.
ARTICLE IV
Capitalization. The Corporation shall have the authority to issue
50,000,000 shares of stock having a par value of one mil ($.001). All stock of
the Corporation shall be of the same class and shall have the same rights and
preferences. Fully paid stock of this Corporation shall not be liable for
further call or assessment. The authorized trading shares shall be issued at the
discretion of the Directors.
ARTICLE V
Commencement of Business. The Corporation shall not commence business
until at least One Thousand Dollars ($1,000) has been received by the
Corporation as consideration for the issuance of its shares.
<PAGE>
ARTICLE VI
Initial Registered Office and Initial Registered Agent. The address of
the initial registered office of the Corporation is 2050 Ellis Way, Elko, Nevada
89801, and the initial registered agent of the Corporation at such address is
Gateway Enterprises, Inc.
ARTICLE VII
Directors. The Corporation shall be governed by a Board of Directors
consisting of no less than three (3) and no more than nine (9) directors.
Directors need not be stockholders in the Corporation but shall be elected by
the stockholders of the Corporation. The number of Directors constituting the
initial Board of Directors is three (3) and the name and post office address of
the person who shall serve as Directors until their successors are elected and
qualified are:
R. Kenneth Jarrell
4091 Westlake Avenue
West Valley City, Utah 84120
Kurtis D. Hughes
2325 Arbor Lane
Salt Lake City, Utah 84117
Sharon Lundskog
1168 Sunnyside Avenue
Salt Lake City, Utah 84102
ARTICLE VIII
Incorporators. The name and post office address of each incorporator
is:
Kurtis D. Hughes
2325 Arbor Lane
Salt Lake City, Utah 84117
ARTICLE IX
Preemptive Rights. There shall be no preeemptive right to acquire
unissued and/or treasury shares of the stock of the Corporation.
<PAGE>
ARTICLE X
Voting of Shares. Each outstanding share of common stock of the
Corporation shall be entitled to one vote on each matter submitted to a vote at
the meeting of the stockholders. Each stockholder shall be entitled to vote his
or its shares in person or by proxy, executed in writing by such stockholder, or
by his duly authorized attorney-in-fact. At each election of Directors, every
stockholder entitled to vote in such election shall have the right to vote in
person or by proxy the number of shares owned by him or it for as many persons
as there are directors to be elected and for whose election he or it has the
right to vote, but the shareholder shall have no right to accumulate his or its
votes with regard to such election.
/s/ Kurtis D. Hughes
--------------------
Kurtis D. Hughes
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On the 8th day of November, 1984, personally appeared before me Kurtis
D. Hughes and duly acknowledged to me that he is the person who signed the
foregoing instrument as incorporator and that he has read the foregoing
instrument and know the contents thereof and the same is true of his own
knowledge except as to those matters upon which he operates on information and
belief and as to those matters believes them to be true.
/s/ Debbie Hunis
----------------
NOTARY PUBLIC
Residing in Salt Lake City, Utah
My Commission Expires:
July 26, 1987
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CONNECTIONS MARKETING CORP.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Connections Marketing Corp. (the "Corporation") adopts the
following Articles of Amendment to its Articles of Incorporation by stating the
following:
FIRST: The present name of the Corporation is Connections Marketing
Corp.
SECOND: The following amendments to its Articles of Incorporation were
adopted by majority vote of shareholders of the corporation on June 17, 1992 in
the manner prescribed by Nevada law.
1. Article I is amended to read as follows:
Name. The name of the corporation shall be: LSI Communications, Inc.
2. Article IV is hereby amended to read as follows:
Capitalization. (a) Common Stock. The corporation shall have the
authority to issue 50,000,000 shares of common stock having a par value of
$.001. All common stock of the corporation shall be of the same class and shall
have the same rights and preferences. Fully paid common stock of this
corporation shall not be liable for further call or assessment. The authorized
common shares shall be issued at the discretion of the Directors. (b) Preferred
Stock. The corporation shall have the authority to issue 5,000,000 shares of
preferred stock each having a par value of $.001, with such rights, preferences
and designations as to be issued in such series as determined by the Board of
Directors of the Corporation.
3. Articles VI is hereby amended to read as follows:
Directors. The Corporation shall be governed by a board of directors
consisting of no less than one person. Directors need not be stockholders in the
corporation but shall be elected by the stockholders of the Corporation unless
appointed by other directors to fill a vacancy on the Board.
<PAGE>
4. Article XI is hereby added as follows:
ARTICLE XI
Liability of Directors and Officers. No director or officer shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty by such person as a director or officer.
Notwithstanding the foregoing sentence, a director or officer shall be liable to
the extent provided by applicable law, (i) for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (ii) for the
payment of dividends in violation of NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the Corporation for
or with respect to any acts or omissions of such person occurring prior to such
amendment.
5. The Corporation has effectuated a 1 for 9 reverse stock split
of its shares of common stock outstanding as of May 15, 1992 decreasing said
shares from 10,250,000 shares to 1,138,839 shares. Said reverse split to be
effective with the commencement of business on August 3, 1992.
THIRD: The number of shares of the Corporation outstanding and entitled
to vote at the time of the adoption of said amendment was 10,250,000.
FOURTH: The number of shares voted for such amendments was 9,449,200
(93%) and the number voted against such amendment was -0-.
DATED this 30th day of July, 1992.
CONNECTIONS MARKETING CORP.
By: /s/ Michael Lee
-------------------
Michael Lee,
President/Secretary
<PAGE>
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the Secretary of Connections Marketing Corp. That the undersigned
has read the Articles of Amendment and knows the contents thereof and that the
same contains a truthful statement of the Amendment duly adopted by the sole
director and stockholders of the Corporation.
/s/ Michael Lee
--------------------
Michael Lee,
Secretary
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Connections Marketing
Corp., a Nevada corporation, and signed the foregoing Articles of Amendment as
their own free and voluntary acts and deeds pursuant to a corporate resolution
for the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 30th day of July,
1992.
/s/ Thomas G. Kimble
------------------------------
NOTARY PUBLIC, residing at
Salt Lake City, Utah
My Commission Expires:
November 1, 1993
- - ----------------------
BY-LAWS
OF
CONNECTIONS MARKETING CORP.
ARTICLE I. OFFICES
The principal office of the corporation in the State of Nevada shall be
located in the City of Elko, County of Elko. The corporation may have such other
offices, either within or without the State Of Nevada as the Board of Directors
may designate or as the business of the corporation may require from time to
time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the 15th day in the month of May in each year, beginning with the
year 1985, at the hour of 3:00 o'clock P.M., for the purpose of electing
Directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State Of Nevada, such meeting shall be held on the next succeeding business day.
If the election of Directors shall not be held on the day designated herein for
any annual meeting of the shareholders, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than ten percent (l0%) of
all the outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State Of Nevada unless otherwise prescribed
by statute, as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place either within
or without the State of Nevada, unless otherwise prescribed by statute, as the
place for the holding of such meeting.
<PAGE>
If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the principal office of the corporation in the State
of
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of special meeting, the purpose or purposes for
which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
President, or the secretary, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
share-holders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, ten (10) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceeding such meeting. In
lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty (50) days and, in case of a
meeting of shareholders, not less then ten (10) days prior to the date on which
the particular action, requiring such determination of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or a vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders
<PAGE>
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
twelve (12) months from the date of its execution, unless otherwise provided in
the proxy.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one (1) vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
By-Laws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
<PAGE>
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name, if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be three (3). Each director shall hold office until the
next annual meeting of shareholders and until his successor shall have been
elected and qualified.
<PAGE>
SECTION 3. Regular Meetings. The Board of Directors shall be held
without other notice than this By-Law immediately after, and at the same place
as, the annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. REGULAR MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least five (5) days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed1 such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors but, if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. Action Without A Meeting. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed before such
action by all of the Directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of
<PAGE>
Directors, unless otherwise provided by law. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of Directors by the shareholders.
SECTION 10. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefore.
SECTION 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
President, a Vice President, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
SECTION 2. Election And Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each
<PAGE>
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. Vice President. In the absence of the President or in event
of his death, inability or refusal to act, the Vice President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all
<PAGE>
notices are duly given in accordance with the provisions of these By-Laws or as
required by law; (c) be custodian of the corporate records and of the seal of
the corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal is
duly authorized; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (3)
sign with the President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time be assigned to him by the
President or the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such monies in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article V of these By-Laws; and (c) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the President or by the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall. be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
<PAGE>
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money1 notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefore upon such terms arid indemnity to the
corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on
<PAGE>
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of May
and end on the last day of April in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the word "Corporate Seal".
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these By-Laws or under the Articles of Incorporation or under the provisions of
the Utah Business Corporation Act, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
CONNECTIONS MARKETING CORP.
By: /s/ Kurtis D. Hughes
-----------------------
President
.
PROMISSORY NOTE
For consideration received, Coaching Institute, Inc., 112 West Business
Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks
(Lender) according to the following terms:
Principal amount: $100,000
Annualized Interest Rate: 9.75%
Term: 1 year
Payment Terms: Interest only with balloon payment
due on or before month 12.
Date of Loan: August 1, 1999
This promissory note is secured by the general credit of Coaching
Institute, Inc., and at the option of the Lender, a security interest
may be filed securing the loan with the assets of the borrower.
/s/ Craig J. Hendricks, Pres. /s/ Lona J. Hendricks
----------------------------- ---------------------
Coaching Institute, Inc. Lender
Borrower
PROMISSORY NOTE
For consideration received, Coaching Institute, Inc., 112 West Business
Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks
(Lender) according to the following terms:
Principal amount: $40,000
Annualized Interest Rate: 9.75%
Term: 3 years
Payment Terms: Monthly payments of principal and
interest amortized over 36 months.
Date of Loan: April 1, 1999
This promissory note is secured by the general credit of Coaching
Institute, Inc., and at the option of the Lender, a security interest
may be filed securing the loan with the assets of the borrower.
/s/ Craig J. Hendricks, Pres. /s/ Lona J. Hendricks
----------------------------- ---------------------
Coaching Institute, Inc. Lender
Borrower
PROMISSORY NOTE
For consideration received, Coaching Institute Inc, 112 West Business
Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks
(Lender) according to the following terms:
Principal amount: $50,000
Annualized Interest Rate: 9.75%
Term: 1 year
Payment Terms: Monthly payments of interest only
with balloon payment due on or
before month 12.
Date of Loan: July 1,1999
This promissory note is secured by the general credit of Coaching
Institute, Inc., and at the option of the Lender, a security interest
may be filed securing the loan with the assets of the borrower.
/s/Craig R. Hendricks /s/Lona J. Hendricks
--------------------- --------------------
Coaching Institute, Inc. Lender
Borrower
COACHING AND STRATEGIC AGREEMENT
This agreement is entered into this 25th day of August, 1999 between Coaching
Institute, Inc., a Utah company with its principal place of business located at
112 West Business Park Drive, Draper, UT 84020, and SDI LeGrand Publishing,
Inc., a Florida company with its principal place of business located at 9799 Old
St. Augustine Rd., Jacksonville, FL 32257
RECITALS
1. Coaching Institute is engaged in the business of providing coaching
services.
2. [Company] requires the services from Coaching Institute that are set
forth in this agreement ("Services").
3. Coaching Institute desires to provide Services to [Company] and
[Company] desires to receive Services from Coaching Institute.
OPERATIVE PROVISIONS
1. ASSOCIATION. Coaching Institute and [Company] hereby agree to be
associated with each other on and subject to the terms and conditions herein. It
is the intention of Coaching Institute and [Company] to focus on their
respective areas of business and technological expertise, and to enhance their
own and each other's business opportunities by associating together to offer
solutions to their customers whenever and wherever possible.
2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties
that as to their relationship with each other they are independent contractors.
Nothing in this Agreement shall be construed as creating any partnership,
agency, joint venture, or other joint obligation, and both parties agree not to
make any representations to the contrary. Any conduct in which a party engages
in connection with or in the performance of this Agreement shall be solely in
its capacity as an independent contractor, and nothing in this Agreement shall
be construed to the contrary. The parties agree that, as independent
contractors, they do not have authority to sign contracts, notes, or
obligations, or to purchase, acquire, or dispose of any property for or on
behalf of the other party or any of its customers, and shall only have authority
to perform those services specifically described herein. Each party is solely
responsible and liable for all labor and expenses in connection with its
services performed hereunder, and for any and all damages which may be
occasioned on account of the operation of this Agreement, whether the same be
for personal injuries or damages of any other kind.
3. TAX LIABILITY. Each party assumes full responsibility for the payment
of its respective taxes, assessments, or contributions, whether state or
federal, as to compensation paid and/or the services performed under this
Agreement. Each party also agrees to pay any and all gross receipts,
compensation, transaction, sales, use, or other
taxes or assessments of whatever nature or kind levied or assessed as a
consequence of the compensation paid and/or services performed under this
agreement.
4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains
with the creator of the property.
5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties
agree to the following:
A. Coaching Institute responsibilities
1. Coaching Institute will develop the [Company]
Coaching Program and associated curriculum. The
curriculum will be focused on the sales and marketing
of [Company] business opportunity, building
communication skills, and personal and business
development. Professional skills assessment will be
included.
2. Coaching Institute will hire and train appropriately
skilled coaches and mentors.
3. Coaching Institute will hire and train salespeople
that will appropriately represent the [Company]
organization.
4. Coaching Institute will provide inbound and outbound
call center services to market the coaching program
to the [Company] students/customers.
5. Coaching Institute is responsible for maintaining its
phone system, phone lines, computer equipment, office
supplies, office space, and other materials and
assets necessary to perform its function to
adequately support and market services to the
[Company] customer base.
6. To maintain or assist in the maintenance of the
[Company] database
B. [Company] responsibilities:
1. To promote and sell the [Company] coaching program in
all its seminars, workshops, and other venues.
2. To work in conjunction with Coaching Institute to
assure that the expectations regarding the quality
and content of the coaching program are met.
3. To provide Coaching Institute with customer names and
lists of seminar attendees and other interested
parties on a regular basis for the intent of
marketing the coaching program to them.
4. To provide materials, including copies of software
packages sold, training videos, and other relevant
information for the coaching staff.
5. To process all [Company] coaching sales through its
merchant account.
6. To compensate Coaching Institute according to the
financial arrangements contained herein and to pay on
a schedule according to, or similar to, the "general
procedures guidelines" provided.
<PAGE>
C. Mutual Responsibilities
1. It is understood that an undertaking of this
magnitude, with the possibility of thousands of
individuals contacted, enrolled, and spoken with,
there will inevitably be some individuals who will be
displeased with some aspect of the service.
Therefore, if there are any concerns regarding
representations made, the quality of service
provided, or the manner in which a customer is
treated, both parties agree to notify the other
immediately and use their combined best efforts to
rectify the situation. Customer satisfaction is the
ultimate goal.
6. PRODUCTS
A. Personal Coaching - Coaching will be considered as contact
between Coaching Institute and individuals enrolled in the
process of coaching. Coaching will be sold in blocks of
sessions of 8, 10, or 12 with coaching resources available for
up to a year. The coaching may be sold by either Coaching
Institute or the company and it may also be bundled into or
with the company's regular products.
B. Symposium - Symposiums will be considered as one day or more
of workshop type training followed by at least 8 sessions of
coaching. Pricing and content to be negotiated at later date.
C. Technical Package - The Technical Package will include but
is not limited to the following components, laptop computer,
digital camera, web site, contact management software, SDI
LeGrand materials package and Personal Coaching.
7. COMPENSATION. - The following are the retail values associated with the
products described in paragraph 6.
A. Personal Coaching - The personal coaching program is valued at
$1,495.00 - $2,995, depending on the duration and content of
the coaching program. [Company] agrees to compensate Coaching
Institute as follows for each program sold:
Coaching Institute SDI - LeGrand
SDI LeGrand Sale: 50% 50%
Coaching Institute Sale: 70% 30%
B. Symposium pricing content and duration to be considered at
later date.
<PAGE>
C. Technical Package pricing and content to be considered at
later date.
8. MUTUAL EXCLUSIVITY AND NON-COMPETE - Throughout the duration of this
agreement, [Company] grants Coaching Institute, Inc. status as its sole
provider of coaching services. [Company] agrees not to develop any
similar or competing program and also agrees not to utilize other
third-party coaching providers through the duration of this agreement.
9. TERM OF AGREEMENT- This agreement and the association hereunder shall
commence on the effective date hereof and shall continue for a period
of 1 year. Upon the completion of the one-year term of the agreement,
the agreement will automatically extend an additional 2 years unless
notification is received according to the terms in paragraph 10.
10. TERMINATION - Either party may terminate this Agreement on the
expiration date by giving written notice to the other party at least
ninety (90) days prior to the expiration of the Agreement. The premise
of this arrangement is that it will continue so long as it is mutually
beneficial
11. RESTRICTIVE COVENANTS - Each party understands that the other party has
disclosed and will disclose certain knowledge concerning the other
party's trade secrets, proprietary information, business and marketing
methods, procedures, products, and services, including, but not limited
to, names of customers, clients, and suppliers, and other things which
constitute the property of the other party and which enable the other
party to compete successfully in its business. In consideration of the
parties association with each other and these disclosures, each party
agrees as follows:
A. Confidential Information; Covenant of Non-Disclosure; Trade
Secrets--Proprietary Information. Each party covenants that it shall
treat all such matters relating to the other party's business as
confidential and proprietary information entrusted to said party solely
for accomplishing the purposes of this agreement, and shall not at any
time, either during or after the term of this Agreement, either
directly or indirectly, use, divulge, disclose, or communicate to any
person, firm, or corporation any information concerning any matters
affecting or relating to the business of the other party, including
without limiting the generality of the foregoing, any of its customers,
clients, suppliers, the prices it obtains or has obtained for the
services it renders and/or the products it sells, or any other
information, written or otherwise, concerning the business of the other
party, the manner of operation, plans processes, products, employees,
or other data without regard to whether all the foregoing will be
deemed confidential, material, or important. All of the terms contained
anywhere in this Agreement shall remain in full force and effect from
the effective date hereof indefinitely and perpetually thereafter,
notwithstanding the termination of the association between the parties
and regardless of the reason for such termination.
<PAGE>
12. INDEMNIFICATION. The party to whom a customer is referred shall
indemnify the referring party against all liability or loss, and
against all claims or actions based upon or arising out of the
relationship between the referred customer and the party to whom the
customer was referred pursuant to the terms of this Agreement, or based
upon any violation of any statute, ordinance, code, or regulation, and
the defense of any such claims or actions. Each party shall also
indemnify the other against all liability and loss in connection with,
and shall assume full responsibility for, payment of their respective
federal, state, and local taxes, contributions, or assessments imposed
or required as a result of this Agreement.
13. GENERAL PROVISIONS
A. Remedies. The rights and remedies of any of the parties hereto
shall not be exclusive. In general, the respective rights and
obligation hereunder shall be enforceable by specific
performance, injunction, or other equitable remedy, but
nothing herein contained is intended to or shall limit or
affect any rights at law or by statute or otherwise of any
party aggrieved as against the other party for a breach or
threatened breach of any provision hereof, it being the
intention of this Paragraph to make clear the agreement of the
parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at
law or otherwise.
B. Governing Law, Jurisdiction, and Venue. This Agreement is
governed by the laws of the State of Utah in all respects, and
the parties hereto consent to jurisdiction and venue in the
United States Court, District of Utah and/or the Courts of
Salt Lake County, State of Utah, as applicable.
C. Entire Agreement. This instrument sets forth the entire
agreement among the parties and supersedes all prior
agreements, whether written or oral. All parts of Section
titles or Paragraph captions of this Agreement are for
convenience only, and shall not be deemed part of this
Agreement, and in no way define, limit, augment, extend, or
describe the scope, content, or intent of any part or parts of
this Agreement.
D. Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
representatives, successors, and assigns; provided, however,
that this provision shall not be construed as permitting
assignment, substitution, delegation, or other transfer of
rights or obligations by either party except upon the prior
written consent of both parties hereto.
E. Waiver or Forbearance Unless otherwise indicated herein,
failure by any party to insist upon the strict performance of
any covenant, duty,
<PAGE>
agreement, or condition of this Agreement, or to exercise any
right or remedy consequent upon a breach thereof, shall not
constitute a waiver of any such breach or of any other
covenant, agreement, term, or condition. Any party, by notice
delivered in the manner provided in this Agreement, may, but
shall be under no obligation to waive any rights or any
conditions to its obligation hereunder, or any duty,
obligation, or covenant of any other party. No waiver shall
affect or alter the remainder of this Agreement, but each and
every other covenant, agreement, term and condition hereof
shall continue in full force and effect with respect to any
other then existing or subsequently occurring breach. To be
effective, any waiver must be signed by both parties hereto.
F. Severability. In the event that any condition, covenant, or
other provision herein contained is held to be invalid or void
by any court of competent jurisdiction, the same shall be
deemed severable from the remainder of this Agreement and
shall in no way affect any other covenant or condition herein
contained. If such condition, covenant, or other provision
shall be deemed invalid due to is scope or breadth, such
provision shall be deemed valid to the extent of the scope or
breadth permitted by law.
The parties have executed this Coaching and Strategic Agreement
effective the date and year set forth above.
/s/ Craig R. Hendricks /s/ David A. Reecher
---------------------- --------------------
Craig R. Hendricks Name David A. Reecher
President Title President and CEO
Coaching Institute, Inc. SDI LeGrand Publishing, Inc.
Additional Items (hand written)
A. SDI to approve final coaching program prior to first training
program.
B. SDI to also approve "Coaching Institute's" SA Program prior
to contact with SDI customers.
COACHING AND STRATEGIC AGREEMENT
This agreement is entered into this 6th day of January, 1999 between Coaching
Institute, Inc., a Utah company with its principal place of business located at
112 West Business Park Drive, Draper, UT 84020, and RE Marketing, a California
company with its principal place of business located at 11330 Sunrise Park
Drive, #C, Rancho Cordova, CA.
RECITALS
1. Coaching Institute is engaged in the business of providing coaching
services.
2. RE Marketing requires the services from Coaching Institute that are set
forth in this agreement ("Services").
3. Coaching Institute desires to provide Services to RE Marketing and RE
Marketing desires to receive Services from Coaching Institute.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
OPERATIVE PROVISIONS
1. ASSOCIATION. Coaching Institute and RE Marketing hereby agree
to be associated with each other on and subject to the terms and conditions
herein. It is the intention of Coaching Institute and RE Marketing to focus on
their respective areas of business and technological expertise, and to enhance
their own and each other's business opportunities by associating together to
offer solutions to their customers whenever and wherever possible.
2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties
that as to their relationship with each other they are independent contractors.
Nothing in this Agreement shall be construed as creating any partnership,
agency, joint venture, or other joint obligation, and both parties agree not to
make any representations to the contrary. Any conduct in which a party engages
in connection with or in the performance of this Agreement shall be solely in
its capacity as an independent contractor, and nothing in this Agreement shall
be construed to the contrary. The parties agree that, as independent
contractors, they do not have authority to sign contracts, notes, or
obligations, or to purchase, acquire, or dispose of any property for or on
behalf of the other party or any of its customers, and shall only have authority
to perform those services specifically described herein. Each party is solely
responsible and liable for all labor and expenses in connection with its
services performed hereunder, and for any and all damages which may be
occasioned on account of the operation of this Agreement, whether the same be
for personal injuries or damages of any other kind.
<PAGE>
3. TAX LIABILITY. Each party assumes full responsibility for the payment
of its respective taxes, assessments, or contributions, whether state or
federal, as to compensation paid and/or the services performed under this
Agreement. Each party also agrees to pay any and all gross receipts,
compensation, transaction, sales, use, or other taxes or assessments of whatever
nature or kind levied or assessed as a consequence of the compensation paid
and/or services performed under this agreement.
4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains
with the creator of the property.
5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties agree
to the following:
A. Coaching Institute responsibilities
1. Coaching Institute will develop the RE Marketing
Coaching Program and associated curriculum. The
curriculum will be focused on the sales and marketing
of real estate, building communication skills, and
personal and business development. Professional
skills assessment will be included.
2. Coaching Institute will hire and train appropriately
skilled coaches and mentors.
3. Coaching Institute will hire and train salespeople
that will appropriately represent the RE Marketing
organization.
4. Coaching Institute will provide inbound and outbound
call center services to market the coaching program
to RE Marketing seminar attendees - non-buyers.
5. Coaching Institute is responsible for maintaining its
phone system, phone lines, computer equipment, office
supplies, office space, and other materials and
assets necessary to perform its function to
adequately support and market services to the RE
Marketing customer base.
6. To maintain or assist in the maintenance of the RE
Marketing database
7. To forward all coaching tuition moneys to RE
Marketing.
8. To include a coaching evaluation and feedback form
with every program. All completed copies of this
form, as well as any testimonial letters, will be
forwarded to RE Marketing.
B. RE Marketing responsibilities:
1. To promote and sell the RE Marketing coaching program
in all its seminars, workshops, and other venues.
2. To work in conjunction with Coaching Institute to
assure that the expectations regarding the quality
and content of the coaching program are met.
<PAGE>
3. To provide Coaching Institute with customer names and
lists of seminar attendees and other interested
parties on a regular basis for the intent of
marketing the coaching program to them.
4. To provide materials, including copies of software
packages sold, training videos, and other relevant
information for the coaching staff.
5. To process all RE Marketing coaching sales through
its merchant account or through its financing or
lease program.
6. To compensate Coaching Institute according to the
financial arrangements contained herein and to pay on
a schedule according to, or similar to, the "general
procedures guidelines" provided.
C. Mutual Responsibilities
1. It is understood that an undertaking of this
magnitude, with the possibility of thousands of
individuals contacted, enrolled, and spoken with,
there will inevitably be some individuals who will be
displeased with some aspect of the service.
Therefore, if there are any concerns regarding
representations made, the quality of service
provided, or the manner in which a customer is
treated, both parties agree to notify the other
immediately and use their combined best efforts to
rectify the situation. Customer satisfaction is the
ultimate goal.
6. COMPENSATION. - The retail value associated with the coaching program
is $1,495.00 - $1,995. RE Marketing agrees to compensate Coaching
Institute as follows for each program or package sold. The percentage
of payment to Coaching Institute will be made after the credit card
processing fee is deducted.
Bundled or Sold by R.E.M. Sold by Coaching Institute
55% 70%
A. Coaching Packages -
Initial package offerings to be sold are detailed in
Exhibit A. Coaching packages may be changed from time
to time with mutual approval from Coaching Institute
and RE Marketing.
B. Separate Product Sales -
When RE Marketing products are sold separately by
Coaching Institute, and not in conjunction with a
coaching program, Coaching Institute will receive 40%
of the gross sale amount. These individual product
sales will be included on the weekly reconciliation
report with regular coaching package sales.
7. MUTUAL EXCLUSIVITY AND NON-COMPETE - Throughout the duration of this
agreement, REM grants Coaching Institute, Inc. status as its sole
provider of coaching services. REM agrees not to develop any similar or
<PAGE>
competing program and also agrees not to utilize other third-party
coaching providers through the duration of this agreement.
8. TERM OF AGREEMENT- This agreement will be subject to a 120-day trial
period. Either party may terminate this Agreement within 30 days of the
termination of the trial period. After the completion of the trial
period, and subject to the provisions for termination contained herein,
this Agreement and the association hereunder shall commence on the
effective date hereof and shall continue for a period of 1 year. Upon
the completion of the 1-year term of the agreement, the agreement will
automatically extend an additional 2 years unless notification is
received according to the terms in paragraph 9.
9. TERMINATION - Either party may terminate this Agreement on the
expiration date by giving written notice to the other party at least
ninety (90) days prior to the expiration of the Agreement. The premise
of this arrangement is that it will continue so long as it is mutually
beneficial
10. RESTRICTIVE COVENANTS - Each party understands that the other party has
disclosed and will disclose certain knowledge concerning the other
party's trade secrets, proprietary information, business and marketing
methods, procedures, products, and services, including, but not limited
to, names of customers, clients, and suppliers, and other things which
constitute the property of the other party and which enable the other
party to compete successfully in its business. In consideration of the
parties association with each other and these disclosures, each party
agrees as follows:
A. Confidential Information; Covenant of Non-Disclosure; Trade
Secrets--Proprietary Information. Each party covenants that it shall
treat all such matters relating to the other party's business as
confidential and proprietary information entrusted to said party solely
for accomplishing the purposes of this agreement, and shall not at any
time, either during or after the term of this Agreement, either
directly or indirectly, use, divulge, disclose, or communicate to any
person, firm, or corporation any information concerning any matters
affecting or relating to the business of the other party, including
without limiting the generality of the foregoing, any of its customers,
clients, suppliers, the prices it obtains or has obtained for the
services it renders and/or the products it sells, or any other
information, written or otherwise, concerning the business of the other
party, the manner of operation, plans processes, products, employees,
or other data without regard to whether all the foregoing will be
deemed confidential, material, or important. Upon termination of this
agreement, or when this agreement becomes null and void, each party
shall inform the other party as to what material and information is
confidential. The named material and information shall not be used in
any way by the other party and, if possible, shall be surrendered upon
request.
<PAGE>
11. INDEMNIFICATION. The party to whom a customer is referred shall
indemnify the referring party against all liability or loss, and
against all claims or actions based upon or arising out of the
relationship between the referred customer and the party to whom the
customer was referred pursuant to the terms of this Agreement, or based
upon any violation of any statute, ordinance, code, or regulation, and
the defense of any such claims or actions. Each party shall also
indemnify the other against all liability and loss in connection with,
and shall assume full responsibility for, payment of their respective
federal, state, and local taxes, contributions, or assessments imposed
or required as a result of this Agreement.
12. GENERAL PROVISIONS
A. Remedies. The rights and remedies of any of the parties hereto
shall not be exclusive. In general, the respective rights and
obligation hereunder shall be enforceable by specific
performance, injunction, or other equitable remedy, but
nothing herein contained is intended to or shall limit or
affect any rights at law or by statute or otherwise of any
party aggrieved as against the other party for a breach or
threatened breach of any provision hereof, it being the
intention of this Paragraph to make clear the agreement of the
parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at
law or otherwise.
B. Governing Law, Jurisdiction, and Venue. This Agreement is
governed either by the laws of the State of Utah or the State
of California. If action is brought by RE Marketing, this
agreement will be governed by the State of Utah, with
jurisdiction and venue in the United States Court, District of
Utah and/or the Courts of Salt Lake County, State of Utah. If
action is brought by Coaching Institute, this agreement shall
be governed by the State of California, with jurisdiction and
venue in the United States Court, the corresponding District
and/or County Courts where RE Marketing is located.
C. Entire Agreement. This instrument sets forth the entire
agreement among the parties and supersedes all prior
agreements, whether written or oral. All parts of Section
titles or Paragraph captions of this Agreement are for
convenience only, and shall not be deemed part of this
Agreement, and in no way define, limit, augment, extend, or
describe the scope, content, or intent of any part or parts of
this Agreement.
D. Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
representatives, successors, and assigns; provided, however,
that this provision shall not be construed as permitting
assignment, substitution, delegation, or other
<PAGE>
transfer of rights or obligations by either party except upon
the prior written consent of both parties hereto.
E. Waiver or Forbearance Unless otherwise indicated herein,
failure by any party to insist upon the strict performance of
any covenant, duty, agreement, or condition of this Agreement,
or to exercise any right or remedy consequent upon a breach
thereof, shall not constitute a waiver of any such breach or
of any other covenant, agreement, term, or condition. Any
party, by notice delivered in the manner provided in this
Agreement, may, but shall be under no obligation to waive any
rights or any conditions to its obligation hereunder, or any
duty, obligation, or covenant of any other party. No waiver
shall affect or alter the remainder of this Agreement, but
each and every other covenant, agreement, term and condition
hereof shall continue in full force and effect with respect to
any other then existing or subsequently occurring breach. To
be effective, any waiver must be signed by both parties
hereto.
F. Severability. In the event that any condition, covenant, or
other provision herein contained is held to be invalid or void
by any court of competent jurisdiction, the same shall be
deemed severable from the remainder of this Agreement and
shall in no way affect any other covenant or condition herein
contained. If such condition, covenant, or other provision
shall be deemed invalid due to is scope or breadth, such
provision shall be deemed valid to the extent of the scope or
breadth permitted by law.
The parties have executed this Coaching and Strategic Agreement
effective the date and year set forth above.
/s/ Craig R. Hendricks /s/ Roger Butcher
---------------------- -----------------
Craig R. Hendricks Roger Butcher
President President
Coaching Institute, Inc. RE Marketing
<PAGE>
Exhibit A
Roger Butcher Coaching Programs
Package #1
Intensive 8-Session personalized Roger Butcher Real Estate Coaching
Program msrp $1,495.00
-Includes Professional Sales Assessment msrp $ 199.00
-Also includes Roger Butcher Real Estate
Master Series Study Guide msrp $ 89.95
---------
Total Value $1,783.95
Special package price: $1,495.00
Package #2
Powerful 10-Session personalized Roger Butcher Real Estate Coaching
Program msrp $1,695.00
-Includes Professional Sales Assessment $ 199.00
-Also includes Roger Butcher Real Estate
Master Series Study Guide $ 89.95
---------
Super Bonus Pack Including the following:
-Master series 16 cassette sales training course $ 259.95
-Personal Brochure Design Kit $ 49.95
-Postcard Marketing System $ 99.95
-Working with an Agent Video $ 49.95
-Pricing to Sell for Top Dollar Video $ 49.95
-Listing Visual Presentation Video $ 49.95
-Listing Visual Presentation (39 color pp) $ 60.00
-Counselor "Sold" Folder $ 24.95
-Power Letters Book & Computer Disc $ 125.00
-14 page personal Web Site Design $ 795.00
---------
Total Value $3,548.60
Special Package Price $1,795.00
<PAGE>
Package #3
Expanded 12-Session personalized Roger Butcher Real Estate Coaching
Program msrp $1,995.00
-Includes Professional Sales Assessment $ 199.00
-Also includes Roger Butcher Real Estate
Master Series Study Guide $ 89.95
Super Bonus Pack $1,570.00
Delux Career Mega Pack Including the following:
-Dialogue Memory Flashcards $ 45.95
-Absentee Owner Video $ 49.95
-Expired Listing Video $ 49.95
-Personal Brochure Design Video $ 49.95
-Prospect & List for Sale by Owners Video $ 49.95
-Variable Price Ranging Video $ 49.95
-Personal Assistant Program (6 cassettes) $ 89.95
---------
Total Value $4,239.60
Special Package Price $1,995.00
/s/ Craig R. Hendricks /s/ Roger Butcher
- - ---------------------- -----------------
Craig R. Hendricks Roger Butcher
President President
Coaching Institute, Inc. Real Estate Marketing
COACHING AND STRATEGIC AGREEMENT
This agreement is entered into this 5th day of June, 1999 between Coaching
Institute, Inc., a Utah company with its principal place of business located at
112 West Business Park Drive, Draper, UT 84020, and Automation Quest, a Utah
company with its principal place of business located at 7231 South 900 East,
Suite 700, Salt Lake City, UT 84047.
RECITALS
1. Coaching Institute is engaged in the business of providing coaching
services.
2. Automation Quest requires the services from Coaching Institute that are
set forth in this agreement ("Services").
3. Coaching Institute desires to provide Services to Automation Quest and
Automation Quest desires to receive Services from Coaching Institute.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
OPERATIVE PROVISIONS
1. ASSOCIATION. Coaching Institute and Automation Quest hereby agree to be
associated with each other on and subject to the terms and conditions herein. It
is the intention of Coaching Institute and Automation Quest to focus on their
respective areas of business and technological expertise, and to enhance their
own and each other's business opportunities by associating together to offer
solutions to their customers whenever and wherever possible.
2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties that as
to their relationship with each other they are independent contractors. Nothing
in this Agreement shall be construed as creating any partnership, agency, joint
venture, or other joint obligation, and both parties agree not to make any
representations to the contrary. Any conduct in which a party engages in
connection with or in the performance of this Agreement shall be solely in its
capacity as an independent contractor, and nothing in this Agreement shall be
construed to the contrary. The parties agree that, as independent contractors,
they do not have authority to sign contracts, notes, or obligations, or to
purchase, acquire, or dispose of any property for or on behalf of the other
party or any of its customers, and shall only have authority to perform those
services specifically described herein. Each party is solely responsible and
liable for all labor and expenses in connection with its services performed
hereunder, and for any and all damages which may be occasioned on account of the
operation of this Agreement, whether the same be for personal injuries or
damages of any other kind.
<PAGE>
3. TAX LIABILITY. Each party assumes full responsibility for the payment of its
respective taxes, assessments, or contributions, whether state or federal, as to
compensation paid and/or the services performed under this Agreement. Each party
also agrees to pay any and all gross receipts, compensation, transaction, sales,
use, or other taxes or assessments of whatever nature or kind levied or assessed
as a consequence of the compensation paid and/or services performed under this
agreement.
4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains with
the creator of the property.
5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties agree
to the following:
A. Coaching Institute responsibilities
1. The Coaching Institute will develop the Automation
Quest Coaching Program and associated curriculum. The
curriculum will be focused on utilizing technology in
the sales and marketing of real estate, building
communication skills, and personal and business
development. Professional skills assessment will be
included.
2. The Coaching Institute will hire and train
appropriately skilled coaches and mentors.
3. The Coaching Institute will hire and train
salespeople that will appropriately represent the
Automation Quest organization.
4. The Coaching Institute will provide inbound and
outbound call center services to market the coaching
program to Automation Quest seminar attendees -
non-buyers.
5. The Coaching Institute is responsible for maintaining
its phone system, phone lines, computer equipment,
office supplies, office space, and other materials
and assets necessary to perform its function to
adequately support and market services to the
Automation Quest customer base.
6. To maintain or assist in the maintenance of the
Automation Quest database
B. Automation Quest responsibilities:
1. To include the Automation Quest coaching program in
all its seminars, workshops, and other venues.
2. To work in conjunction with Coaching Institute to
assure that the expectations regarding the quality
and content of the coaching program are met.
3. To provide Coaching Institute with customer names and
lists of seminar attendees and other interested
parties on a regular basis for the intent of
marketing the coaching program to them.
<PAGE>
4. To provide materials, including copies of software
packages sold, training videos, and other relevant
information for the coaching staff.
5. To process all Automation Quest coaching sales
through its merchant account or through its financing
or lease program.
6. To compensate Coaching Institute according to the
financial arrangements contained herein and to pay on
a schedule according to, or similar to, the "general
procedures guidelines" provided.
C. Mutual Responsibilities
1. It is understood that an undertaking of this
magnitude, with the possibility of thousands of
individuals contacted, enrolled, and spoken with,
there will inevitably be some individuals who will be
displeased with some aspect of the service.
Therefore, if there are any concerns regarding
representations made, the quality of service
provided, or the manner in which a customer is
treated, both parties agree to notify the other
immediately and use their combined best efforts to
rectify the situation. Customer satisfaction is the
ultimate goal.
6. COMPENSATION. - The retail value associated with the coaching program
is $1,495.00. Automation Quest agrees to compensate The Coaching
Institute as follows for each program sold:
Bundled (Sold by A.Q.) Sold by The Coaching Institute
---------------------- ------------------------------
$672.75 (45%) $971.75 (65%)
7. MUTUAL EXCLUSIVITY AND NON-COMPETE - So long as Automation Quest
includes the coaching program in each of their packages as described in
paragraph 5.B.1, and that monthly coaching clients exceed an average of
60 per month, The Coaching Institute agrees that Automation Quest will
have an exclusive arrangement with The Coaching Institute for providing
coaching services to the real estate agent industry. The Coaching
Institute will not actively pursue other marketing or real estate
companies whose focus is to sell products and services to real estate
agents during the term of this Agreement. It is understood that The
Coaching Institute currently has customers in the real estate
investment industry and that these types of companies do not fall into
the restricted category.
Pursuant to this arrangement, Automation Quest agrees to promote The
Coaching Institute's coaching program to other current and potential
real estate clients. In those situations in which Automation Quest
introduces and promotes The Coaching Institute's coaching program to
its clients, Automation Quest will receive an agreed-upon commission or
royalty for each sale made through the new channel.
<PAGE>
Throughout the duration of this agreement, Automation Quest grants The
Coaching Institute, Inc. status as its sole provider of coaching
services. Automation Quest agrees not to develop any similar or
competing program and also agrees not to utilize other third-party
coaching providers.
8. TERM OF AGREEMENT- Subject to the provisions for termination contained
herein, this Agreement and the association hereunder shall commence on
the effective date hereof and shall continue for an indefinite period
of time.
9. TERMINATION - Either party may terminate this Agreement at any time
after an initial 120-day trial period for any reason by giving the
other party a ninety (90) day written notice. The premise of this
arrangement is that it will continue so long as it is mutually
beneficial.
10. RESTRICTIVE COVENANTS - Each party understands that the other party has
disclosed and will disclose certain knowledge concerning the other
party's trade secrets, proprietary information, business and marketing
methods, procedures, products, and services, including, but not limited
to, names of customers, clients, and suppliers, and other things which
constitute the property of the other party and which enable the other
party to compete successfully in its business. In consideration of the
parties association with each other and these disclosures, each party
agrees as follows:
A. Confidential Information; Covenant of Non-Disclosure; Trade
Secrets--Proprietary Information. Each party covenants that it shall
treat all such matters relating to the other party's business as
confidential and proprietary information entrusted to said party solely
for accomplishing the purposes of this agreement, and shall not at any
time, either during or after the term of this Agreement, either
directly or indirectly, use, divulge, disclose, or communicate to any
person, firm, or corporation any information concerning any matters
affecting or relating to the business of the other party, including
without limiting the generality of the foregoing, any of its customers,
clients, suppliers, the prices it obtains or has obtained for the
services it renders and/or the products it sells, or any other
information, written or otherwise, concerning the business of the other
party, the manner of operation, plans processes, products, employees,
or other data without regard to whether all the foregoing will be
deemed confidential, material, or important. All of the terms contained
anywhere in this Agreement shall remain in full force and effect from
the effective date hereof indefinitely and perpetually thereafter,
notwithstanding the termination of the association between the parties,
and regardless of the reason for such termination.
11. INDEMNIFICATION. The party to whom a customer is referred shall
indemnify the referring party against all liability or loss, and
against all claims or actions based upon or arising out of the
relationship between the referred customer and the party to whom the
customer was referred pursuant to the terms of this Agreement, or based
upon any violation of any statute, ordinance, code, or
<PAGE>
regulation, and the defense of any such claims or actions. Each party
shall also indemnify the other against all liability and loss in
connection with, and shall assume full responsibility for, payment of
their respective federal, state, and local taxes, contributions, or
assessments imposed or required as a result of this Agreement.
12. GENERAL PROVISIONS
A. Remedies. The rights and remedies of any of the parties hereto
shall not be exclusive. In general, the respective rights and
obligation hereunder shall be enforceable by specific
performance, injunction, or other equitable remedy, but
nothing herein contained is intended to or shall limit or
affect any rights at law or by statute or otherwise of any
party aggrieved as against the other party for a breach or
threatened breach of any provision hereof, it being the
intention of this Paragraph to make clear the agreement of the
parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at
law or otherwise.
B. Governing Law, Jurisdiction, and Venue. This Agreement is
governed by the laws of the State of Utah in all respects, and
the parties hereto consent to jurisdiction and venue in the
United States Court, District of Utah and/or the Courts of
Salt Lake County, State Utah, as applicable.
C. Entire Agreement. This instrument sets forth the entire
agreement among the parties and supersedes all prior
agreements, whether written or oral. All parts of Section
titles or Paragraph captions of this Agreement are for
convenience only, and shall not be deemed part of this
Agreement, and in no way define, limit, augment, extend, or
describe the scope, content, or intent of any part or parts of
this Agreement.
D. Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
representatives, successors, and assigns; provided, however,
that this provision shall not be construed as permitting
assignment, substitution, delegation, or other transfer of
rights or obligations by either party except upon the prior
written consent of both parties hereto.
E. Waiver or Forbearance Unless otherwise indicated herein,
failure by any party to insist upon the strict performance of
any covenant, duty, agreement, or condition of this Agreement,
or to exercise any right or remedy consequent upon a breach
thereof, shall not constitute a waiver of any such breach or
of any other covenant, agreement, term, or condition. Any
party, by notice delivered in the manner provided in this
Agreement, may, but shall be under no obligation to waive any
rights or any conditions to its obligation hereunder, or any
duty, obligation, or covenant of any
<PAGE>
other party. No waiver shall affect or alter the remainder of
this Agreement, but each and every other covenant, agreement,
term and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequently
occurring breach. To be effective, any waiver must be signed
by both parties hereto.
F. Severability. In the event that any condition, covenant, or
other provision herein contained is held to be invalid or void
by any court of competent jurisdiction, the same shall be
deemed severable from the remainder of this Agreement and
shall in no way affect any other covenant or condition herein
contained. If such condition, covenant, or other provision
shall be deemed invalid due to is scope or breadth, such
provision shall be deemed valid to the extent of the scope or
breadth permitted by law.
The parties have executed this Coaching and Strategic Agreement
effective the date and year set forth above.
/s/ Craig R. Hendricks /s/ Brent D. Gray, Pres.
---------------------- ------------------------
Craig R. Hendricks Brent D. Gray
President President
Coaching Institute, Inc. Automation Quest
1221 Avenue of the Americas
New York NY 10020-1090
Telephone: (212) 596-2000
March 28, 1997
Warever Corp.
112 West Business Park Drive
Draper, UT 84020
Ladies and Gentlemen:
Thisletter and the attached Standard Distribution Provisions, when
signed by you and by us, will constitute our agreement with you. (All words
defined in the Standard Distribution Provisions have the same meanings in this
letter.)
1. Rights. You authorize us to copy and duplicate the Programs
in your CD-ROM catalogue in CD-ROM Devices, to copy and duplicate related
Packaging Materials, and to distribute those Devices and Materials by Direct
Response Distribution, as provided in this letter and the Standard Distribution
Provisions.
2. Term. The Term of this agreement will be the period beginning
on the date of this agreement and ending March 31, 2000.
3. Programs. This agreement will apply to all Programs that you
make available for distribution in the form of CD-ROM Devices in the Territory
at any time during the Term of this agreement.
4. Royalties. We will pay you royalties on our Net Paid Sales of
CD-ROM Devices in accordance with the Standard Distribution Provisions.
Very truly yours,
THE COLUMBIA HOUSE COMPANY
By: /s/ AJG
-------------------------------------
AGREED:
WAREVER CORP.
By: /s/ Craig R. Hendricks, President
-----------------------------------
<PAGE>
STANDARD DISTRIBUTION PROVISIONS
attached to the letter agreement dated March 28, 1997 (CH 97-31.1(1)) between
Warever Corp. ("you") and The Columbia House Company ("we"). The "agreement",
below, means the attached letter agreement and these Standard Distribution
Provisions.
1. Definitions
(Each definition prescribed in this agreement will apply to all uses of
the term defined, whether or not the term is capitalized in the use concerned.)
(a) "Actual Selling Price". The price we charge our customer for
the CD-ROM Device concerned, excluding: (1) shipping and handling charges, (2)
sales, excise, and value-added taxes and any other turnover taxes, (3) customs
duties and other importation expenses, and (4) partial credits against our
selling prices allowed to customers for any reason. (Units for which full credit
is allowed are excluded from "Net Paid Sales" under subparagraph 1(b).)
(b) "Net Paid Sales". Those CD-ROM Devices for which we derive
actual revenues, including those distributed to members for enrolling free of
charge or for a nominal price ("Introductory Units"). Net Paid Sales do not
include actual returns, units whose full selling prices are credited to
customers for any reason, or units for which we are not paid the amounts due us.
(If we are paid part of the amount due us for a unit, the unpaid balance will be
treated as a credit against the selling price under clause (4) of subparagraph
1(a).)
(c) "Program". An information or entertainment program and any
related materials, including computer software programs, that can be
communicated by the use of CD-ROM Devices.
(d) "CD-ROM Device". An optical disc storage device containing
a Program and using the technology commonly known as compact disc
read-only-memory ("CD-ROM") or any subset, format, enhancement or other version
of it, whether now known or developed in the future (including but not limited
to CD-ROM-XA, CD-I, 3D-O, and CDTV).
(e) "Packaging Materials" Packaging, instruction manuals and other
informational materials, and other packaging elements distributed with CD-ROM
Devices.
(f) "Direct Response Distribution" Distribution directly to
consumers (not through wholesalers or intermediate distributors), and not by
sale in retail stores.
(g) "Territory". The United States, Canada and Mexico and their
territories, possessions and military bases.
2. Grant of Rights. You grant and assign to us irrevocably the
non-exclusive rights, under copyright and otherwise, to copy and duplicate in
CD-ROM Devices the Programs which you make available for distribution in CD-ROM
format, to copy and duplicate all Packaging Materials used by you in connection
with those Programs, to advertise those Devices and to market, distribute, and
sell those Devices and Materials by Direct Response Distribution, during the
Term and in the Territory, and to authorize our subsidiaries and affiliates in
the Territory to do so.
<PAGE>
3. Royalties.
(a) Basic royalty rates. Your royalty on each unit of Net Paid
Sales will be the higher of the following amounts:
(1) The applicable percentage of our Actual Selling Price
specified in the "PERCENTAGE ROYALTY RATE" column below; or
(2) The applicable amount specified in the "MINIMUM ROYALTY"
column:
YOUR SUGGESTED PERCENTAGE MINIMUM
RETAIL LIST PRICE ROYALTY RATE ROYALTY
("SRLP")
$70 and above 17.5% $4.50
$25 - $69.99 15% $3.00
---------------- ---
$15 - $24.99 12.5% $1.25
---------------- -----
Under $15 10% $0.50
-----
If you do not publish a SRLP for the CD-ROM Device concerned, our regular list
price will be substituted for it in the calculation under this subparagraph (a).
Your royalties may be increased under subparagraph 3(b).
(b) Excess Introductory Units If more than fifty percent (50%) of
our Net Paid Sales of CD-ROM Devices in any SRLP category listed above are
Introductory Units, the royalty payable on those excess Introductory Units (the
excess over 50%) will be calculated by applying the applicable percentage
royalty rate for that SRLP category to the average of our Actual Selling Prices
for all CD-ROM Devices in that category, excluding Introductory Units,
distributed under this agreement.
(c) Cumulative Calculation. The calculation called for in
subparagraph 3(b) will be made on a cumulative basis after the rendition of the
last royalty accounting statement due under this agreement.
(d) Foreign Sales.
(1) Canada. In respect of Net Paid Sales in Canada, the
list price and selling price amounts used in making the calculations
under this paragraph 3 will be the same amounts in Canadian currency,
without exchange rate adjustments. (For example, a unit sold in Canada
will be treated as having a SRLP of $70.00 if your SRLP for it in
Canada is $70.00 (Canadian)). The royalties on Net Paid Sales in Canada
will be calculated in Canadian currency and paid in the equivalents in
United States currency. (For example, if the SRLP of the unit concerned
is $70.00 (Canadian), the Minimum Royalty applicable to it will be the
U.S. currency equivalent of $4.50 (Canadian)).
(2) Mexico. In respect of Net Paid Sales in Mexico, the
list price and selling price amounts used in making the calculations
under this paragraph 3 will be the equivalents in Mexican currency. The
royalties on Net Paid Sales in Mexico will be calculated in Mexican
currency and paid in the equivalents in United States currency.
(3) Each currency conversion calculation under this
subparagraph (d) will be based on the then current exchange rates at
the close of the royalty accounting period concerned.
<PAGE>
4. Royalty Accounting.
(a) We will compute and pay royalties due you, accompanied by
accounting statements, within sixty (60) days after each March 31, June 30,
September 30 and December 31 during the Term for the preceding three (3) months,
for each such three month period during which CD-ROM Devices are distributed or
sold.
(b) You may, at your expense, examine our books and records
relating to your account and the sale of CD-ROM Devices under this agreement,
during our regular business hours and at the place where we regularly keep them,
for the sole purpose of verifying the accuracy of the statements sent to you
under subparagraph 4(a). You may make such an examination with respect to a
particular statement only once, and not later than one (1) year after the date
of the statement covering the cumulative calculation required under subparagraph
3(c).
(c) Each royalty statement and other accounting rendered by us
will be conclusively binding upon you and not subject to any objection by you
for any reason unless you give us specific notice of your objections to it and
your reasons for them before the end of the one year period prescribed in the
second sentence of subparagraph 4(b). You will not have the right to sue us in
connection with any accounting or for royalties on sales of CD-ROM Devices
during the period covered by an accounting, unless you commence the suit within
that one year period.
5. Mechanical Royalties and Other Payments. You will make all payments to
third parties, including but not limited to payments to holders of rights
(including copyrights) in musical compositions, master recordings, literary
material, audio and audiovisual elements, computer software programs, graphics,
technology, artwork, photographs, names and likenesses, required by reason of
the use of the Programs in the duplication, modification or marketing of the
CD-ROM Devices.
6. Duplicating.
(a) (1) This subparagraph 6(a) will apply in those instances
in which we elect to procure duplication of CD-ROM Devices from you.
Subparagraph 6(b) below will apply when we elect to duplicate them ourselves (or
have them duplicated by others for our account).
(2) You will supply us with the CD-ROM Devices we require
for distribution, ready for delivery to our customers, in the same quality,
packaging and format as the units you distribute in the highest quality retail
channels through which you distribute CD-ROM Devices.
(3) The CD-ROM Devices furnished under this subparagraph
6(a) will not contain any advertising or promotion material or any other matter
that is not an integral part of the Program designated in our duplication order.
You will not package those Devices with any inserts, stickers, or other
materials that: (1) are not customarily packaged in your general release of the
CD-ROM Devices concerned; (ii) advertise or promote any CD-ROM products or other
interactive or multimedia products not available to us under this agreement;
(iii) advertise or promote any Program on or in any platform, format or
technology other than CDROM Devices, or (iv) advertise or promote any Direct
Response Distribution or other direct marketing.
<PAGE>
(4) We shall pay you for the CD-ROM Devices you duplicate
for us in accordance with prices listed on Schedule A plus the cost of shipping
direct from your duplicator to our designated facility. You represent and
warrant that the prices in Schedule A are your actual duplication costs, FOB
your duplicator (i.e., that they do not include any creative or mastering costs,
order processing or inventory control costs, or allocations of overhead or
profit). You will review those duplicating costs not less frequently than
semi-annually, will notify us of any reductions or increases in them, and will
adjust those duplicating prices commensurately with those changes.
(5) With respect to the duplication and delivery of CD-ROM
Devices, we will be treated no less favorably than any other distributor of
CD-ROM Devices for whom you duplicate or furnish duplicated product. You shall
make reasonable efforts to deliver the CD-ROM Devices within fourteen (14) days
of receipt of our order. In no event will any CD-ROM Devices be delivered to us
later than thirty (30) days after receipt of our order. All CD-ROM Devices will
be bulk-packed for shipment to us in accordance with our specifications.
(6) Payment for all CD-ROM Devices ordered and shipped to
us shall be made within thirty (30) days of delivery of the CD-ROM Devices or
our receipt of your invoices, whichever is later. All sales to us shall be final
and we shall have no right to return any unsold or returned CD-ROM Devices
except defective units. Any units returned as defective will be accompanied by
statements describing the defect(s). We will pay all sales taxes or equivalent
taxes resulting directly from the sale and delivery of the CD-ROM Devices to us.
(b) (1) If we so elect in any instance, we may procure the
duplication of CD-ROM Devices, including packaging, from other sources. If we
do, this subparagraph 6(b) will apply instead of subparagraph 6(a).
(2) All CD-ROM Devices duplicated under this subparagraph
(b) will be of a quality comparable to the quality of CD-ROM Devices containing
the Program concerned distributed by you.
(3) You will furnish to us, promptly after our request:
(i) Any master, duplicating or other materials
relating to the Program that we may require for the manufacture of
first class quality CD-ROM Devices suitable for commercial
distribution;
(ii) Duplicating film for the production of
Packaging Materials and labels, or, if we so elect, graphic materials
suitable for our use in cre~ting our own Packaging Materials and labels
(including modified Packaging Materials to conform with section
6(a)(3)); and
(iii) Any technical assistance and information
(including but not limited to copyright, trademark, patent and credit
information) that we require to duplicate CD-ROM Devices and Packaging
Materials.
We will reimburse you for your actual costs (excluding all origination charges)
incurred in furnishing materials and assistance to us under this section
6(b)(3). After the end of the Term, we will return those materials to you or, at
your request, destroy them and furnish you with an affidavit attesting to such
destruction.
<PAGE>
7. Termination and Post-Termination Sales For six (6) months after the end
of the Term ("Sell-Off Period"), we may advertise, distribute and sell CD-ROM
Devices duplicated or in the process of duplication by you or by us at the end
of the Term. We will pay royalties and render statements regarding those sales
in the same manner as during the Term. After the end of the Sell-Off Period, we
will notify you of the number and types of CD-ROM Devices remaining on hand and
you may, at your option exercisable by notice within thirty (30) days of our
notice, purchase any such CD-ROM Devices at our actual duplicating costs plus
shipping and handling charges or instruct us to destroy them. You will pay all
amounts payable in connection with the sale of all such CDROM Devices purchased
by you.
8. Advertising, Promotion, Packaging and Labels; Review Samples.
(a) We shall have the right to use and authorize others to use
the names, likenesses and voices of the performers and other persons who have
rendered services in connection with the Programs, and biographical information
about them, for advertising and purposes of trade in connection with the CD-ROM
Devices and in institutional advertising for our company in all formats, markets
and media now known or hereafter devised.
(b) We may use synopses and excerpts from the Program(s) and
pre-existing advertising, publicity and promotional materials for the
Program(s), in advertising, promoting and publicizing the CD-ROM Devices in any
medium and by any method, including but not limited to compact disc samplers and
electronic catalogs, and may authorize others to do so, without additional
payment. You will furnish us with such technical assistance and information as
we may reasonably require to prepare such advertising, promotion and publicity
materials. At our request, you shall promptly deliver to us a reasonable
quantity of pre-existing advertisements, publicity pieces and promotion
materials concerning all the components of the Program as are available to you,
including but not limited to:
(1) copies of critics' reviews or other commentaries;
(2) a synopsis of the advertising credits used for
distribution;
(3) a list of principal performers and their roles,
creators, animators, and other significant contributors to the Program
(including but not limited to voice-over and character voice talent);
(4) a list of all underlying and pre-existing materials
contained in the Program or upon which the Program is based and the
name of the licensor or supplier; and
(5) a music cue sheet in customary form containing titles,
composers, timings, copyrights owners and publishers.
We will reimburse you for your actual costs (excluding all creative costs)
incurred in furnishing materials and assistance to us under this subparagraph
8(b). After the end of the Term, we will return such materials to you or, at
your request, destroy them and furnish you with an affidavit attesting to such
destruction.
(c) We shall have the right to use the labels, trademarks, trade
names, designs and artwork owned, controlled, or distributed by you on CD-ROM
Devices and in packaging, advertising and other marketing materials for them.
(d) You will furnish us with five (5) samples of each Program in
your catalog during the
<PAGE>
Term for review purposes.
9. Warranties and Representations.
You warrant and represent:
(a) You have the right and power to enter into and fully
perform this agreement;
(b) No Materials (defined below), or any use of them
in accordance with this agreement will violate any law, infringe upon the rights
of any person or entity, or otherwise cause us to incur liability to any third
party. "Materials," in this subparagraph (b), means the Programs and any related
materials, including computer software programs, technology, graphics, dramatic,
literary, musical, or artistic elements, ideas, or other intellectual properties
contained in or furnished by you for use in connection with the Programs or the
packaging, advertising, promotion or marketing of CD-ROM Devices made from them;
and
(c) We will not be required to make any payments or incur
any liability by reason of our exercise of our rights under this agreement,
except the payments specifically provided for in this agreement.
10. Indemnity. You will at all times indemnify and hold us and our
licensees harmless from and against any and all claims, damages, liabilities,
cost and expenses, including legal expenses and reasonable counsel fees, arising
out of any breach or alleged breach by you of any warranty or representation
made by you in this agreement. Pending the resolution of any claim in respect of
which we are entitled to be indemnified, we will not withhold monies which would
otherwise be payable to you under this agreement in an amount exceeding your
potential liability to us under this paragraph.
11. Withdrawal of Programs You may terminate our rights under paragraph 2
in any Program for all or part of the Territory ("Terminated Area") if the
payments you are required to make to others by reason of our distribution of it
exceed the royalties we are required to pay you. You will give us at least three
(3) months' prior notice of any such termination.
12. Assignment. Either party may assign its rights under this agreement in
whole or in part to any subsidiary or controlling corporation, to any entity
owned or controlled by it, or to any entity acquiring a substantial portion of
its assets, and such rights may be assigned by any such assignee. No such
assignment shall relieve such party of any of its obligations under this
agreement.
13. Notices. All notices under this agreement shall be in writing and
shall be given by courier or other personal delivery or by registered or
certified mail at the appropriate address indicated above or at a substitute
address designated by notice by the party concerned. Each notice to us shall be
addressed for the attention of our Senior Vice President, Business and
Government Affairs, and a copy of each notice sent to us shall be sent
simultaneously to our Senior Vice President and General Counsel. Notices shall
be deemed given when delivered to the courier, personally delivered, or mailed,
except that a notice of change of address shall be effective only from the date
of its receipt.
<PAGE>
14. Miscellaneous
(a) Force Majeure. If we are materially hampered in the
duplication, advertising, distribution or sale of CD-ROM Devices because of act
of God, accident, fire, labor dispute, riot or civil disorder, act of public
enemy, enactment or act of any government or governmental instrumentality
(whether federal, state, local or foreign), failure of technical facilities,
failure or delay of transportation facilities, or other cause of a similar or
different nature not reasonably within our control, then we will have the right,
without limiting our other rights, to suspend the running of the Term by notice
to you, for the duration of such contingency. All dates and periods of time
prescribed in this agreement and occurring during or affected by any such
suspension may be postponed or extended, at our discretion, for a period of time
equivalent to the duration of the suspension.
(b) Entire agreement; Captions. This agreement contains the entire
understanding of the parties relating to its subject matter and cannot be
changed orally. Paragraph captions are included for convenience only and will
not limit the interpretation of any provision.
(c) Waiver; Remedies. A waiver of any term or condition of this
agreement in any instance shall not be deemed to waive it for the future. All
remedies, rights, undertakings, obligations, and agreements contained in this
agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either party.
(d) Applicable Law. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE
STATE OF NEW YORK, AND ITS VALIDITY, INTERPRETATION AND LEGAL EFFECT WILL BE
GOVERNED BY THE LAWS OF THAT STATE APPLICABLE TO CONTRACTS ENTERED INTO AND
ENTIRELY PERFORMED THERE. THE NEW YORK COURTS (STATE AND FEDERAL), ONLY, WILL
HAVE JURISDICTION OF ANY CONTROVERSIES REGARDING THIS AGREEMENT; ANY ACTION OR
OTHER PROCEEDING WHICH INVOLVES SUCH A CONTROVERSY WILL BE BROUGHT IN THOSE
COURTS, IN NEW YORK COUNTY, AND NOT ELSEWHERE. ANY PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY, AMONG OTHER METHODS, BE SERVED BY DELIVERING IT OR MAILING IT,
BY REGISTERED OR CERTIFIED MAIL, DIRECTED TO THE APPLICABLE ADDRESS ABOVE OR
SUCH OTHER ADDRESS AS THE PARTY CONCERNED MAY DESIGNATE PURSUANT TO PARAGRAPH
13. ANY SUCH DELIVERY OR MAIL SERVICE WILL HAVE THE SAME EFFECT AS PERSONAL
SERVICE WITHIN THE STATE OF NEW YORK.
(e) Severability The invalidity or unenforceability of any
provision of this agreement shall in no way affect the validity or
enforceability of any other provision of this agreement.
(f) Breach. Neither party shall be entitled to recover damages or
to terminate the Term by reason of any breach of this agreement by the other
party, unless the latter party has failed to remedy the breach concerned within
twenty-one (21) days after notice.
THE COLUMBIA HOUSE COMPANY
By: /s/ AJG
---------------------------------
WAREVER CORP.
By: /s/ Craig R. Hendricks
---------------------------------
<PAGE>
Our taxpayer identification number is 87-0498368. Under the penalties of
perjury, I certify that this information is true, correct, and complete.
/s/ Craig R. Hendricks, President
---------------------------------
For: /WAREVER CORP.
SCHEDULE A
(Reference: Section 6(a)(4))
<PAGE>
SCHEDULE A
Product Description Price
- - ------- ----------- -----
Action Plus LE Powerful, yet easy-to-use productivity too $49.95
including contact manager, scheduler, and
word processor. Designed to increase your
sales and help you service your customers
better.
Pricing: Units per Order Cost of Goods
--------------- --------------
50 - 100 $5.88
101-250 $5.49
251-500 $5.19
501-1,000 $4.89
1,001+ $4.49
Action Spreadsheet Excel-compatible, Windows spreadsheet
Pricing: Units per Order Costs of Goods
--------------- --------------
50 - 100 $2.47
101-250 $2.19
251 - 500 $1.98
501-1,000 $1.89
1,001+ $1.77
Action Planner Helps you manage your time better. Includes $29.95
Personal scheduler and day planner.
Prints to popular Day planners.
Pricing: Units per Order Cost of Goods
--------------- --------------
50 - 100 $2.94
101-250 $2.71
251-500 $2.45
501 - 1,000 $2.29
1,001+ $2.05
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (herein referred to as the "Agreement") is
entered into in duplicate effective for all purposes and in all respects as of
the 13th day of April, 1999, by and between WAREVER, INC., a Utah Corporation,
with its principal place of business located at 112 West Business Park Drive,
Draper, Utah, 84020 (herein referred to as "Warever"), and PLUS MARK, Inc. an
Ohio Corporation (a wholly owned subsidiary of American Greetings Corporation,
an Ohio Corporation), with its principal place of business located at One
American Road, Cleveland, Ohio, 44144-2398 (herein referred to as "Plus Mark"),
and SNARR AND DYER LICENSING, LLC, a Utah Limited Liability company having its
principal place of business at 4728 Dearcreek Road, Salt Lake City, UT 84124
("Snarr").
RECITALS
1. Warever is in the business of researching, developing, and marketing
certain proprietary computer software products and related
instructional, reference, learning, and training manuals and systems.
2. Plus Mark owns all right, title, and interest to the name and mark
"DateWorks", along with the associated good will.
3. Snarr owns United States Patent No. 5,222,764, along with certain
improvements and variations with respect to the inventions covered
thereby (the "Patent"), and the name and mark "Pocket-It", along with
the associated good will, and has licensed the same, along with the
Patent, to Plus Mark.
4. Warever has and is currently developing a customized software program
known as "Pocket-It" (herein referred to as the "Pocket-It Software").
The Pocket-It Software, as defined in Section 1 C below, is a
modification of an existing proprietary software program owned by
Warever (herein referred to as the "Riptide Software"). The Riptide
Software is similar to the Pocket-It Software, but is not part of this
Agreement. Warever owns all right, title, and interest in and to said
Riptide Software.
5. Except as set forth on Schedule A, which is attached hereto and
incorporated herein, Warever owns all right, title, and interest in and
to the Pocket-It Software.
6. Plus Mark desires to obtain certain reproduction and marketing rights
from Warever to the Pocket-It Software on the terms and conditions
described herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
<PAGE>
OPERATIVE PROVISIONS
1. Definitions. For purposes of this Agreement, the following definitions
shall apply to the respective terms:
A. "Warever" shall be defined to mean WAREVER, INC., a Utah
Corporation; and any of its designated agents or affiliates.
B. "Plus Mark" shall be defined to mean PLUS MARK, an Ohio
Corporation (a wholly owned subsidiary of American Greetings Corporation, an
Ohio Corporation); and any of its designated agents or affiliates.
C. The "Pocket-It Software" shall be defined to mean that certain
Pocket-It customized computer software program, developed by Warever., and any
related or derivative works, including books, manuals, outlines, tapes, videos,
etc., developed by Warever for use in connection with the Pocket-It Software.
The Pocket-It Software is a companion to the Pocket-It paper-based planning
system. The Pocket-It Software enables the user to print a variety of reports
directly onto the Pocket-It planning system's forms. The Pocket-It Software is
intended to be marketed and sold in conjunction with the Pocket-It paper-based
planning system. Except as set forth in Schedule A, Warever possesses full
ownership rights in and to the Pocket-It Software.
D. The "Riptide Software" shall be defined to mean that certain
Riptide computer software program, and any related or derivative works,
including source code, books, manuals, outlines, tapes, videos, etc. The Riptide
Software is similar to the Pocket-it Software, but is not part of this
Agreement. Warever possesses full ownership rights in and to the Riptide
Software.
2. Development of the Pocket-it Software; Conditions Precedent. Warever
shall be responsible to develop the Pocket-it Software for delivery to Plus Mark
on or before April 19, 1999. The obligations of PlusMark under this Agreement
are subject to satisfaction, at or prior to April 19, 1999, of the condition
that PlusMark shall have approved the Pocket-It Software for initial release.
Such approval shall be in writing and shall not be unreasonably withheld. If
Plus Mark determines that product modifications or enhancements are necessary in
order to approve the initial release of Pocket-It Software, the parties will use
commercially reasonable efforts to work together in an expeditious manner to
implement those modifications or enhancements, and the deadline for completion
of the Pocket-It Software shall be extended during such time, for a period not
to exceed sixty (60) days. Except for the initial product release, any product
modifications or enhancements will be implemented in a subsequent release of the
product and will not prevent current product from being marketed and sold.
3. Reproduction, Marketing and Sales. Warever hereby grants to Plus Mark
an exclusive license to make, have made, reproduce, have reproduced, package,
market, distribute, promote, use, and sell the Pocket-It Software through any
retail outlets throughout the United States of America during the term of this
Agreement. The parties understand, acknowledge, and agree that Warever may
reproduce, package, market, and sell, or contract with other individuals or
entities to reproduce, package, market, and sell, the Riptide Software
throughout the world during the term of this Agreement. The parties further
understand and acknowledge that Plus Mark and Snarr are in no way prohibited
from developing or having developed other software for use in connection with
the Pocket-It paper-based planning system, provided such
<PAGE>
software does not infringe any of Warever's rights with respect to the Pocket-It
Software.
4. Customer Registration and Support. For all Pocket-It Software sold
pursuant to this Agreement, Plus Mark shall be responsible for inserting
customer registration cards in each package for the purpose of capturing the
names, addresses, telephone numbers, e-mail addresses, and other information to
identify each customer that purchases the Pocket-It Software. The registration
card is to be mailed by the Customer to Warever Corporation's corporate address
provided. Warever shall then be responsible to register all the customers who
send in a registration card or register by electronic means, and provide them
with appropriate and reasonable product support. The parties acknowledge and
agree that Plus Mark and Warever jointly own all right, title, and interest in
and to the customer information. One of the primary, but not exclusive, purposes
for which Warever is to use the customer information is to ascertain feature
preferences by the customers. Such customer feature preferences will be
considered by Warever for implementation in future version releases of the
Pocket-It Software.
5. Royalty Payments. As consideration therefor, Plus Mark hereby agrees to
pay Warever a royalty fee of Five and 00/100 Dollars ($5.00) for each individual
Pocket-it Software program (unit) sold by a retail outlet throughout the United
States of America during the term of this agreement and for which PlusMark is
paid by the retailer, less all returns. Plus Mark shall send (by United States
mail) to Warever within thirty (30) days following the end of each month a
report for the previous month detailing all sales of the Pocket-It Software by
the retail outlets, which said report shall include information concerning: (a)
the name, address, and telephone number of each retail outlet; (b) the dates and
number of the Pocket-It Software programs (units) sold by each retail outlet;
and (c) the appropriate royalty fee payment.
6. Inspection and Auditing. PlusMark shall keep and maintain complete and
accurate records of the transactions underlying the reports to be furnished
hereunder. All books of accounts and records shall be kept available for at
least two (2) years from the date of the report to which they relate. Warever
may, at Warever's expense and on ninety (90) days' advance written notice to
PlusMark, conduct an annual audit of PlusMark's books of accounts and records
relating to the reports to be flirnished hereunder. Such audit shall be
conducted during regular business hours at a mutually agreeable time and place
and shall not materially interfere with the conduct of PlusMark's business.
7. License. Subject to the terms and conditions herein set forth, Warever
hereby grants to Plus Mark an exclusive, non-transferable License to use the
Pocket-It Software solely for the purposes set forth in Sections 3 and 4 above.
This License shall become effective upon the date of this Agreement, and shall
continue throughout the term of this Agreement. This License shall terminate
upon the termination of this Agreement. The termination of the License shall in
no way restrict the right of PlusMark and/or resellers to sell, advertise, and
promote those individual Pocket-It Software programs which were produced during
the term of this Agreement, so long as Warever continues to be compensated for
the products sold according to the terms of this Agreement. Warever warrants and
represents that it (1) has authority in all respects to enter this Agreement;
(2) holds all such rights, title, and interest in the Pocket-It Software as
required to permit Warever to enter into this Agreement; and (3) that the
obligations and rights herein granted shall be binding upon its successors and
assigns.
8. Ownership of the Pocket-It Software. The Pocket-It Software shall be the
sole and exclusive property of Warever and shall not be reproduced, marketed,
distributed, sold, licensed, used, revealed, disclosed, or communicated,
directly or indirectly, by Plus Mark to any person or entity whatsoever other
<PAGE>
than pursuant to the License and for the purposes specifically set forth herein.
Plus Mark acknowledges Warever's ownership, right, title, and interest in the
Pocket-It Software, and of the copyrights, trademarks, and patents thereto and
in any and all derivative works therefrom. Plus Mark further acknowledges that
it does not acquire any rights of ownership in the Pocket-It Software by reason
of performing its duties hereunder and/or providing certain contributions in the
development of the Pocket-It Software.
9. Discoveries and Improvements. Warever shall own those modifications,
improvements and developments to the Pocket4t Software made by Warever
independently of PlusMark during the term of this Agreement and PlusMark shall
own those modifications, improvements and developments to the Pocket-It Software
made by PlusMark independently of Warever during the term of this Agreement. The
parties shall jointly own all jointly developed modifications, improvements and
developments made during the term of this Agreement. Neither party shall
preclude the other from using any independent or joint developments as long as
such party continues to distribute, promote or sell the Pocket-It Software.
10. Copying Restrictions and Requirements. Plus Mark agrees that on each
copy of the Pocket-It Software it shall properly reproduce all notices of
Warever's patent, copyright, trademark, or trade secret rights as provided by
Warever. Plus Mark also agrees that on each copy of the Pocket-It Software it
shall property reproduce Warever's logo, design style, and layout as provided by
Warever. Furthermore, Plus Mark shall also include in each package (unit) of the
Pocket-It Software program a shrinkwrap license agreement to be provided by
Warever. Nothing in section 10 shall restrict PlusMark from reproducing on
copies of the Pocket-It Software any Pocket-It patent, copyright, trademark
rights, logo, design style and layout, or any other patent, copyright, trademark
rights, logo, design style and layout, in the manner and style as PlusMark sees
fit.
11. Indemnification.
A. By Warever. Warever hereby agrees to indemnify, defend, and
hold harmless PlusMark, its subsidiaries, affiliates, and their respective
officers, directors, employees, and agents, from and against all claims, losses,
damages, expenses, obligations, penalties, demands, suits, procedures,
assessments, judgments, costs and liabilities (including the reasonable costs of
collection, investigation, attorney's fees and other reasonable costs of
defense) arising out of or resulting from: (1) any breach or alleged breach of
any warranty or representation; (2) the authorized use by PlusMark of the
Poeket-It Software; (3) any claims of infringement, including all copyright,
trademark, patents, or other intellectual property rights associated with the
Pocket-It Software (except claims based on the intellectual property rights
listed in Schedule A), or on the negligence or intentional misconduct of
PlusMark; or (4) Warever's performance of its obligations under this Agreement.
B. By PlusMark. PlusMark hereby agrees to indemnify, defend and
hold harmless Warever, its subsidiaries, affiliates, and their respective
officers, directors, employees and agents, from and against all claims, losses,
damages, expenses, obligations, penalties, demands, suits, procedures,
assessments, judgments, costs and liabilities (including the reasonable costs of
collection, investigation, attorney's fees and other reasonable costs of
defense) arising out of or resulting from: (1) any breach or alleged breach of
any warranty or representation; (2) the authorized use by PlusMark of the
Pocket-It Software: (3) PlusMark's performance of its obligations under this
Agreement.
<PAGE>
C. General. The parties agree to provide prompt written
notification of any claim requiring indemnification, and agree to reasonably
cooperate in the defense of any such claim. The party obligated to provide
indemnification may do so with attorneys of its own choosing, and shall have
authority to settle or otherwise dispose of such claim. The provisions of this
Section 11 shall survive the termination or expiration of this Agreement.
12. Independent Contractor Status. It is understood and agreed that the
parties are independent contractors and not officers, employees, partners,
agents, or affiliates of the other party or its customers and clients, and the
parties agree not to make any representations to the contrary. Any conduct in
which either party engages in connection with or in the performance of this
Agreement shall be solely in its capacity as an independent contractor, and
nothing in this Agreement shall be construed to the contrary. Each party agrees,
that as an independent contractor, it does not have authority to sign contracts,
notes, or obligations, or to make, purchase, acquire, or dispose of any property
for or on behalf of the other or any of its customers and clients, and shall
only have authority to perform those services specifically described herein.
Nothing in this Agreement shall be construed as creating any partnership, joint
venture, or other joint arrangement. Each party is solely and completely liable
for all labor and direct expenses in connection with any of its obligations to
be performed hereunder.
13. Confidential Information
A. Warever Confidential Information. For the purposes of this
Agreement, "Warever Confidential Information" shall mean all information,
without limitation, pertaining to Warever's trade secrets, financial and other
business data, technical information, and development of the Pocket-It Software,
including, but not limited to, drawings, tools, models, written technical
information, materials, data, know-how, source code, and oral communications,
provided that such information has been adequately identified as proprietary or
confidential or could be reasonably considered to be proprietary or
confidential. Any written or pictorial embodiments of the Warever Confidential
Information provided by Warever to PlusMark in accordance with this Agreement
are the property of Warever and shall be returned to Warever upon termination of
this Agreement.
B. PlusMark Confidential Information. For the purposes of this
Agreement, PlusMark Confidential Information shall include, without limitation,
reports, trade secrets, technical, financial, and other business data and
documentation, and all information pertaining to PlusMark's manufacture,
production and marketing of the Pocket-It Software and the Pocket-It and
Pocket-It paper-based planning systems, including but not limited to, drawings,
tools, models, written technical information, materials, data, know-how, and
oral communications, provided that such information has been adequately
identified as proprietary or confidential or could be reasonably considered to
be proprietary or confidential, including all written and oral information
already received by Warever from PlusMark prior to the execution of this
Agreement, and including the terms and existence of this Agreement. Any written
or pictorial embodiments of the PlusMark Confidential Information provided by
PlusMark to Warever in accordance with this Agreement are the property of
PlusMark and shall be returned to PlusMark upon terinination of this Agreement.
C. Exclusions The parties agree that neither the Warever
Confidential Information nor the PlusMark Confidential Information shall include
any information that:
<PAGE>
1. is made public by the disclosing party;
2. is or hereafter becomes part of the public domain
through no wrongful act, fault or negligence on the part of
the receiving party or parties;
3. the receiving party or parties can reasonably
demonstrate is already in the possession of such receiving
party or parties and not subject to an existing agreement of
confidentiality;
4. is received from a third party without restriction
and without breach of this Agreement;
5. was independently developed by the receiving party or
parties as evidenced by its/their records; or
6. the receiving party or parties are required to
disclose pursuant to a valid order of a court or other
governmental body; provided however, that the recipient of the
confidential information shall first have given notice to the
disclosing party or parties and shall give the disclosing
party or parties a reasonable opportunity to interpose an
objection or obtain a protective order requiring that the
confidential information so disclosed be used only for the
purposes for which the order was issued.
D. Survival. The parties further agree, for a period of three (3)
years following the termination of this Agreement, not to disclose Confidential
Information of the other party to any third party, except as provided in this
Agreement, unless specifically authorized by the other party in writing. The
provisions of this section 13 will survive the termination or expiration of this
Agreement.
E. Covenant Not to Compete. Plus Mark covenants and agrees that
it shall not at any time during the term of this Agreement, and for a period of
one (1) year after the termination of this Agreement (except termination by
PlusMark pursuant to Section 14B (1)), engage in any business that develops
and/or markets a product for sale to retail outlets in the United States of
America that is similar to and/or in competition with the Pocket-It Software, or
solicit or influence (or attempt to solicit or influence) any of the suppliers,
customers, employees, or other clients of Warever to terminate their dealings or
employment with Warever to work for PlusMark. The parties understand and
acknowledge that this Section 13E applies only to PlusMark and does not bind or
purport to obligate American Greetings Corporation or any of its subsidiaries,
divisions, or affiliates other than PlusMark.
14. Default and Remedies.
A. Default. The occurrence of any of the following shall
constitute a default and breach of this Agreement:
1. Failure to observe or perform any of the parties'
respective covenants, agreements, or obligations
hereunder; or
<PAGE>
2. The filing of a voluntary or involuntary petition by
or against either party under any law for the purpose
of adjudicating such party bankrupt; or for extending
time for payment, adjustment, or satisfaction of such
party's liabilities; or for reorganization,
dissolution, or arrangement on account of or to
prevent proceedings, and all consequent orders,
adjudication, custodies, and supervision are not
dismissed, vacated, or otherwise permanently stayed
or terminated within sixty (60) days after the
assignment, filing, or other initial event.
B. Remedies. If any material breach occurs, the non-breaching
party has the following remedies in addition to all other rights and remedies
provided by law or equity, to which the non-breaching party may resort
cumulatively or in the alternative:
1. The non-breaching party may, at its election,
terminate this Agreement by giving the breaching
party notice of termination pursuant to the
provisions herein. On the giving of notice, all the
breaching party's rights in the Agreement shall
immediately terminate.
2. The rights and remedies of any of the parties hereto
shall not be mutually exclusive and the election of
one remedy for any one item shall not foreclose or
prevent an election of any other remedy for another
item, or for the same item at a later time. In
general, the respective rights and obligations
hereunder shall be enforceable by specific
performance, injunction, or other equitable remedy,
but nothing herein contained is intended to or shall
limit or affect any rights at law or by statute or
otherwise of any party aggrieved as against the other
party for a breach or threatened breach of any
provision hereof, it being the intention of this
Section to make clear the agreement of the parties
that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as
well as at law or otherwise.
3. The parties specifically agree that any breach of
Section 13 of this Agreement by one party will cause
immediate and irreparable damage and injury to the
other, and confirm that damages at law may be an
inadequate remedy for a breach or threatened breach
of such provisions. In the event of such breach, the
nonbreaching party shall be entitled by right to an
injunction (without the necessity of posting any bond
in connection therewith) restraining the breaching
party from violating any of said provisions.
15. Marketing Requirements. Except as set forth in Section 17B of this
Agreement, Plus Mark hereby agrees in good faith to reasonably and actively
market the Pocket-It Software to the various American Greeting retail outlets
throughout the United States of America and to the end user/customer.
16. Term of Agreement. Subject to the provisions for termination contained
herein, this Agreement and the License granted hereunder shall commence on the
effective date hereof and shall continue for a period of two (2) years from the
delivery date (on or before April 19, 1999) of the Pocket-It Software from
Warever to Plus Mark. Following the expiration of the said two (2) year period,
this Agreement and the License granted hereunder shall continue for an
indefinite period of time until terminated as provided in Section 17 below.
<PAGE>
17. Termination of Agreement.
A. By Either Party. In addition to any other provisions for
termination contained herein, after the initial two (2) term hereof as set forth
in Section 16 above, either party may terminate this Agreement at any time and
for any cause by giving the other party at least sixty (60) days prior written
notice in accordance with the notice provisions set forth herein.
B. By Plus Mark for Discontinuance of Pocket-It Business.
If PlusMark discontinues selling the Pocket-It paper-based planning system at
any time with or without cause in PlusMark's sole discretion, then this
Agreement shall terminate on thirty (30) days' advance written notice of such
discontinuation to Warever.
18. General Provisions.
A. Severability. In the event that any condition, covenant, or
other provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement, and shall in no way affect any other covenant or condition
herein contained. If such condition, covenant, or other provision shall be
deemed invalid due to its scope or breadth, such provision shall be deemed valid
to the extent of the scope or breadth permitted by law.
B. Entire Agreement. This Agreement sets forth the entire
agreement between the parties and supersedes all prior agreements, whether
written or oral. No promise, representation, warranty, or covenant not included
in this Agreement has been or is relied upon by the parties to this Agreement.
C. Covenants and Conditions. Each provision of this Agreement
performable by either party shall be deemed to be both a covenant and a
condition.
D. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, personal representatives,
successors, legal representatives and assigns; provided that this provision
shall not be construed as permitting assignment, substitution, delegation, or
other transfer of rights or obligations by each party except with the prior
written consent of the other party, which consent shall not be unreasonably
withheld.
E. Headings. The headings to the various Sections and Paragraphs
of this Agreement are for convenience and ease of reference only and do not
define, limit, augment, or describe the scope, content, or intent of this
Agreement or any part or parts of this Agreement.
<PAGE>
F. Notices. All notices given under any of the provisions of this
Agreement must be in writing and shall be deemed to have been given either: (a)
when delivered in person to the recipient named below; or (b) upon deposit in
United States mail, either registered or certified, return receipt requested,
postage prepaid, addressed to the party or person intended as follows:
"Warever" WAREVER, INC.
Craig R. Hendricks, President
112 West Business Park Drive
Draper, Utah 84020
1-800-766-7229
"Plus Mark" PLUS MARK, INC.
An American Greetings Company
Kurt A. Spitler, Vice President of
Sales & Marketing
One American Road
Cleveland, Ohio 44144-2398
1-800-321-3040
with a copy to
AMERICAN GREETINGS CORPORATION
One American Road
Cleveland, OH 44144
Attention: General Counsel
"Snarr" SNARR AND DYER LICENSING, LLC,
4728 Dearcreek Road
Salt Lake City, UT 84124
Either party may, by notice given at any time or from time to time,
require subsequent notices to be given to another individual person, whether a
party, officer, or representative, or to a different address, or both. Notices
given before actual receipt of notice of change shall not be invalidated by the
change.
G. Time. Time is of the essence of each term, provision,
condition, and covenant of this agreement.
H. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
I. Gender and Number. The singular number include the plural
whenever the context so indicates. The neuter gender includes the feminine and
masculine, the masculine includes the feminine and neuter, and the feminine
includes the masculine and neuter, and each includes corporation, partnership,
limited liability company, or other legal entity when the context so requires.
The word "person" means person or persons or other entity or entities or any
combination of persons and entities.
J. Governing Law, Dispute Resolution, Limitation on Damages.
The validity,
<PAGE>
interpretation, and performance of this Agreement will be determined in
accordance with the laws of the State of Ohio without regard to conflict of laws
rules. The parties will attempt to settle all disputes amicably within 30 days
of receipt of written notice of a dispute through non-binding mediation.
However, if they are unsuccessful, any dispute arising out of or relating to
this Agreement (other than the right to secure injunctive relief) shall be
settled by binding arbitration in Cleveland under Ohio law. Such arbitration
shall be administered by the American Arbitration Association under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. In no event
shall either party be liable for any indirect, special, incidental, or
consequential damages (whether defined as such or provided for under applicable
case law, statute, or otherwise) in any way connected with this Agreement, even
if the party has advance notice of the possibility of such damages.
K. Waiver. Unless otherwise indicated herein, failure by any
party to insist upon the strict performance of any covenant, duty, agreement, or
condition of this Agreement, or to exercise any right or remedy consequent upon
a breach thereof, shall not constitute a waiver of any such breach or any other
covenant, agreement, term, or condition. Any party, by notice delivered in the
manner provided in this Agreement, may, but shall be under no obligation to
waive any of its rights or any conditions to its obligation hereunder, or any
duty, obligation, or covenant of any other party. No waiver shall affect or
alter the remainder of this Agreement, but each and every other covenant,
agreement, term, and condition hereof shall continue in frill force and effect
with respect to any other then existing or subsequently occurring breach. To be
effective, any waiver must be signed by both parties hereto.
L. Modification and Amendment. This Agreement may be amended or
modified only by an instrument in writing signed by all the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the date and year set forth above.
"WAREVER"
WAREVER, INC.
A Utah Corporation
By: /s/ Craig R. Hendricks
-----------------------------
CRAIG R. HENDRICKS, President
"PLUS MARK"
An Ohio Corporation, a wholly owned subsidiary
of American Greetings Company, an Ohio Corporation
By: /s/ Kurt A. Spitler
----------------------------------------------------
KURT A. SPITLER, Vice President of Sales & Marketing
<PAGE>
SNARR AND DYER LICENSING, LLC
A Utah Limited Liability Company
By: /s/ Doug Snarr
--------------------------
DOUG SNARR, President
<PAGE>
Schedule A
All Trademarks, Trade Names, Patents, Copyrights, Tradedress, and other
intellectual property related to the Pocket-It paper-based planning system and
the Pocket-It product line.
LIST OF SUBSIDIARIES
OWNERSHIP
GOVERNING INTEREST OF THE
NAME JURISDICTION COMPANY
Coaching Institute, Inc. Utah 85%
Warever Corp. Utah 100%
