U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
BUI, INC.
(Name of Small Business Issuer in its charter)
Delaware 87-0528557
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
66 E. Wadsworth Park Drive, Suite 101, Draper, Utah 84020
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (801) 523-8929
Securities to be registered under Section 12(b) of the Act:
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.0001
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TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
1. Description of Business 3
2. Management's Discussion and Analysis or Plan of Operations 8
3. Description of Properties 12
4. Security Ownership of Certain Beneficial Owners and Management 12
5. Directors, Executive Officers, Promoters and Control Persons 14
6. Executive Compensation 15
7. Certain Relationships and Related Transactions 17
8. Legal Proceedings 18
9. Market for Common Equity and Related Stockholder Matters 18
10. Recent Sales of Unregistered Securities 19
11. Description of Securities 20
12. Indemnification of Directors and Officers 22
13. Financial Statements 23
14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23
15. Financial Statements and Exhibits 23
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ITEM 1. DESCRIPTION OF BUSINESS
General
BUI, Inc., is a Delaware corporation engaged in the business
of selling to consumers and small businesses services and
products under the name "Buyers United." The marketing strategy
of Buyers United is based on a membership concept under which
members of Buyers United are entitled to receive the services and
products offered at lower prices than can be obtained elsewhere.
Buyers United uses the purchase power of its membership to
negotiate lower prices from producers and resellers of the
services and products. Lower pricing allows Buyers United to
attract and retain members, and makes it possible for Buyers
United to offer rebate incentive programs to its members for
referring to Buyers United new prospective members.
Buyers United focuses on providing services and products
that it believes are perceived by consumers and businesses as
essential or are compatible with their normal annual
expenditures. Buyers United is researching additional services
and products to offer its members.
Buyers United has over 9,000 members located in 48 states.
Its target market includes networking professionals, small
businesses, and middle-class families with an annual household
income between $36,000 and $80,000, as these are the most likely
to respond actively to the savings opportunity offered by Buyers
United. Members reside mostly in high population centers and
they tend to spend more than the average on long distance
services. Approximately one-third of the present membership
consists of small businesses and entrepreneurs who operate home-
based businesses.
Buyers United was formed as a Utah corporation under the
name "Linguistix, Inc.", in 1995 as a subsidiary of Twin Creek
Exploration Co., Inc. ("Twin Creek"). It received certain assets
of Twin Creek for its stock and was spun-off to the stockholders
of Twin Creek in connection with a business reorganization
between Twin Creek and an unrelated corporation. Efforts to
exploit the assets held by Buyers United after the spin-off were
unsuccessful, and the assets were sold or written off in 1997.
In November 1997, Buyers United acquired WealthNet Incorporated,
a Utah corporation. Buyers United adopted the name, "Buyers
United International, Inc.," and WealthNet changed its name to
"Buyers United, Inc." Since that acquisition, Buyers United has
pursued the business described herein, which was started with the
inception of WealthNet in January 1996. In March 1999, Buyers
United changed its corporate domicile from Utah to Delaware
through a merger with a Delaware corporation formed for that
purpose. In connection with the change in domicile, Buyers
United changed its name to BUI, Inc., and effected a 1-for-4
reverse split in the issued and outstanding common stock of
Buyers United.
Buyers United's offices are located at 66 E. Wadsworth Park
Drive, Suite 101, Draper, Utah 84020, where its telephone number
is (801) 523-8929.
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Marketing strategy
Selection of services and products
Buyers United intends to offer services and products that
are considered "essential"; part of the monthly or annual budget
of individuals, families, and small businesses. Buyers United
believes consumers prefer to save money where they spend it most;
on services and products they must consume or use each month and
year. By becoming a member, a consumer or small business simply
makes a choice on where to purchase essential services and
products, not on whether to spend money on items outside its
normal budget.
In selecting service and product providers, Buyers United
focuses on the quality of the service or product. It believes
that offering a service or product at a low cost, alone, is not
enough. The service or product must meet consumer expectations
of performance and quality. After locating a suitable service or
product, Buyers United negotiates for lower pricing based on the
purchase power of its members. The combination of good quality
and low cost will attract and retain members for Buyers United.
Since its inception in January 1996, Buyers United focused
on selling long distance service because consumers and businesses
use long distance every month and look for ways to save money on
this service. This focus has enabled Buyers United to build the
size of its membership base. Buyers United also provides
teleconferencing service and is in the process of establishing
local telephone service for its members in the Salt Lake City
metropolitan area. With the recent explosion in Internet
commerce, especially among small businesses, Buyers United is now
offering low cost Internet access to its members. In 1999,
Buyers United expanded its services and products to include
travel services, new and used car purchase services, food
coupons, entertainment coupons, prescription drugs, legal
services, financial planning, real estate and mortgage services,
and selected health services. By expanding its service and
product offerings, Buyers United believes that membership will be
attractive to a larger number of prospective members and existing
members will have added incentive for staying with Buyers United.
Member referral strategy
Management believes that member-generated, "word-of-mouth"
referral sales is a fast and cost-effective way for Buyers United
to increase its membership and its sales. It has focused on this
marketing approach since its inception.
Buyers United believes consumers are willing to share with
their personal acquaintances a satisfying and rewarding
experience with its services and products, and the recommendation
of a personal acquaintance is credible. As an inducement to
share this experience, Buyers United has adopted an incentive
program for members called "Piece of the Pie", which allows them
to benefit from identifying new prospective members for Buyers
United.
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Under the "Piece of the Pie" incentive program, a member
receives a rebate on services and products it purchases from
Buyers United. The amount of the rebate is based on the sales
volume of members referred to Buyers United by the member and new
members "down line" from members referred by the original member.
If a member's "down line" and the resulting sales volume grows
substantially, the rebate may equal or exceed the cost of
services and products purchased by the member. Excess rebates
can be applied to purchase future services and products or paid
to the member in cash, as the member elects.
A member is not required to refer any new members to Buyers
United in order to purchase services and products from Buyers
United on the same terms as all other members. The services and
products offered meet the needs of many members, who simply want
to save money on services and products. The "Piece of the Pie"
incentive program allows the entrepreneur-minded member to obtain
additional benefits through rebates.
Buyers United believes the "Piece of the Pie" incentive
program has the added value of creating member loyalty. Members
receiving rebates on services and products purchased from Buyers
United will be reluctant to give up those rebates by switching to
a different provider. The rebate benefit also makes it more
difficult for other service providers to compete with Buyers
United on the basis of price.
A member who refers a new prospective member does not make a
sale for Buyers United. All new members are signed by Buyers
United from the referrals it receives. Members are not
employees, independent contractors, or agents of Buyers United,
and have no authority to sign new members.
Member service
Buyers United maintains a staff of service representatives
for its members, which is designated as the "Legendary Member
Service" group. Management believes that member support and
assistance is important to growing and maintaining its member
base, because member service is an important part of the overall
consumer experience with the services and products offered by
Buyers United. Buyers United's goal is to exceed members'
service expectations, so that they remain with Buyers United and
are more willing to tell new prospective members of their
positive experiences.
Members are urged to contact Buyers United through its toll
free number with any questions or concerns. The Legendary Member
Service group addresses member questions and complaints, assists
members with the "Piece of the Pie" incentive program, provide
information on services and products, and works with members on
billing questions and timely payment.
Infomercial proposal
Buyers United is investigating the development of a one-half
hour television program, which it would broadcast to market the
benefits of membership. At present, Buyers United is
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negotiating production agreements for the infomercial with a view
to testing the program in the first quarter of 2000.
Services and products
Buyers United offers long distance phone service and related
products, including travel cards, pre-paid debit cards, 800/888
service, and teleconferencing. Long distance and related
services are provided by IXC Communications, Inc., a wholesale
long distance carrier based in Austin, Texas. Under its contract
with IXC, Buyers United is able to offer domestic long distance
service to its members at a rate of 7.9 cents per minute and
overseas long distance at discounted rates. The long distance
rate to Buyers United for domestic charges is fixed by agreement.
The long distance rate for overseas calls may be adjusted by IXC
on seven days advance notice to Buyers United. All long distance
charges are billed to Buyers United and due within 30 days.
Buyers United, in turn, bills its members for their long distance
calls. The contract is for a term of three years ending in April
2002. Buyers United is in the process of negotiating contracts
with other long distance service providers, which will enable
Buyers United to take advantage of least cost pricing for long
distance calls.
Management intends to initiate a plan to resell long
distance service that utilizes "voice-over-data" based on
Internet Protocol technology. It is expected the plan will be
rolled out in Utah during the later part of 1999, where a package
of in-state, out-of-state, and toll-free long distance will be
offered to members at a flat rate of just 5.9 cents per minute.
The final terms of the contract between Buyers United and the
provider of this service are yet to be finalized.
Buyers United launched an Internet service program in
January 1999. Internet services include unlimited local dial-up
access at approximately 2,100 locations across the country, free
filtering services, unlimited e-mail, web hosting for businesses,
and activity reporting. Management plans to add online billing
capability for bundled goods and services, discount consolidating
with existing web sites, and manufacturer-direct web commerce
opportunities. The Internet access program is provided by SISNA,
Inc., based in Salt Lake City, Utah, under a three-year contract
expiring in October 2001. The basic Internet service is offered
to members at $16.95 per month for unlimited access.
Buyers United offers travel services, new and used car
purchase services, food coupons, entertainment coupons,
prescription drugs, legal services, financial planning, real
estate and mortgage services, and selected health services
through United Buyers Advantage, Inc., of Coral Springs, Florida,
which is unrelated to Buyers United. United Buyers Advantage
obtains independent providers of services and products and
packages them for resale. These packages are offered to members
of Buyers United at different prices ranging from $ 49.95 to $
79.95 annually. Buyers United reports weekly to United Buyers
Advantage on the members participating in the program. The
agreement with United Buyers Advantage expires in January 2000.
Buyers United has no plans to acquire a long distance
network or establish its own infrastructure for other services
and products it offers. As a result, Buyers United depends on
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developing and maintaining relationships with third party
providers of the services and products it offers. Buyers United
relies on the purchasing power of its members to negotiate the
terms of its arrangements with providers. An additional benefit
to providers is that Buyers United handles all billing and
collection for the services and products purchased by its
members, so that the provider avoids this cost of business.
Buyers United believes that it is on good terms with its current
providers. In the event its relationship with a provider
terminates for any reason, management believes it could obtain
the same services or products from other providers on terms
similar to existing contracts.
Competition
The consumer buying organization industry is highly
competitive. Many of the competitors of Buyers United are
substantially larger with greater financial and other resources.
The U.S. long distance telecommunications industry is highly
competitive and significantly influenced by the marketing and
pricing practices of the major industry participants, AT&T, MCI,
Sprint and WorldCom. AT&T, MCI, Sprint and WorldCom are
significantly larger than Buyers United and have substantially
greater resources. Buyers United also competes with other
national and regional long distance carriers, which employ
various means to attract new subscribers, including television
and other advertising campaigns, telemarketing programs, network
marketing, cash payments and other incentives to new subscribers.
The ability of Buyers United to compete effectively will depend
on its ability to provide high quality services at competitive
prices.
Governmental Regulations
Buyers United's relationship marketing system may be
affected by government regulation, including, state regulation of
marketing practices and federal and state regulation of the offer
and sale of business franchises, business opportunities, and
securities. Although Buyers United believes that its
relationship marketing system is in compliance with all currently
applicable regulations, there can be no assurance that it will
remain in compliance in the future as a result of new
interpretations of existing regulations or adoption of new
regulations.
Long distance telecommunications carriers currently are
subject to extensive federal and state government regulation,
including, regulation of both domestic and international tariffs
for their services, and certification or registration
requirements. Buyers United is indirectly subject to these
regulations because it offers long distance service provided by
others. Of particular relevance to Buyers United is federal and
state regulation of "slamming", which is the practice of changing
long distance service of a consumer without proper authorization.
To avoid violation of regulations in this area, Buyers United is
required to obtain from its members written authorization to
change long distance service that meets certain requirements.
Buyers United believes it is in compliance with federal and state
regulation of changing long distance service.
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Employees
As of June 30, 1999, Buyers United employed a total of 25
persons, including four executives and 13 in member services and
marketing. None of the its employees is represented by a labor
union. Buyers United has experienced no work stoppages and
believes that its relations with its employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Overview
Buyers United is engaged in the business of selling to
consumers and small businesses services and products. The
marketing strategy of Buyers United is based on a membership
concept under which members of Buyers United are entitled to
receive the services and products offered at lower prices than
can be obtained elsewhere. Buyers United uses the purchase power
of its membership to negotiate lower prices from producers and
resellers of the services and products. Lower pricing allows
Buyers United to attract and retain members, and makes it
possible for Buyers United to offer rebate incentive programs to
its members for referring to Buyers United new prospective
members. Buyers United's goal is to build a national consumer
membership organization. Its strategy for achieving this goal is
to focus on its member referral and rebate program, expand
service and product offerings, and develop and promote an
infomercial to attract new members through television.
Buyers United focuses on providing services and products
that it believes are perceived by consumers and businesses as
essential or are compatible with their normal annual
expenditures. Since its inception in January 1996, Buyers United
focused on selling long distance service. This focus has enabled
Buyers United to build the size of its membership base. Buyers
United also provides teleconferencing service and is in the
process of establishing local telephone service for its members
in the Salt Lake City metropolitan area. With the recent
explosion in Internet commerce, especially among small
businesses, Buyers United is now offering low cost Internet
access to its members. In 1999, Buyers United expanded its
services and products to include travel services, new and used
car purchase services, food coupons, entertainment coupons,
prescription drugs, legal services, financial planning, real
estate and mortgage services, and selected health services. By
expanding its service and product offerings, Buyers United
believes that membership will be attractive to a larger number of
prospective members and existing members will have added
incentive for staying with Buyers United.
Buyers United has over 9,000 members located in 48 states.
Its target market includes networking professionals, small
businesses, and middle-class families with an annual household
income between $36,000 and $80,000, as these are the most likely
to respond actively to the savings opportunity offered by Buyers
United. Members reside mostly in high population centers and
they tend to spend more than the average on long distance
services. Approximately one-third of the present membership
consists of small businesses and entrepreneurs who operate home-
based businesses.
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Internal business development over the past two years has
resulted in substantial growth. Total revenues after cost of
revenues in 1998 were $946,411, as compared to $811,644 in 1997.
Total revenues after cost of services for the first three months
of 1999 were $418,271, as compared to $112,731 for the same
period in 1998.
Results of Operations
Three Months Ended March 31, 1999 and 1998
Revenues increased $928,097 or 236% to $1,321,733 for the
three months ended March 31, 1999, from $393,636 for the same
period in 1998. Cost of revenues increased from $280,905 in the
first quarter of 1998 to $903,463 in the first three onths of
1999. The increases in revenue and cost of revenues are
attributable to a change from a commission based agreement with
one supplier to purchasing wholesale from a new supplier and
reselling the services with better margins.
Operating expenses exclusive of cost of services were
$553,380 in the first quarter of 1999 as compared to $633,272 for
the first three months of 1998. This decrease in expenses is
attributable to reductions in work force, which Buyers United was
able to implement as a result of changing long distance providers
to a provider with better and more efficient service and the
development of more efficient internal systems for providing
customer service.
Loss from operations decreased $132,168 to a loss from
operations of $57,484 for the three months ended March 31, 1999,
compared to a loss from operations of $189,652 for the same
period in 1998. This substantial improvement is a result of
increased revenues in 1999 from Buyers United's growing
membership base with a decrease in its operating expenses before
cost of services for the periods.
Total other expense decreased from $189,652 in the first
quarter of 1998 to $57,484 for the same period in 1999. This
reduction is a result of a decrease in interest expense on debt
financing.
As a result of the above factors, net loss decreased from
$710,193 for the first three months of 1998 to $192,594 for the
three-month period ended March 31, 1999.
Years Ended December 31, 1998 and 1997
Revenue after cost of revenues increased $1,134,767 to
$1,946,411 for the year ended December 31, 1998, from $811,644
for the year ended December 31, 1997. Cost of revenues in 1997
were $51,108 as compared to $3,088,344 in 1998. The increases in
revenues and cost of revenues are attributable to a change from a
commission based agreement with one supplier to purchasing
wholesale from a new supplier and reselling the services with
better margins.
Operating expenses exclusive of cost of revenues were
$3,024,294 in 1998 as compared to $2,982,956 in 1997. In 1997
Buyers United established the basic operating systems and
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facilities for its business, which needed to be in place to
support future growth in membership. Consequently, membership
growth in 1998 and the resulting increase in revenues were
achieved without any meaningful increase in operating expenses.
Buyers United expects that its operating expenses exclusive of
cost of services as a percentage of revenues will continue to
decrease in 1999 as membership grows.
Loss from operations decreased $1,093,429 to a loss from
operations of $1,077,883 for the year ended December 31, 1998,
compared to a loss from operations of $2,171,312 for the year
ended December 31, 1997. This substantial improvement is a
result of increased revenues in 1998 from Buyers United's growing
membership base without an increase in its operating expenses
before cost of revenues from 1997 to 1998.
Total other expense decreased from $522,090 in 1997 to
$388,699 for 1998. This reduction is a result of a decrease in
interest expense on debt financing.
As a result of the above factors, net loss decreased from
$2,693,402 for the the 12-month period ended December 31, 1997,
to $1,466,582 for the 12-month period ended December 31, 1998.
Operations were not significantly impacted by inflation
during the years ended December 31, 1998 and 1997, and it is not
anticipated that inflation will have any significant impact on
results of operations for at least the next year.
Liquidity and Capital Resources
Net cash used in operating activities was $155,843 during
the three-month period ended March 31, 1999. This is primarily
due to a net loss of $192,594, during the period. It is
anticipated net cash used in operating activities will improve in
1999, as revenues increase from the addition of new members. In
the first quarter of 1998 net cash used in operating activities
was $589,873 primarily due a net loss of $710,193.
Total cash generated from financing activities was $186,108
for the three-month period ended March 31, 1999, compared to
$591,668 generated from financing activities in the first quarter
of 1998. Cash from financing activities in the first quarter of
1999 and 1998 resulted primarily from sales of stock for cash.
Net cash used in operating activities was $1,275,988 in
1998. This is primarily due to a net loss of $1,466,582 and a
substantial increase in accounts receivable to $617,421 resulting
from the commencement of billing and collection form members by
Buyers United at the beginning of 1998, which were offset by
issuance of common stock to pay for services and credit
extensions in the amount of $304,774, and increases in accounts
payable and accrued liabilities to a total of $519,153. It is
anticipated net cash used in operating activities will improve in
1999, as revenues increase from the addition of new members. In
1997 net cash used in operating activities was $1,293,199
primarily due a net loss of $2,693,402.
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Total cash generated from financing activities was
$1,327,213 for 1998, compared to $1,162,635 generated from
financing activities in fiscal 1997. Cash from financing
activities in 1998 was primarily related to the net proceeds from
sales of stock for cash. Cash from financing activities in 1997
was primarily related to debt financing in the amount of $793,000
and sales of stock for cash in the amount of $514,825.
At March 31, 1999, Buyers United had a working capital
deficit of $894,065, and at December 31, 1998, it had a working
capital deficit of $811,850. In July 1999, the Company completed
an equity financing resulting in net proceeds of $3,480,000,
which will be used for marketing and working capital. Management
anticipates that working capital will continue to improve in 1999
if the Company's performance continues at present levels.
Management estimates that cash flow from operations in 1999 as
well as funds generated by the recent financing will be
sufficient for meeting payment obligations and working capital
needs for the next 12 months.
Year 2000 Compliance
Buyers United's internal computer information system is Year
2000 compliant, since its database does not store dates as plain
text. The dates are converted into an internal date format that
does not rely on the year to determine the century. Any new
software purchases will conform to the same type of internal date
storage specifications, which should eliminate any internal Year
2000 issues. As Buyers United has determined it has no internal
Year 2000 issues, it has not developed a contingency plan.
Year 2000 issues and any potential business interruptions,
costs, damages or losses related thereto are primarily dependent
upon the Year 2000 compliance of third parties. Buyers United's
suppliers that provide mission-critical services are primarily
large companies, such as local and long distance telephone
service providers. Buyers United has no reason to believe that
these suppliers will not be Year 2000 compliant. However, Buyers
United is in the process of reviewing its third party
relationships in order to assess and address Year 2000 issues
with respect to these third parties. Buyers United has no
contingency plan should any significant problems arise with its
suppliers.
The costs associated with Year 2000 compliance have been
nominal and Buyers United believes that the remaining costs will
be minimal and will not have a material adverse effect on its
financial condition or results of operations.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1985
provides a safe harbor for forward-looking statements made by
Buyers United. All statements, other than statements of
historical fact, which address activities, actions, goals,
prospects, or new developments that Buyers United expects or
anticipates will or may occur in the future, including such
things as expansion and growth of its operations and other such
matters are forward-looking statements. Any one or a combination
of factors could materially affect Buyers United's operations and
financial
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condition. These factors include competitive
pressures, success or failure of marketing programs, changes in
pricing and availability of services and products offered to
members, legal and regulatory initiatives affecting member
marketing and rebate programs or long distance service, and
conditions in the capital markets. Forward-looking statements
made by Buyers United are based on knowledge of its business and
the environment in which it operates as of the date of this
report. Because of the factors listed above, as well as other
factors beyond its control, actual results may differ from those
in the forward-looking statements.
ITEM 3. DESCRIPTION OF PROPERTIES
Buyers United leases its executive offices at a single
location in Draper, Utah (a suburb of Salt Lake City). The
offices consist of approximately 2,600 square feet. The current
monthly lease rate is approximately $3,500, and increases
annually at the rate of 3.5 percent. The lease for this facility
expires on December 31, 2003, but Buyers United has an option to
renew the lease for an additional five years. Management
believes that the office space is adequate for Buyers United's
anticipated needs for at least the next 3 months.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of July 28, 1999, the
number and percentage of the outstanding shares of common stock
which, according to the information supplied to Buyers United,
were beneficially owned by (i) each person who is currently a
director, (ii) each executive officer, (iii) all current
directors and executive officers as a group and (iv) each person
who, to the knowledge of Buyers United, is the beneficial owner
of more than 5% of the outstanding common stock. The only
beneficial owners of more than 5% of the outstanding common stock
of which Buyers United is aware are also directors or officers.
Except as otherwise indicated, the persons named in the table
have sole voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
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Amount and Nature of
Beneficial Ownership
Common Preferred Percent
Name and Address Shares Options(1) of Class(2)
Rod Smith (3) 248,151 0 391,250 18.8
66 E. Wadsworth Park Drive
Draper, Utah 84020
Theodore Stern 0 80,000 0 2.3
2210 One PPG Place
Pittsburgh, PA 15222
Gary Smith (3) 259,567 0 183,122 13.8
66 E. Wadsworth Park Drive
Draper, Utah 84020
Edward Dallin Bagley 297,912 20,000 0 10.5
2350 Oakhill Drive
Salt Lake City, Utah 84121
G. Douglas Smith (3) 61,184 0 238,913 9.2
66 E. Wadsworth Park Drive
Draper, Utah 84020
Paul Jarman 61,184 0 216,798 8.6
66 E. Wadsworth Park Drive
Draper, Utah 84020
All Executive officers and 927,998 100,000 1,030,083 49.6
Directors as a Group
(6 persons)
________________________________
(1) These figures represent options that are vested or will vest
within 60 days from the date as of which information is
presented in the table.
(2) These figures represent the percentage of ownership of the
named individuals assuming each of them alone has exercised
his options or conversion rights, and percentage ownership
of all officers and directors as a group assuming all
purchase and conversion rights held by such individuals are
exercised.
(3) Gary Smith is the father of Rod Smith and G. Douglas Smith.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
Directors and Officers
The following table sets forth the names, ages, and
positions with Buyers United for each of the directors and
officers.
Name Age Positions Since
Rod Smith 43 Chairman of the Board, President 1996
and Chief Executive Officer
Theodore Stern 69 Director 1999
Gary Smith 61 Director 1999
Edward Dallin Bagley 60 Director 1999
G. Douglas Smith 30 Executive Vice President of Marketing 1997
Paul Jarman 30 Treasurer and Vice President of Sales 1997
All directors hold office until the next annual meeting of
stockholders and until their successors are elected and qualify.
Officers serve at the discretion of the Board of Directors.
The following is information on the business experience of
each director and officer.
Rod Smith founded the predecessor of Buyers United in
January 1996 and has served as the President, Chief Executive
Officer, and Chairman of the Board since that time. From January
1993 to November 1995, Mr. Smith was an independent distributor
of health and beauty products provided by NuSkin International, a
consumer products network marketing organization.
Theodore Stern retired as senior executive vice president
and member of the board of directors of Westinghouse Electric
Corporation at the end of 1992, after 34 years of service in a
variety of positions with that company. After retiring form
Westinghouse Electric, Mr. Stern served as vice chairman of the
board of directors of Superconductivity, Inc., of Madison,
Wisconsin, a small technology company, until it was acquired in
April 1997. Mr. Stern currently is a member of the board of
directors of Copperweld Corporation of Pittsburgh, Pennsylvania,
a privately-owned steel and cable manufacturer, and Northern
Power Systems of Waitsfield, Vermont, a manufacturer of renewable
generation systems. Mr. Stern is also self-employed as a
consultant to manufacturing companies.
Gary Smith was the founder, majority owner and former
President of HealthRider, Inc. From 1991 until sale of the
business in 1997, he managed and directed every phase of business
14
<PAGE>
and sales operations at HealthRider. From 1997 to the present,
Mr. Smith has been self-employed as a business consultant and
advisor.
Edward Dallin Bagley has been self-employed as an investment
and financial consultant for the past five years. He is
currently a director of Tunex International, Inc., Gentner
Communications, National Environmental Services Corp., and
National Financial Corp.
G. Douglas Smith joined Buyers United in April 1997, and is
responsible for all aspects of marketing, including brand
strategy, advertising, promotions, corporate communication, and
product development. For six years prior to April 1997, Mr.
Smith served first as the Director of Media and then Senior Vice
President of HealthRider, Inc., an exercise equipment company
based in Salt Lake City, Utah. At HealthRider Mr. Smith was
responsible for infomercial marketing, which was the primary
sales strategy for HealthRider products.
Paul Jarman became employed by Buyers United in April 1997,
and is responsible for all facets of operations. He also comes
to Buyers United from HealthRider, where he was employed from
March 1994 to August 1996, first as Texas Regional Manager for 15
retail locations, then Western Area Manager in charge of 95
retail locations, and finally Acting Director of Retail
Operations managing 250 retail locations. In August 1996, Mr.
Jarman moved to HealthRider's marketing department as the
Director of New Product Development, where he served until April
1997.
ITEM 6. EXECUTIVE COMPENSATION
Annual Compensation
The following table sets forth certain information regarding
the annual and long-term compensation for services in all
capacities to Buyers United for the prior fiscal years ended
December 31, 1998, 1997, and 1996, of those persons who were
either (i) the chief executive officer during the last completed
fiscal year or (ii) one of the other four most highly compensated
executive officers of the end of the last completed fiscal year
whose annual salary and bonuses exceeded $100,000 (collectively,
the "Named Executive Officers").
Name and Principal Long Term All Other
Position Annual Compensation Compensation Compensation
___________________ ___________ ____________
Options/
Year Salary ($) SARs (#)
Rod Smith, Chairman 1998 69,829 141,250 7,468
President, Chief 1997 75,050 250,000 0
Executive Officer 1996 0 0 0
15
<PAGE>
Employment and Other Arrangements
Rod Smith, G. Douglas Smith, and Paul Jarman each receive a
salary of $6,500 per month for their respective services to
Buyers United as executive officers. Buyers United does not have
a written employment agreement with any of its executive
officers. All executive officers participate in insurance and
benefit programs established by Buyers United for its full time
employees.
In January 1998, Buyers United entered into a consulting
agreement with Gary Smith under which he agreed to commit a
substantial portion of his time and effort to the development of
retail sales programs for Buyers United's products and services.
Mr. Smith received $5,000 per month under the agreement until
June 1999, when it terminated.
Stock Options
The following table sets forth certain information with
respect to grants of stock options during 1998 and the first six
months of 1999 to the Named Executive Officers.
% of Total
Number of Options/SARs
Securities Granted to Exercise or
Name and Principal Underlying Employees in Base Price Expiration
Principal Options Granted Fiscal Year ($/Sh) Date
Rod Smith, Chairman 291,250 43.7 2.00 March 2008
President, Chief 100,000 15.0 2.00 June 2009
Executive Officer
The following table sets forth certain information with
respect to unexercised options held by the Named Executive
Officers as of July 2, 1999. No outstanding options held by the
Named Executive Officers were exercised in 1998 or through July
2, 1999.
Number of Securities Value of Unexercised
Name and Principal Underlying Unexercised Options In-the-Money Options
Position At July 2, 1999 ($) at July 2, 1999 (#) (1)
Exercisable/Unexercisable Exercisable/Unexercisable
Rod Smith, Chairman 391,250/ -0- $1,173,750/ -0-
President, Chief
Executive Officer
___________________________________________
(1) This value is determined on the basis of the difference
between the fair market value of the securities underlying the
options and the exercise price at July 2, 1999. The fair market
value of the Company's common stock at July 2, 1999, is
determined by the last sale price on that date, which was $5.00
per share.
16
<PAGE>
Description of Long Term Stock Incentive Plan
The purpose of the Long Term Stock Incentive Plan is to
provide directors, officers, employees, and consultants with
additional incentives by increasing their ownership interests in
Buyers United. Directors, officers, and other employees of
Buyers United and its subsidiaries are eligible to participate in
the plan. In addition, awards may be granted to consultants
providing valuable services to Buyers United. As of June 30,
1999, Buyers United and its affiliates employed approximately 25
individuals and retained approximately two consultants who are
eligible to participate in the plan. A committee of the board or
the entire board grants awards under the plan. Awards may
include incentive stock options, non-qualified stock options,
stock appreciation rights, stock units, restricted stock,
restricted stock units, performance shares, performance units, or
cash awards.
The committee or the Board of Directors has discretion to
determine the terms of a plan award, including the type of award,
number of shares or units covered by the award, option price,
term, vesting schedule, and post-termination exercise period or
payment. Notwithstanding this discretion: (i) the number of
shares subject to an award granted to any individual in any
calendar year may not exceed 30,000 shares; (ii) the option price
per share of common stock may not be less than 100 percent of the
fair market value of such share at the time of grant or less than
110% of the fair market value of such shares if the option is an
incentive stock option granted to a stockholder owning more than
10% of the combined voting power of all classes of the stock of
Buyers United (a "10% stockholder"); and (iii) the term of any
incentive stock option may not exceed 10 years, or five years if
the option is granted to a 10% stockholder. No outstanding stock
option or other award under the plan has been granted.
A maximum of 600,000 shares of common stock that may be
subject to outstanding awards, determined immediately after the
grant of any award under the plan. Shares of common stock which
are attributable to awards which have expired, terminated, or
been canceled or forfeited during any calendar year are available
for issuance or use in connection with future awards.
The plan was effective March 11, 1999, and is not limited in
duration. No incentive stock option may be granted more than 10
years after the effective date. The Plan may be amended by the
Board of Directors without the consent of the stockholders,
except that stockholder approval is required for any amendment
that materially increases the aggregate number of shares of stock
that may be issued under the plan or materially modifies the
requirements as to eligibility for participation in the plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996 and 1997, Gary Smith advanced $1,100,000 to Buyers
United for working capital and other corporate purposes. Under
an informal agreement with Buyers United, the advances by Gary
Smith accrued interest at the rate of 20% per annum and were
unsecured. In consideration for making these loans and for other
services provided, Buyers United issued to Gary Smith 259,567
shares of the common stock, and granted to him options to
purchase 55,622
17
<PAGE>
shares of common stock at a price of $2.024 per
share, and additional options to purchase 185,405 shares at an
exercise price of $5.392 per share. Of the options exercisable
at $5.392, Gary Smith subsequently conveyed options for 27,811
shares to G. Douglas Smith and 18,541 shares to Paul Jarman as
inducements for them to accept employment with Buyers United.
In October 1997, Gary Smith and Rod Smith entered into a
Restructuring Agreement with Buyers United, which provides for
formalization of the debt obligation of Buyers United to Gary
Smith and the return of shares of common stock for cancellation.
Buyers United issued to Gary Smith an unsecured promissory note
in the principal amount of $1,300,000 (which included $200,000
borrowed by Rod Smith from Gary Smith and loaned to Buyers
United), bearing interest at 20% per annum. Principal was
payable in three installments during 1997 and 1998. Under the
Restructuring Agreement, Gary Smith returned to Buyers United for
cancellation 74,162 shares of common stock, and Rod Smith
returned to Buyers United for cancellation 37,081 shares of
common stock.. Buyers United was unable to meet the interest and
principal payments under the note to Gary Smith, which resulted
in a further restructuring of the obligation in January 1998. Of
the $1,300,000 loaned to Buyers United, $1,000,000 was provided
to Gary Smith by a third party. Under the new restructuring,
Gary Smith assigned a portion of the repayment obligation to the
third party, which is represented by a note payable by the
Company in the principal amount of $1,000,000 bearing interest at
10 percent per annum with interest payable monthly in arrears
commencing February 1, 1998, and all principal and accrued
interest due and payable on November 15, 1998. The promissory
note given to the third party is guaranteed by Gary Smith. In
consideration of the guaranty given by Gary Smith, Buyers United
issued to him 74,162 shares of common stock. In addition, Buyers
United issued to Gary Smith a new promissory note in the
principal amount of $300,000 bearing no interest and providing
for payments of $10,000 per month commencing February 1, 1998 and
continuing through February 1, 1999, when all remaining principal
is due and payable.
In September 1998, the $1,000,000 note payable to the third
party was restructured to include $50,000 of accrued interest and
to extend the due date to April 2000, with monthly interest
payments of $8,750 commencing on October 15, 1998. As
consideration for the restructuring, Buyers United issued to the
holder of the note 15,625 shares of common stock and granted to
the holder the right to convert $500,000 of the note into shares
of common stock at a price of $4.00 per share through April 15,
1999.
ITEM 8. LEGAL PROCEEDINGS
Buyers United is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such
proceedings by or against Buyers United have been threatened.
ITEM 9. MARKET FOR COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
The common stock of Buyers United trades sporadically in the
over-the-counter market. There was no trading market for the
common stock prior to the first quarter of 1998. The following
table sets forth for the respective periods indicated the prices
of the common stock in
18
<PAGE>
the over-the-counter market, as reported
and summarized on the OTC Bulletin Board. Such prices are based
on inter-dealer bid and asked prices, without markup, markdown,
commissions, or adjustments and may not represent actual
transactions. In April 1999, Buyers United effected a 1-for-4
reverse split in the issued and outstanding common stock in
connection with the change of its domicile to Delaware. All
prices have been adjusted to reflect the reverse split.
Calendar Quarter Ended High Bid ($) Low Bid ($)
March 31, 1998 12.00 7.00
June 30, 1998 14.00 6.00
September 30, 1998 9.00 5.00
December 31, 1998 4.50 2.00
Since its inception, no dividends have been paid on the
common stock. Buyers United intends to retain any earnings for
use in its business activities, so it is not expected that any
dividends on the common stock will be declared and paid in the
foreseeable future. At June 30, 1999, there were approximately
3,795 holders of record of the common stock.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
In September 1997, Buyers United issued approximately
2,498,044 shares to the former shareholders of WealthNet,
Incorporated, in connection with the acquisition of WealthNet,
Incorporated as a wholly subsidiary. These shares were issued in
reliance on the exemptions from registration under Sections 3(b)
and/or 4(2) of the Securities Act of 1933. No broker was
involved in the transaction and no commissions were paid to any
person.
In 1997, Buyers United sold 276,891 shares of stock to 23
accredited investors at a gross purchase price of $1,154,189 in
reliance of the exemption from registration set forth in Section
4(2) of the Securities Act of 1933. No brokers were involved in
the transactions and no commissions were paid to any person.
In 1997, Buyers United issued 53,316 shares to 28
individuals as compensation for services valued at $75,258. The
shares were issued in reliance of the exemption from registration
set forth in Section 4(2) of the Securities Act of 1933.
From January through May 1998, Buyers United issued 867,815
of common stock for cash in the amount of $1,851,478. The shares
were sold to approximately 58 accredited investors in reliance of
the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933. No brokers were involved in the
transactions and no commissions were paid to any person.
From January through May 1998, Buyers United issued 115,124
shares to approximately 23 persons for compensation of services
rendered valued at $165,771. These shares were issued on the
reliance of the exemption from registration set forth in 4(2)
Securities Act of 1933.
19
<PAGE>
From November 1998 through March 1999, Buyers United sold
176,000 share of common stock for $176,000 in cash to
approximately 40 investors in reliance on the exemption from
registration under Rule 504, promulgated under the Securities Act
of 1933. No broker was used in the offering and no commissions
were paid to any person.
From January through June 1999, Buyers United issued 27,814
shares to 7 persons as compensation for services in reliance on
the exemption from registration under Section 4(2) of the
Securities Act of 1933.
In July 1999, Buyers United sold 2,000,000 shares of its 8%
Series A Convertible Preferred Stock, par value $0.0001 at an
offering price of $2.00 per share, or a total of $4,000,000. The
Series A Preferred Stock was sold to 60 accredited investors (as
defined in Rule 501 of Regulation D) in reliance on Rule 506 of
Regulation D. The shares were offered through First Level
Capital, Inc., a member firm of the NASD, which received a
commission of $400,000, a non-accountable expense allowance of
$120,000, and 500,000 shares of Buyers United common stock at a
purchase price of $5,000. In addition, Buyers United entered
into a three-year consulting agreement with First Level Capital,
Inc., providing for the payment of a monthly fee in the amount of
$3,000. First Level Capital, Inc., has a right of first refusal
to participate in future financings of Buyers United for a term
of five years.
ITEM 11. DESCRIPTION OF SECURITIES
General
The authorized capitalization of Buyers United consists of
20,000,000 shares of common stock, par value $0.0001, and
5,000,000 shares of preferred stock, par value $0.0001, of which
2,000,000 shares are designated Series A Convertible Preferred
Stock. There are approximately 3,017,308 common shares
outstanding and 2,000,000 shares of Series A Convertible
Preferred Stock outstanding.
Common Stock
Holders of common stock are entitled to one vote for each
share held on all matters submitted to a vote of shareholders and
do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of all common stock outstanding entitled
to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are
entitled to receive ratably such dividends, if any, as may be
declared by the board of directors out of funds legally available
therefor. Upon the liquidation, dissolution or winding up of the
Company, the holders of all shares of common stock are entitled
to receive ratably the net assets of the Company available after
the payment of all debts and other liabilities. Holders of
common stock have no preemptive, subscription, redemption or
conversion rights.
20
<PAGE>
Preferred Stock
General
The Board of Directors is authorized to classify any shares
of its authorized but unissued preferred stock as preferred stock
in one or more series. With respect to each series, the Board of
Directors shall determine the number of shares which shall
constitute such series; the rate of dividend, if any, payable on
shares of such series; whether the shares of such series shall be
cumulative, non-cumulative or partially cumulative as to
dividends, and the dates from which any cumulative dividends are
to accumulate; whether the shares of such series may be redeemed,
and, if so, the price or prices at which and the terms and
conditions on which shares of such series may be redeemed; the
amount payable upon shares of such series in the event of the
voluntary or involuntary dissolution, liquidation or winding up
of the affairs of Buyers United; the sinking fund provisions, if
any, for the redemption of shares of such series; the voting
rights, if any, of the shares of such series; the terms and
conditions, if any, on which shares of such series may be
converted into shares of capital stock of Buyers United of any
other class or series; whether the shares of such series are to
be preferred over shares of capital stock of Buyers United of any
other class or series as to dividends, or upon the voluntary or
involuntary dissolution, liquidation, or winding up of the
affairs of Buyers United, or otherwise; and any other
characteristics, preferences, limitations, rights, privileges,
immunities or terms not inconsistent with the provisions of the
Certificate of Incorporation. The availability of preferred
stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have
the effect of discouraging takeover proposals, and the issuance
of preferred stock could have the effect of delaying or
preventing a change in control of Buyers United not approved by
the Board of Directors.
Series A Convertible Preferred Stock
Buyers United has authorized 2,000,000 shares of Series A
Convertible Preferred Stock (the "Series A Stock"). Cumulative
dividends accrue on the Series A Stock at the rate of 8% per
annum from the date of original issue and are payable semi-
annually on June 30 and December 31 of each year out of funds
legally available for the payment of dividends. Dividends are
payable in cash or common stock, at the election of Buyers
United. If paid in common stock, the number of shares issued
will be based on the average of the closing bid prices for the
common stock over the five trading days immediately prior to the
dividend payment date. If Buyers United fails to pay any
dividend within 60 days of its due date, the conversion price
will be adjusted downward by $0.25 per share per occurrence.
The Series A Stock is convertible to common stock at any
time at the election of the holder. Buyers United can convert
the Series A Stock to common stock by written notice to the
holders at any time when the closing bid prices for the common
stock of Buyers United for a period of 30 consecutive trading
days equals or exceeds $4.00 per share, and the common stock is
registered for resale under the Securities Act of 1933 or can be
sold without registration under Rule 144(k) promulgated under the
Securities Act of 1933. The conversion rate is one share for one
share, subject to adjustment in the event of a recapitalization,
reorganization, or other
21
<PAGE>
corporate restructuring or in the event
Buyers United shall sell or otherwise issue securities at a price
below $2.00 per share or the then adjusted conversion price.
The Series A Stock can be redeemed at Buyers United's
election at any time commencing January 1, 2005, at a redemption
price of $2.00 per share plus all accrued dividends as of the
redemption date. Buyers United must give not more than 60 nor
less than 30 days advance written notice of the redemption date,
during which period the holder may convert to common stock.
The Series A Stock has no voting rights, except as required
by the General Corporation Laws of Delaware that require class
votes on certain corporate matters and matters affecting the
rights of the holders of the Series A Stock. The Series A Stock
is superior in right of payment in the event of liquidation and
with respect to dividends to the common stock and all other
series of preferred stock that may be subsequently authorized.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Buyers United's Certificate of Incorporation provides that,
to the fullest extent that limitations on the liability of
directors and officers are permitted by the Delaware General
Corporation Law (the "DGCL"), no director or officer of the
Company shall have any liability to Buyers United or its
stockholders for monetary damages. The DGCL provides that a
corporation's charter may include a provision which restricts or
limits the liability of its directors or officers to the
corporation or its stockholders for money damages except: (1) to
the extent that it is provided that the person actually received
an improper benefit or profit in money, property or services, for
the amount of the benefit or profit in money, property or
services actually received, or (2) to the extent that a judgment
or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's
action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. Buyers United's Certificate of
Incorporation and Bylaws provide that it shall indemnify and
advance expenses to its currently acting and its former directors
to the fullest extent permitted by the DGCL and that Buyers
United shall indemnify and advance expenses to its officers to
the same extent as its directors and to such further extent as is
consistent with law.
The Certificate of Incorporation and Bylaws provide that
Buyers United will indemnify its directors and officers and may
indemnify employees or agents to the fullest extent permitted by
law against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with Buyers United. However, nothing in the Certificate of
Incorporation or Bylaws of Buyers United protects or indemnifies
a director, officer, employee or agent against any liability to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office. To the extent
that a director has been successful in defense of any proceeding,
the DGCL provides that he shall be indemnified against reasonable
expenses incurred in connection therewith.
22
<PAGE>
ITEM 13. FINANCIAL STATEMENTS
The financial statements of Buyers United appear at the end
of this registration statement beginning with the Index to
Financial Statements on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with
accountants since the Company's organization.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of Buyers United appear
at the end of this registration statement beginning with the
Index to Financial Statements on page F-1.
Consolidated Condensed Financial Statements (Unaudited)
as of March 31, 1999 and for the Three Month Periods
Ended March 31, 1999 and 1998
Consolidated Financial Statements as of December 31,
1999 and 1998 and for the years then ended
Exhibits
Copies of the following documents are included as exhibits
to this report pursuant to Item 601 of Regulation S-B.
Exhibit SEC Title of Document Page
Ref. No.
1 (2) Agreement and Plan of Merger dated E-1
March 15, 1999
2 (3)(i), Certificate of Incorporation E-5
(4)
3 (3)(i), Certificate of Designation of E-9
(4) Preferred Stock
4 (3)(ii) By-Laws E-20
5 (10) Options granted to Rod Smith E-35
6 (10) Options granted to Gary Smith E-41
7 (10) Options granted to G. Douglas Smith E-47
23
<PAGE>
8 (10) Options granted to Paul Jarman E-53
9 (10) Long-Term Stock Incentive Plan E-59
10 (10) Commercial Lease E-69
11 (27) Financial Data Schedules *
* The Financial Data Schedule is presented only in the
electronic filing with the Securities and Exchange Commission.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned thereunto duly
authorized.
BUI, INC.
Date: July 30, 1999 By: /s/ Rod Smith, President
In accordance with the Exchange Act, this registration
statement has been signed by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Dated: July 30, 1999 /s/ Rod Smith, Chief Executive Officer
and Director
Dated: July 30, 1999 /s/ Paul Jarman, Chief Financial Officer
Dated: July 30, 1999 /s/ Theodore Stern, Director
Dated: July 30, 1999 /s/ Gary Smith, Director
Dated: July 30, 1999 /s/ Edward Dallin Bagley, Director
24
<PAGE>
BUI, INC. AND SUBSIDIARY
Index to Financial Statements
Consolidated Condensed Financial Statements (Unaudited)
as of March 31, 1999 and for the Three Month Periods
Ended March 31, 1999 and 1998
Consolidated Condensed Balance Sheets as of March 31,
1999 (unaudited) and December 31, 1998 F-2
Consolidated Condensed Statements of Operations (unaudited)
for the three-month periods ended March 31, 1999 and 1998 F-3
Consolidated Condensed Statements of Cash Flows (unaudited)
for the three-month periods ended March 31, 1999 and 1998 F-4
Notes to Condensed Consolidated Financial Statements F-5
(Unaudited)
Consolidated Financial Statements as of December 31, 1999 and 1998
and for the years then ended
Report of Independent Public Accountants F-7
Consolidated Balance Sheet as of December 31, 1998 F-8
Consolidated Statements of Operations for the years
ended December 31, 1998 and 1997 F-9
Consolidated Statements of Shareholders' Deficits for
the years ended December 31, 1998 and 1997 F-10
Consolidated Statements of Cash Flows for the years
ended December 31, 1998 and 1997 F-12
Notes to Consolidated Financial statements F-14
F-1
<PAGE>
BUI, Inc.
Consolidated Condensed Balance Sheets
(Unaudited)
Mar. 31, Dec. 31,
1999 1998
Assets
Current Assets:
Cash $ 51,051 $ 22,690
Restricted cash 51,865 42,263
Accounts receivable, trade, net 607,998 631,32
Other current assets 26,069 3,124
Total current assets 736,983 699,401
Property and equipment, net 97,041 112,262
Total Assets $ 834,024 $ 811,663
Liabilities and Stockholders Deficit
Current Liabilities:
Accounts payable $ 655,220 $ 680,607
Accrued liabilities 340,339 349,359
Long-term debt, current portion 595,554 472,285
Other liabilities 39,935 9,000
Total Current Liabilites 1,631,048 1,511,251
Long Term Liabilities:
Long-term debt, less current portion 1,000,000 1,050,000
Stocholders Deficit
Preferred stock, $0.0001 par value;
5,000,000 shares authorized 0 0
Common Stock, $0.0001 par value;
20,000,000 shares authorized;
3,484,193 and 2,949,549 shares
issued respectively 348 295
Additional paid in capital 3,755,257 3,610,15
Treasury Stock (141,800) (141,800)
Options 52,411 52,411
Accumulated deficit (5,463,240) (5,270,646)
Total Stockholders Deficit (1,797,024) (1,749,588)
Total Liabilities & Stockholders Deficit $ 834,024 $ 811,663
See accompanying notes to consolidated condensed financial statements.
F-2
<PAGE>
BUI, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
Three months ended March 31,
1999 1998
Revenues:
Telecommunications services $ 1,282,399 $ 291,669
Net commissions on
telecommunications services 0 69,801
Other 39,334 32,166
1,321,733 393,636
Operting expenses
Direct Costs 903,463 280,905
General and administrative 406,209 464,756
Selling and promotion 130,045 153,768
Depreciation and amortization 17,126 14,748
1,456,843 914,177
Loss from operations (135,110) (520,541)
Other income (expense)
Interest income 156 116
Setup expense (24,000) 0
Loan guarantee 0 (118,659)
Interest expense (33,640) (71,109)
(57,484) (189,652)
Net loss $ (192,594) $ (710,193)
See accompanying notes to consolidated condensed financial statements.
F-3
<PAGE>
BUI, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three months ended March 31,
1999 1998
Operating activities
Net Loss $ (192,594) $ (710,193)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 17,126 14,748
Issuance of common shares for
services 0 89,843
Issuance of common shares in
connection with debt agreements 0 118,660
Changes in operating assets
and liabilities-
Increase in restricted cash (9,602) (5,330)
Decrease (increase in accounts
receivable 23,325 (243,968)
Increase in ther current assets (22,945) 0
(Decrease) in checks written in
excess of cash balance 0 (10,721)
(Decrease) increase in accounts
payable (25,388) 109,824
Increase in accrued liabilities 54,235 67,264
(Decrease in unearned revenue) 0 (20,000)
Net cash used in operating
activities (155,843) (589,873)
Investing activities
Purchase of equipment, furniture and
Fixtures (1,905) 0
Net cash used in investing
activities (1,905) 0
Financing activities
Proceeds from borrowings under
notes payable 51,519 33,333
Principal payments on notes payable (10,569) (69,293)
Net advances from major shareholder 0 0
Issuance of common shares for cash 154,500 641,647
Payments for fundraising activities (9,342) (14,019)
Repurchase of common shares 0 0
Net cash provided by
financing activities 186,108 591,668
Increase in cash 28,360 1,795
Cash at beginning of period 22,690 0
Cash at end of period $ 51,050 $ 1,795
Supplemental disclosures of cash flow information
Cash paid for interest $ 32,754 $ 23,111
See accompanying notes to consolidated condensed financial statements.
F-4
<PAGE>
BUI, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements include
the accounts of BUI, Inc., a Delaware company, and its
wholly owned subsidiary, Buyers United, Inc. (together,
the "Company"). All significant intercompany balances
and transactions have been eliminated in consolidation.
The financial statements have been prepared, without
audit, in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion
of management, the accompanying financial statements
include all adjustments which are necessary for a fair
presentation of the results for the interim periods
include all adjustments which are necessary for a fair
presentation of the results for the interim periods
presented, such adjustments being of a normal recurring
nature. Certain information and footnote disclosures
have been condensed or omitted pursuant to such rules
and regulations. The December 31, 1998, condensed
consolidated statement of financial position was
derived from, the audited balance sheet of the Company
for the year then ended. It is suggested that these
condensed consolidated financial statements and notes
thereto be read in conjunction with the audited
financial statements of the Company for the year ended
December 31, 1998. Results of operations in interim
periods are not necessarily indicative of results to be
expected for a full year.
Note 2. Subsequent Event
On April 21, 1999, the Board of Directors authorized an
offering of a minimum of 600,000 shares or a maximum of
2,000,000 shares of 8% Series A Convertible Preferred
Stock (see Note 6) at an offering price of $2.00 per
share. The Series A Preferred Stock provides for a
cumulative dividend of 8 percent per annum payable semi-
annually on June 30 and December 31 beginning December
31, 1999 out of funds legally available therefore.
Dividends may be paid in cash or common stock at the
election of the Company. If the Company fails to pay
any dividend within 60 days of its due date the
conversion price will be adjusted by $0.25 per share.
The Series A Preferred Stock is convertible into shares
of common stock at an initial conversion price of $2.00
per share at the election of the holder at any time and
under limited circumstances at the election of the
Company.
In connection with the Offering, the Company agreed to
pay First Level Capital, Inc. (the "Placement Agent") a
sales commission equal to 10 percent of the gross
F-5
<PAGE>
proceeds from the sale of the Series A Preferred Stock.
The Company also agreed to pay to the Placement Agent a
non-accountable expense allowance equal to 3 percent of
the gross proceeds. As additional compensation, the
Company agreed to sell to the Placement Agent at the
closing of the minimum number of shares offered 500,000
shares of the Company's common stock at a price of
$0.01 per share. The Series A Preferred Stock was
offered by the Placement Agent on a "best efforts/ all-
or-none" basis as to the first 600,000 shares with a
total subscription price of $1,200,000 and a "best
efforts" basis thereafter. The Company also agreed to
enter into a two-year consulting agreement with the
Placement Agent. For investment banking and advisory
services provided to the Company, the Placement Agent
will receive $3,000 per month. The Placement Agent
upon completion of the offering may designate two
members of the Company's Board of Directors for two
years.
As of July 16, 1999, the 2,000,000 shares of Series A
Convertible Preferred Stock have been sold with the
Company receiving net proceeds of $3,480,000.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BUI, Inc.:
We have audited the accompanying consolidated balance sheet of
BUI, Inc. (formerly Buyers United International, Inc.) (a
Delaware corporation) and subsidiary as of December 31, 1998 and
the related consolidated statements of operations, shareholders'
deficit and cash flows for the years ended December 31, 1998 and
1997. 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 audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our 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 consolidated
financial position of BUI, Inc. and subsidiary as of December 31,
1998, and the results of their operations and their cash flows
for the years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
July 16, 1999
F-7
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash $ 22,690
Restricted cash 42,263
Accounts receivable 631,324
Other current assets 3,124
Total current assets 699,401
EQUIPMENT, FURNITURE AND FIXTURES,
net of accumulated depreciation of $159,726 112,262
Total assets $ 811,663
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of notes payable $ 472,285
Accounts payable 680,607
Accrued liabilities 349,359
Accrued Founders settlement 9,000
Total current liabilities 1,511,251
NOTES PAYABLE, net of current portion 1,050,000
COMMITMENTS AND CONTINGENCIES (Notes 1, 5, 6 and
8)
SHAREHOLDERS' DEFICIT:
Preferred stock, $0.0001 par value; 5,000,000 -
shares authorized
Common stock, $0.0001 par value; 20,000,000
shares authorized; 2,949,549 shares issued 295
Additional paid-in capital 3,610,152
Treasury stock, 74,162 shares, at cost (141,800)
Options outstanding 52,411
Accumulated deficit (5,270,646)
Total shareholders' deficit (1,749,588)
Total liabilities and shareholders' deficit $ 811,663
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
REVENUES:
Telecommunications services $4,580,575 $ -
Net commissions on
telecommunications services 428,382 770,758
Other 78,404 91,994
5,087,361 862,752
OPERATING EXPENSES:
Cost of telecommunication
services 3,088,344 -
Cost of other revenues 52,606 51,108
General and administrative 1,950,854 1,706,407
Selling and promotion 1,073,440 1,276,549
6,165,244 3,034,064
LOSS FROM OPERATIONS (1,077,883) (2,171,312)
OTHER INCOME (EXPENSE):
Interest and other income 274 20,315
Interest expense (388,973) (542,405)
Total other expense, net (388,699) (522,090)
NET LOSS $(1,466,582) $(2,693,402)
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Treasury Stock Options Accumulated
Shares Amount Capital Shares Amount Outstanding Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 1,462,904 $ 146 $ 309,447 - $ - $ - $(1,110,662) $ (801,069)
Sale of common shares for cash 170,670 17 514,808 - - - - 514,825
Issuance of common shares for services 155,829 16 470,654 - - - - 470,670
Issuance of common shares in connection
with debt issuance 74,162 7 223,993 - - - - 224,000
Issuance of common shares in merger
with Linguistix, Inc. 151,299 15 31,995 - - - - 32,010
Issuance of common shares in settlement
of Founders agreements 3,708 - 20,000 - - - - 20,000
Surrendor of common shares for
cancellation by major shareholders (74,162) (7) 7 - - - - -
Repurchase of common shares for cash - - - 74,162 (141,800) - - (141,800)
Net loss - - - - - - (2,693,402) (2,693,402)
BALANCE, December 31, 1997 1,944,410 $ 194 $1,570,904 74,162 $ (141,800) $ - $(3,804,064) $(2,374,766)
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Treasury Stock Options Accumulated
Shares Amount Capital Shares Amount Outstanding Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 1,944,410 $ 194 $1,570,904 74,162 $ (141,800) $ - $(3,804,064) $(2,374,766)
Sale of common shares for cash 332,808 33 1,196,708 - - - - 1,196,741
Issuance of common for services 46,975 5 93,945 - - - - 93,950
Issuance of common shares in
connection with conversion of
debt and related accrued interest 509,747 51 482,783 - - - - 482,834
Issuance of common shares in
connection with loan guarantee
and loan extension 105,412 11 210,813 - - - - 210,824
Issuance of common shares in
settlement of Founders agreements 10,197 1 54,999 - - - - 55,000
Issuance of options to purchase
common shares - - - - - 52,411 - 52,411
Net loss - - - - - - (1,466,582) (1,466,582)
BALANCE, December 31, 1998 2,949,549 $ 295 $3,610,152 74,162 $ (141,800) $ 52,411 $(5,270,646) $(1,749,588)
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Increase (Decrease) in Cash
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,466,582) $(2,693,402)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 62,174 75,981
Issuance of common shares for services 93,950 470,670
Issuance of common shares in connection
with debt agreements 210,824 224,000
Issuance of common shares as payment
for interest 12,834 -
Expense for options to purchase common shares 52,411 -
Gain on sale of equipment, furniture and fixtures - (4,783)
Changes in operating assets and liabilities-
Increase in restricted cash (42,263) -
(Increase) decrease in accounts receivable (617,421) 200,000
Increase in other current assets (2,559) (565)
(Decrease) increase in checks written
in excess of cash balance (10,721) 10,721
Increase in accounts payable 350,266 254,067
Increase in accrued liabilities 168,887 88,324
(Decrease) increase in unearned revenue (81,788) 81,788
(Decrease) increase in accrued Founder
settlement (6,000) -
Net cash used in operating activities (1,275,988) (1,293,199)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in merger with Linguistix - 32,010
Proceeds from the sale of equipment,
furniture and fixtures - 12,500
Purchase of equipment, furniture and fixtures (28,535) (154,331)
Net cash used in investing activities (28,535) (109,821)
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
BUI, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Increase (Decrease) in Cash
1998 1997
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under notes payable 238,000 793,000
Principal payments on notes payable (107,528) (26,187)
Net advances from major shareholder - 22,797
Issuance of common shares for cash 1,196,741 514,825
Repurchase of common shares - (141,800)
Net cash provided by financing activities 1,327,213 1,162,635
NET INCREASE (DECREASE) IN CASH 22,690 (240,385)
CASH AT BEGINNING OF PERIOD - 240,385
CASH AT END OF PERIOD $ 22,690 $ -
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 187,955 $ 306,443
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable to common shares $ 470,000 $ -
Issuance of common shares in settlement
of Founders agreements 55,000 20,000
Assumption of debt from major shareholder - 200,000
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
BUI, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
The Company was originally incorporated in Utah on January 16,
1996 as WealthNet Incorporated ("WealthNet"). On November 13,
1997, WealthNet was merged into Linguistix Acquisition Inc.
("LAI"), a Utah corporation and wholly owned subsidiary of
Linguistix, Inc. ("Linguistix")(the "Linguistix Merger"). LAI
was the surviving corporation and effective with the Linguistix
Merger changed its name to Buyers United, Inc. ("Buyers United").
The Linguistix Merger was approved, with the recommendation of
the Board of Directors of WealthNet, to enhance the ability of
WealthNet to raise debt and equity capital needed for operations.
Linguistix was a Utah corporation organized in August 1994 as a
vehicle to receive the assets of Twin Creek Exploration Co., Inc.
("Twin Creek") prior to a business reorganization. Prior to the
Linguistix Merger, Linguistix' operations were limited to
receiving minimal oil and gas royalties, which have not
continued, and as of the date of the merger the only significant
identifiable asset consisted of $32,010 of cash. There were no
liabilities assumed in the merger. In connection with the
Linguistix Merger, Linguistix changed its name to Buyers United
International, Inc. ("BUII").
The merger of WealthNet with Buyers United and BUII has been
reflected in the accompanying consolidated financial statements
as a reverse acquisition accounted for as a purchase. WealthNet
has been presented as the continuing accounting entity with the
equity accounts and common shares outstanding being retroactively
restated to reflect the effect of the exchange ratio established
in the Linguistix Merger. BUII is presented as the acquired
entity with its assets and liabilities being recorded at
estimated fair value as of the merger date and the results of
operations of BUII being included in the accompanying
consolidated financial statements from the date of the Linguistix
Merger. Following the Linguistix Merger, BUII has pursued the
business of WealthNet.
BUI, Inc. was incorporated in the state of Delaware on March 15,
1999 for the purpose of reincorporating BUII as a Delaware
corporation. Effective April 9, 1999, BUII was merged into BUI,
Inc. (the "BUI Merger"). In the BUI Merger, each four shares of
BUII common stock and each four options to purchase shares of
BUII's common stock were converted into one share of common stock
of BUI, Inc. or options to purchase one share of BUI Inc.'s
common stock. The equity accounts and the common shares
outstanding in the accompanying consolidated financial statements
have been retroactively restated to reflect the effect of the BUI
Merger.
BUI, Inc., BUII, Buyers United, and WealthNet are collectively
referred to herein as the "Company."
The Company is a consumer buying organization with the objective
of providing high quality consumer products and services at
favorable prices to its consumer members. The Company has begun
to form strategic alliances and joint ventures with various
consumer service
F-14
<PAGE>
providers in an effort to combine the purchasing
power of its consumer members to negotiate favorable prices from
these providers. The Company markets its products and services
by offering incentives to its consumer members to attract
additional consumers with whom they have ongoing relationships to
the Company's products and services. As of December 31, 1998,
the Company provided discounted long distance telecommunication
services to its consumer members.
As of December 31, 1998, the Company had a working capital
deficit of $811,850, a shareholders' deficit of $1,749,588 and
has incurred net losses of $1,466,582, and $2,693,402 during the
years ended December 31, 1998 and 1997, respectively. Subsequent
to December 31, 1998, the Company has raised $173,000 of
additional equity capital through the sale of common shares and
has raised $3,480,000 in an offering of 2,000,000 shares of 8%
Series A Convertible Preferred Stock at an offering price of $2
per share (see Note 8). In addition, the Company received
$160,000 in May 1999 under an 8% unsecured convertible promissory
note due June 1, 2000 and five-year warrants to purchase shares
of common stock at an exercise price of $1.25 per share.
The Company is subject to certain risk factors frequently
encountered by companies lacking adequate capital and which are
in the early stages of developing a business line that may impact
its ability to become a profitable enterprise. These risk
factors include:
a) The consumer buying organization industry is characterized
by intense competition, and many of the Company's competitors are
substantially larger than the Company with greater financial and
other resources. In addition, the Company is currently marketing
telecommunications services, including long distance services, to
its consumer members. The U.S. long distance telecommunications
industry is highly competitive and significantly influenced by
the marketing and pricing strategies of the major industry
participants, which are significantly larger than the Company and
have substantially greater resources.
b) The Company's ability to effectively provide
telecommunications services to its members depends on its ability
to form strategic alliances and joint ventures with third party
telecommunications service providers that provide high quality
services at competitive prices. The Company currently obtains
its telecommunications services from one supplier. Although
there are a limited number of telecommunication service
providers, a change in suppliers could cause a disruption in
service and possible loss of revenues, which could affect
operating results adversely.
c) The Company's relationship marketing system is or may be
subject to or affected by extensive government regulation,
including without limitations, state regulation of marketing
practices and federal and state regulation of the offer and sale
of business franchises, business opportunities, and securities.
Long distance telecommunications carriers currently are subject
to extensive federal and state government regulation.
d) Additional funds will be required to finance the Company's
operations until profitability can be achieved and to fund the
repayment of debt obligations and other liabilities. There can
be no assurance that the additional funding will be available or,
if available, that it will be available on acceptable terms or in
required amounts.
F-15
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Equipment, Furniture and Fixtures
Equipment, furniture and fixtures are stated at cost. Major
additions and improvements are capitalized, while minor repairs
and maintenance costs are expensed when incurred. Depreciation
is computed using the straight-line method over the estimated
useful lives of the related assets which are as follows:
Computer and office equipment 3 years
Furniture and fixtures 3 years
When equipment, furniture and fixtures are retired or otherwise
disposed of, the book value is removed from the asset and related
accumulated depreciation accounts, and the net gain or loss is
included in the determination of net income (loss).
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying consolidated
balance sheets for cash, receivables, and accounts payable
approximate fair values because of the immediate or short-term
maturities of these financial instruments. The fair value of the
Company's notes payable also approximate fair value based on
current rates for similar debt instruments.
Revenue Recognition and Related Arrangements
Revenues from telecommunications services are recognized as the
services are provided and billed to the customers by the third-
party service providers with a provision for uncollectable
accounts. Revenues from sales of products are recognized upon
shipment of the products to the customers.
In January 1997, the Company entered into a Strategic Member
Reseller Agreement (the "Reseller Agreement") with I-Link
WorldWide, Inc. ("I-Link"). Under the Reseller Agreement, I-Link
agreed to sell to the Company certain telecommunications services
and products at certain rates and prices and the Company had the
right to resell the services and products to its members. In
addition, I-Link provided all provisioning, tariffing,
negotiating and securing local exchange carrier agreements,
billing and collection services, status tracking, accounting and
reporting, and, at the expense of the Company, customer service
and support.
Due to difficulties encountered under the arrangement with I-
Link, in May 1998, the Company and I-Link entered into a business
separation agreement to provide for the separation of their
business relationship and a mutual release of all claims which
may have arisen between them prior to the date of the Reseller
Agreement. Under the separation agreement, the Company
F-16
<PAGE>
agreed to undertake at its own expense on a "best efforts" basis to
collect all current and past due accounts receivable relating to I-Link
services utilized by the Buyers United customers after January 1,
1997. All collected funds were to be distributed fifty percent
to the Company and fifty percent to I-Link; provided, however,
that the first $200,000 collected was to be allocated to the
Company and the second $200,000 collected was to be allocated to
I-Link. Thereafter, any collected funds would be distributed on
a 50/50 basis to the Company and I-Link. As of December 31,
1998, the Company had received the initial $200,000 and
management does not expect to receive any additional amounts
under the separation agreement.
In December 1997, the Company entered into a three year Service
Agreement with IXC Communications, Inc. ("IXC") (the "IXC Service
Agreement"). Under the IXC Service Agreement, IXC agreed to sell
to the Company telecommunications services at certain rates and
the Company has the rights to resell the services to its members.
In addition, the Company has contracted to have IXC provide
certain billing and collection services, status tracking,
accounting and reporting services. Pursuant to the IXC Service
Agreement, the Company has granted to IXC a first priority
security interest in the Company's receivables from its customers
and has directed its customers to make all payments directly to a
lockbox account for the benefit of IXC. As of December 31, 1998,
the lockbox account had a balance of $42,263, which is reflected
in the accompanying consolidated balance sheet as restricted
cash, and the Company had a payable to IXC of $525,734, secured
by the Company's accounts receivable of $631,324.
Income Taxes
The Company recognizes a liability or asset for the deferred
income tax consequences of all temporary differences between the
tax bases of assets and liabilities and their reported amounts in
the financial statements that will result in taxable or
deductible amounts in future years when the reported amounts of
the assets and liabilities are recovered or settled. These
deferred income tax assets or liabilities are measured using the
enacted tax rates that will be in effect when the differences are
expected to reverse.
Reclassifications
Certain reclassifications have been made to the 1997 and 1996
financial statements to be consistent with the 1998 presentation.
F-17
<PAGE>
(3) NOTES PAYABLE
Notes payable consist of the following as of December 31, 1998:
Note payable to an individual; interest at 10
percent payable monthly, principal due on
April 15, 2000 ($500,000 of principal is
convertible to common stock at $4 per share
at the option of the holder on or before
April 15, 2000); secured by certain assets
of a shareholder of the Company (see
discussion below) $ 1,050,000
Note payable to a shareholder; interest at 20
percent through January 9, 1998 and 6
percent thereafter payable monthly; due on
demand; unsecured (see discussion below) 251,312
Note payable to a shareholder; interest at 10
percent; due on demand (convertible to
common stock at $2.00 per share at the
option of the holder); unsecured 150,000
Note payable to a limited liability company;
interest at 10 percent , principal and
interest due in monthly installments of
$9,578, secured by interest in accounts
receivable 48,771
Note payable to a shareholder; interest at 10
percent; due on demand; unsecured 22,202
Total notes payable 1,522,285
Less current portion (472,285)
Notes payable, net of current portion $ 1,050,000
As of December 31, 1996, the Company had borrowed $163,300 from
Rod Smith, the Company's president, major shareholder and
founder, under an unsecured note payable arrangement providing
interest at 9 percent per annum with the principal and accrued
interest due on June 30, 1997. In October 1997, this amount was
repaid to Rod Smith in connection with the Company assuming a
$200,000 obligation of Rod Smith's to his father, Gary Smith, and
was included in the $1,300,000 note payable to Gary Smith as of
December 31, 1997 included above.
During 1996 and 1997, Gary Smith advanced $1,100,000 to the
Company for working capital and other corporate purposes. Under
an informal agreement with the Company, the advances by Gary
Smith accrued interest at the rate of 20 percent per annum and
were unsecured. In consideration for making these loans and for
other services provided, the Company issued to Gary Smith 185,405
and 74,162 shares of common stock during 1996 and 1997,
respectively, and granted options to purchase 55,622 shares of
common stock at $2.02 per share and 185,405 shares of common
stock at $5.39 per share. The estimated fair market value of the
common
F-18
<PAGE>
shares issued to Gary Smith has been reflected as
additional interest expense or administrative expense in the
accompanying consolidated financial statements.
In October 1997, Gary Smith and Rod Smith entered into a
Restructuring Agreement with the Company, which provided for
formalization of the debt obligation of the Company to Gary Smith
and the return of shares of common stock for cancellation by both
Rod Smith and Gary Smith to assist the Company in obtaining
additional capital (see Note 6). The Company issued to Gary
Smith an unsecured promissory note in the principal amount of
$1,300,000 (which included the $200,000 borrowed by Rod Smith
from Gary Smith and loaned to the Company), bearing interest at
20 percent per annum.
In January 1998, the Company restructured the $1,300,000 note
payable to Gary Smith. The Company transferred $1,000,000 of the
$1,300,000 note payable to an individual. The new $1,000,000
note payable included interest at ten percent payable monthly
with all principal and accrued interest to be due November 15,
1998. The $1,000,000 note payable was guaranteed by Gary Smith.
As consideration for Gary Smith's guarantee of the $1,000,000
note payable, the Company issued 74,162 shares of common stock to
Gary Smith. The terms of the remaining $300,000 were initially
changed to be non-interest bearing and to include monthly
principal payments of $10,000 commencing February 1, 1998 and
continuing thereafter to February 1, 1999, when all remaining
principal was due and payable. Subsequently, the terms of the
remaining $300,000 were modified to include interest at 6 percent
payable monthly with the principal due as the Company has
available resources. The remaining principal balance of $251,312
as of December 31, 1998 has been included as a current note
payable in the accompanying financial statements.
In September 1998, the $1,000,000 note payable was restructured
to add $50,000 of accrued interest to the principal balance,
extend the due date to April 15, 2000 with monthly interest
payments commencing on October 15, 1998, and secure the note with
certain assets of Gary Smith and terminate the guarantee. As
consideration, the individual was issued 31,250 shares of common
stock and was granted an option to convert $500,000 of the note
into shares of common stock at a price of $4.00 per share through
April 15, 2000. The $1,050,000 is classified as a noncurrent
liability in the accompanying December 31, 1998 consolidated
balance sheet.
(4) INCOME TAXES
The components of the net deferred income tax assets as of
December 31, 1998 are as follows:
Net operating loss carryforwards $ 1,428,100
Writeoff of WealthNet System for financial
reporting purposes 138,900
Reserves and accrued liabilities 37,000
Total deferred income tax assets 1,604,000
Valuation allowance (1,604,000)
Net deferred income tax assets $ -
As of December 31, 1998, the Company had net operating loss
carryforwards for federal income tax reporting purposes of
approximately $3,860,000. For federal income tax purposes,
utilization of these carryforwards is limited if the Company has
had more than a 50 percent
F-19
<PAGE>
change in ownership (as defined by the
Internal Revenue Code) or, under certain conditions, if such a
change occurs in the future. The tax net operating loss
carryforwards will expire beginning in 2011.
No benefit for income taxes has been recorded during the years
ended December 31, 1998 and 1997. As discussed in Note 1,
certain risks exist with respect to the Company's future
profitability and management has concluded that, due to these
uncertainties, the related deferred income tax assets may not be
realized. Accordingly, a valuation allowance has been recorded
to offset the deferred income tax assets.
(5) COMMITMENTS AND CONTINGENCIES
Legal Matters
Teleconference Units - As discussed in Note 6, in 1996 the
Company entered into agreements with certain investors pursuant
to which they were entitled to receive 1,000 teleconference
units, each unit entitling the holder to one 30-minute conference
call for up to 200 participants through December 1998. As of
December 31, 1998, the Company has reacquired all of the units
except for 900 units granted to Mr. Ray Gray. On October 15,
1997, the Company made a formal demand on Mr. Gray to surrender
all 1,000 teleconferencing units he received as an original
investor in the Company in exchange for $10,000, as provided in
the original agreement. On December 16, 1997, the Company was
served with a complaint filed in the Third Judicial District
Court, Salt Lake County, Utah, alleging that the Company breached
a contract to provide teleconferencing units resulting in damages
to the plaintiff, It Makes Cents ("IMC"), of at least $270,000.
IMC is allegedly the assignee of 900 teleconferencing units
originally granted to Mr. Gray. The Company is of the opinion
that the purported assignment of the units is a breach of the
Company's contract with Mr. Gray.
The teleconferencing units were granted to the original investors
based on certain beliefs regarding the cost of providing the
teleconferencing units. Subsequently, the Company determined
that the costs to provide the teleconferencing units would be
higher than originally estimated. The original investors,
including Mr. Gray, agreed not to sell any of the
teleconferencing units without first contacting the Company. Mr.
Gray did not contact the Company prior to his alleged sale of
teleconferencing units to IMC.
The Company, by way of defense, asserts that Mr. Gray agreed to
not market or sell the teleconferencing units and that Mr. Gray
is in breach of that contractual agreement. The Company also
asserts that the plaintiff is not in privity of contract with the
Company and therefore, the Company owes no contractual duty to
Plaintiff. A pre-trial conference has been held at which the
complaint was dismissed without prejudice for failure of the
plaintiff to appear. If the plaintiff does not refile the
complaint within one year, it will be barred from doing so under
the applicable statute of limitations. Based on the foregoing
circumstances and after discussion with legal counsel, management
believes that the ultimate outcome of this matter will not have a
material effect on the Company's financial position or results of
operations.
Bountiful - As discussed in Note 7, commencing in January 1996,
the Company was involved in a series of transactions with
Bountiful. Bountiful originally obtained funds for its
operations in 1995 by selling income participation interests to a
small group of individuals ("Participants") and borrowing certain
funds from the Participants. Bountiful was formed for the
purpose of
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developing a multi-level marketing training system
known as the "WealthNet System," and an infomercial for marketing
the system primarily to NuSkin distributors. Bountiful was
unable to market its program to NuSkin distributors and sought to
market the WealthNet System to other multilevel distributors
through marketing companies and the infomercial. This also
proved unsuccessful. On January 23, 1998, the Participants filed
a lawsuit in Federal District Court, District of Utah against Rod
Smith, individually, Bountiful, and the Company. The complaint
alleged that Rod Smith and Bountiful committed fraud in
connection with the offer and sale of the revenue participation
interests to the Participants, that Rod Smith and Bountiful
violated securities registration requirements of federal and
state securities laws in connection with the offer and sale of
those interests, and that Rod Smith and Bountiful wrongfully
diverted funds and other assets of Bountiful to the Company. The
Participants sought rescission of their investment in Bountiful
in the amount of approximately $675,000 and asked by way of
relief that the stock of the Company owned by Rod Smith be
declared to be held in trust for the benefit of the Participants.
The Participants further demanded unspecified damages against the
Company for the conversion of the assets of Bountiful.
Subsequent to December 31, 1998, two of the plaintiffs and Rod
Smith entered into a settlement agreement. Under the settlement
agreement, the Company will grant to the two plaintiffs options
to purchase a total of 50,000 shares of the Company's common
stock at a price of $2.00 per share exercisable through July 15,
1999. The plaintiffs will dismiss their claims against the
Company with prejudice, and will indemnify the Company against
all claims and causes of actions which were or could be brought
against the Company by the remaining two plaintiffs. Management
believes, after discussion with legal counsel, that the ultimate
outcome of this matter will not have a material effect on the
Company's financial position or results of operations.
The Company is the subject of certain other legal matters, which
it considers incidental to its business activities. It is the
opinion of management, after discussion with legal counsel, that
the ultimate disposition of these legal matters will not have a
material impact on the financial position, liquidity or results
of operations of the Company.
(6) CAPITAL TRANSACTIONS
Authorized Capitalization
As a result of the reincorporation as a Delaware corporation
discussed in Note 1, the authorized capitalization of the Company
consists of 20,000,000 shares of common stock, par value $0.0001,
and 5,000,000 shares of preferred stock, par value $0.0001. In
the reincorporation, each four shares of common stock previously
issued and outstanding and each four outstanding options to
purchase shares of common stock were converted into one share of
common stock or options to purchase one share of common stock, a
one for four reverse stock split. The equity accounts and the
common shares outstanding in the accompanying consolidated
financial statements have been retroactively restated to reflect
the reverse stock split.
Preferred Stock - The Board of Directors is authorized to
classify any shares of the Company's authorized but unissued
preferred stock in one or more series. With respect to each
series, the Board of Directors is authorized to determine the
number of shares which constitute such series; the rate of
dividend, if any, payable on shares of such series; whether the
shares of such series shall be cumulative, non-cumulative or
partially cumulative as to dividends, and the
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dates from which
any cumulative dividends are to accumulate; whether the shares of
such series may be redeemed, and, if so, the price or prices at
which and the terms and conditions on which shares of such series
may be redeemed; the amount payable upon shares of such series in
the event of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; the
sinking fund provisions, if any, for the redemption of shares of
such series; the voting rights, if any, of the shares of such
series; the terms and conditions, if any, on which shares of such
series may be converted into shares of capital stock of the
Company of any other class or series; whether the shares of such
series are to be preferred over shares of capital stock of the
Company of any other class or series as to dividends, or upon the
voluntary or involuntary dissolution, liquidation, or winding up
of the affairs of the Company, or otherwise; and any other
characteristics, preferences, limitations, rights, privileges,
immunities or terms.
Series A Convertible Preferred Stock - The Board of Directors has
authorized 2,000,000 shares of Series A Convertible Preferred
Stock (the "Series A Preferred Stock"). Cumulative dividends
accrue on the Series A Preferred Stock at the rate of 8% per
annum from the date of original issue and are payable semi-
annually on June 30 and December 31 of each year out of funds
legally available for the payment of dividends. Dividends are
payable in cash or common stock at the election of the Company.
If paid in common stock, the number of shares issued will be
based on the average of the closing bid prices for the common
stock over the five trading days immediately prior to the
dividend payment date. If the Company fails to pay any dividend
within 60 days of its due date, the conversion price (see below)
is adjusted downward by $0.25 per share for each occurrence.
The Series A Preferred Stock is convertible to common stock at
any time at the election of the holder and under limited
circumstances at the election of the Company. The conversion
rate is one share for one share, subject to adjustment in the
event of a recapitalization, reorganization, or other corporate
restructuring or in the event the Company shall sell or otherwise
issue securities at a price below $2.00 per share or the then
adjusted conversion price. The Series A Preferred Stock can be
redeemed at the Company's election at any time commencing January
1, 2005, at a redemption price of $2.00 per share plus all
accrued dividends as of the redemption date.
The Series A Preferred Stock has no voting rights, except as
required by the General Corporation Laws of Delaware that require
class votes on certain corporate matters and matters affecting
the rights of the holders of the Series A Preferred Stock. The
Series A Preferred Stock is superior in right of payment in the
event of liquidation and with respect to dividends to the common
stock and all other series of preferred stock that may be
subsequently authorized.
As discussed in Note 8, subsequent to December 31, 1998 the
Company sold the 2,000,000 shares of Series A Preferred Stock in
a private offering.
Merger of WealthNet into LAI
As discussed in Note 1, on November 13, 1997 WealthNet was merged
into Buyers United, a wholly owned subsidiary of BUII, formerly
Linquistix. The merger of WealthNet with Buyers United has been
reflected in the accompanying consolidated financial statements
as a reverse acquisition accounted for as a purchase. WealthNet
has been presented as the continuing accounting entity with the
equity accounts and common shares outstanding being retroactively
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restated to reflect the effect of the exchange ratio established
in the merger. BUII is presented as the acquired entity with its
assets and liabilities being recorded at estimated fair value as
of the merger date. Prior to the merger, BUII's operations were
limited to receiving minimal oil and gas royalties, which have
not continued, and as of the date of the merger the only
significant identifiable asset consisted of $32,010 of cash.
There were no liabilities assumed in the merger. The 151,299
shares (post reverse stock split) of common stock of BUII
outstanding at the date of the merger have been recorded at the
value of the cash obtained in the merger.
Stock Issued for Services
During the years ended December 31, 1997 and 1998, the Company
has issued shares of common stock to certain officers, key
employees and others for services provided to the Company. The
shares issued have been valued by the Company's Board of
Directors at estimated fair values based on other shares issued
for cash and on the terms of the related transactions. The
Company has issued 46,975, and 155,829 shares of common stock to
other key employees, directors, and promoters for services
rendered during the years ended December 31, 1998 and 1997,
respectively. These shares were valued at $2.00 per share during
1998 and at $3.02 per share during 1997.
In connection with the Linguistix Merger and the Company's
efforts to obtain additional financing, in September 1997 Rod
Smith and Gary Smith (the "Shareholders") entered into a
Restructuring Agreement with the Company. Pursuant to the
agreement, the Shareholders agreed to surrender 37,081 and 74,162
shares of common stock, respectively, to the Company for
cancellation. The shares surrendered were previously issued to
the Shareholders for services as described above. The 37,081
shares of common stock to be surrendered by Rod Smith were not
actually returned to the Company, but rather were transferred to
new investors who purchased common shares in 1998 as discussed
below.
Private Offerings of Common Stock
During the year ended December 31, 1997, the Company sold 170,670
shares of common stock for cash at prices ranging from $1.96 to
$5.40 per share resulting in net proceeds of $514,825. The
Company also repurchased 74,162 shares of common stock from a
shareholder in exchange for $141,800 in cash and the issuance of
options to purchase 4,635 shares of common stock at $4.00 per
share through October 15, 1999.
In February 1998, the Board of Directors authorized a best
efforts private offering of 500,000 shares of common stock at a
price of $4.00 per share. The shares were offered directly by
the Company. During 1998, the Company sold 286,288 shares of
common stock at a price of $4.00 per share. With respect to the
investors that acquired 260,038 of the 286,288 shares of common
stock, as additional incentive to invest in the Company Rod Smith
agreed to transfer to the investors one share of common stock
from his personal shares for each share acquired resulting in the
investors effectively paying $2.00 per share. The 260,038 shares
of common stock transferred by Rod Smith to the investors
included the 37,081 shares he had committed to return to the
Company in 1997 as discussed above. Additionally, the Company
sold 41,020 shares of common stock to certain employees at a
price of $2.00 per share, based on the effective price of $2.00
per share paid during the year by a majority of investors.
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During 1998, the Company also sold 5,500 shares of common stock
to investors at a price of $4.00 per share in connection with an
offering of shares in the State of New York. The New York
offering was completed to satisfy a public offering requirement
related to the Founders agreements discussed below.
Debt Conversions and Related Agreements
As discussed in Note 3, during the year ended December 31, 1998
the Company converted an 8% convertible debenture in the amount
of $400,000 to 468,330 shares of common stock at a price of $0.85
per share based on the contractual terms of the debenture. The
Company also converted a $70,000 note payable and related accrued
interest of $12,834 to 41,417 shares of common stock at a price
of $2.00 per share. In connection with the conversion of the
$70,000 note payable, the Company granted options to purchase
6,250 shares of common stock at $4.00 per share to the debt
holder.
Additionally, the Company issued 74,162 shares of common stock to
Gary Smith valued at $148,324 or $2.00 per share as consideration
of his guarantee of the Company's $1,000,000 note payable. The
Company also issued 31,250 shares of common stock valued at
$62,500 or $2.00 per share in connection with restructuring the
$1,000,000 note payable. As discussed in Note 3, certain of the
Company's notes payable are convertible to common stock at the
option of the holders at prices ranging from $2.00 to $4.00 per
share.
Founders Agreements
On January 16, 1996, the Company entered into agreements
("Founders Agreements") with 19 individuals and/or entities that
had previously provided $105,000 of funding to Rod Smith for the
purpose of acquiring certain telecommunications services. The
funds paid to Rod Smith were used for the benefit of the Company.
The Founders also provided services to the Company in promoting
the original members for the consumer buying organization. Under
the Founders Agreements, the Company agreed to pay each Founder
one-twentieth of 1 percent of the gross receipts from certain
telecommunications services for a term of 60 years, or until such
time that the Company sells its assets to a third party or makes
a public offering of its common stock. At the time of a public
offering, the Founders in aggregate were to receive options to
purchase 19,468 shares of common stock at a price of $0.06 per
share in exchange for the royalty interests. As discussed above,
the Company sold certain shares of common stock during 1998 in
the State of New York, which was determined by the Company to
satisfy the requirement of a public offering. Accordingly, the
royalty interest was terminated and options to purchase 19,468
shares of common stock at $.06 per share were issued to the
Founders. The estimated fair value of the options granted of
$38,156 was recorded by the Company as additional royalty expense
in 1998 with the corresponding credit recorded as outstanding
options.
The Founders also received the right to transfer, assign, or sell
an aggregate of 21,000 teleconferencing units, as defined in the
Founders Agreements, at any price deemed appropriate by the
Founders until December 31, 1998. The Company reserved the right
to purchase back or cancel any untransferred, unassigned, or
unsold units at any time prior to December 31, 1998 for a price
of $10 per unit.
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As discussed in Note 5, subsequent to entering into the Founders
Agreements the Company determined that the teleconferencing units
were granted based on certain beliefs regarding the cost of
providing the teleconferencing units. Subsequently, the Company
determined that the costs to provide the teleconferencing units
would be higher than originally estimated and the Company
proceeded with purchasing back the units. As of December 31,
1998, the Company had issued 35,226 shares of common stock for
19,000 of the teleconferencing units rather than purchasing the
units at a price of $10 per unit and had paid $11,000 for 1,100
of the remaining units. As of December 31, 1998, the Company had
recorded the contract price of $10 per unit for the 900 units not
repurchased as accrued Founder settlement in the accompanying
consolidated balance sheet. As discussed in Note 5, the
remaining 900 units are subject to certain legal proceedings.
The Company has, in effect, issued shares of common stock to the
Founders in exchange for their initial cash investments and for
the promotion services rendered to the Company. The amount of
the initial investments has been recorded as proceeds from the
issuance of stock and the additional cost to repurchase the
telecommunication units has been expensed with a credit to
shareholders' equity for the shares issued.
Stock Options
The Company's Board of Directors has from time to time authorized
the grant of stock options to directors, officers and key
employees as compensation and in connection with obtaining
financing. The following tables summarize the option activity
for the period from inception (January 16, 1996) to December 31,
1996 and for the years ended December 31, 1997 and 1998.
Weighted
Options Price Range Average Exercise
Balance, December 31, 1996 259,567 $2.02 - 5.39 $4.43
Granted 363,363 2.70 - 5.40 2.82
Balance, December 31, 1997 622,930 2.02 - 5.40 3.49
Granted 969,840 0.06 - 9.00 2.71
Cancelled or expired (253,125) 4.00 - 9.00 4.06
Balance, December 31, 1998 1,339,645 $0.06 - 9.00 $2.82
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The weighted average fair value of options granted during the
years ended December 31, 1998 and 1997 was $0.39 and $0.10,
respectively. A summary of the options outstanding and options
exercisable at December 31, 1998 is as follows:
Options Outstanding Options Exercisable
________________________________________________ _______________________
Weighted
Average
Range of Remaining Weighted Weighted
Exercise Options Contractual Average Options Average
Prices Outstanding Life Exercise Exercisable Exercise
Price Price
0.06 - 1.99 19,468 0.5 years $ 0.06 19,468 $ 0.06
2.00 - 3.99 1,070,762 6.6 years 2.22 959,519 2.16
4.00 - 5.99 221,290 4.0 years 5.20 221,290 5.20
6.00 - 9.00 28,125 2.6 years 9.00 15,625 9.00
0.06 - 9.00 1,339,645 6.0 years $ 2.82 1,215,902 $ 2.77
Stock-Based Compensation
The Company applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for its grants of
options to purchase common shares to employees. SFAS No. 123,
"Accounting for Stock-Based Compensation," requires pro forma
information regarding net income (loss) as if the Company had
accounted for its stock options granted under the fair value
method of the statement. The fair value of the stock options was
estimated at the grant date by the Company based on the Black-
Scholes option pricing model. The following assumptions were
used in the Black-Scholes model: a risk-free interest rate of 6.0
percent, a dividend yield of 0.0 percent, and weighted-average
expected lives of 7.5 years and 3.0 years for the years ended
December 31, 1998 and 1997 respectively. The pro forma net
losses under SFAS No. 123 for the years ended December 31, 1998
and 1997 are $1,948,191, and $2,837,384, respectively, as
compared to the reported net losses of $1,466,582 and $2,693,402,
respectively.
Due to the nature and timing of option grants, the resulting pro
forma compensation cost may not be indicative of future years.
(7) RELATED-PARTY TRANSACTIONS
Bountiful, Inc.
Effective February 1, 1996, WealthNet entered into a license
agreement with Bountiful, Inc. ("Bountiful"), a Utah corporation
owned by WealthNet's founder and major shareholder, Rod Smith.
Under the License Agreement, WealthNet licensed the rights to the
"WealthNet System" and to an infomercial produced to market the
WealthNet System in exchange for a one-time license fee of
$150,000, future royalties on sales of the WealthNet System and
278,107 shares of WealthNet's common stock. The WealthNet System
was designed to provide training regarding forming and operating
a home-based business using relationship marketing to sell
products and services.
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Bountiful sold certain of the 278,107 shares of common stock of
the Company to investors for proceeds of $613,653. From the
proceeds received by Bountiful, Bountiful made cash advances to
the Company of $190,000, paid expenses on behalf of the Company
of $223,283, and used $200,370 to further develop the WealthNet
System and related infomercial. As of December 31, 1996, the
Company had a receivable from Bountiful of $225,370. During
1997, the Company and Bountiful agreed that the Company would
forgive the receivable from Bountiful in exchange for Bountiful's
remaining interest in the WealthNet System. Accordingly, the
receivable was reclassified to investment in the WealthNet
System. As of December 31, 1996 the Company was no longer
selling the WealthNet System; therefore, the Company determined
that the total investment of $375,370 in the WealthNet System
should be written off.
IXC Service Agreement
In connection with the IXC Service Agreement discussed in Note 2,
the Company was required to establish with IXC a $100,000 letter
of credit upon execution of the Agreement to secure the Company's
performance. The requirement to provide letters of credit was
released under the IXC Service Agreement upon the Company
granting to IXC a first priority security interest in the
Company's receivables from its end users and directing the end
users to make payments directly into a lockbox account for the
benefit of IXC (see Note 2).
In December 1997, the Company obtained the initial letter of
credit required for the IXC Agreement under an agreement with
Gary Smith (the "LC Agreement"). The LC Agreement provided that
Gary Smith would make available to the Company upon its request a
letter of credit in the principal amount of $100,000 issued
through a bank for a term of six months. In the event any amount
was drawn on the letter of credit and not repaid within five days
following the date of the draw, the amount drawn was to bear
interest at the rate of 20 percent per annum. If the letter of
credit was not replaced by another credit facility by the end of
the initial six month term, then the letter of credit was
automatically extended for a term of six additional months and in
consideration for such extension interest would accrue on the
principal amount of the letter of credit at the rate of 20
percent per annum, excluding any amounts drawn against the line
of credit. In addition, the Company agreed to issue to Gary
Smith shares of common stock in number equal to the principal
amount of the letter of credit, excluding any amount representing
a draw under the agreement. As consideration for the LC
Agreement, the Company agreed to extend the term of options to
purchase 139,054 shares of common stock at $5.40 per share and
options to purchase 55,622 shares of common stock at $2.04 per
share held by Gary Smith. The option exercise period was
extended from October 15, 1998 to October 15, 1999.
On July 1, 1998, the Company extended the term of the LC
Agreement and modified the consideration to be paid to Gary Smith
to include the issuance of five-year options to purchase 27,500
shares of common stock at $2.00 per share. The estimated fair
value of the options of $14,255 was recorded as interest expense
during the year ended December 31, 1998 and as outstanding
options in the accompanying December 31, 1998 consolidated
balance sheet.
Consulting Agreement
In January 1998, the Company entered into a one year consulting
agreement with Gary Smith pursuant to which the Company agreed to
pay $5,000 per month to Gary Smith for marketing and other
related consulting services. The agreement was subsequently
modified to cancel the
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consulting payments during 1998 and to
continue the consulting agreement for an additional one-year term
beginning January 1, 1999.
(8) SUBSEQUENT EVENTS
Long-Term Stock Incentive Plan
Effective March 11, 1999, the Company established the Buyers
United International, Inc. Long-Term Stock Incentive Plan (the
"Stock Plan"). The Stock Plan provides for a maximum of 600,000
shares of common stock of the Company to be awarded to
participants and their beneficiaries. The Committee, as
determined by the Board of Directors, determines and designates
the eligible participants and awards to be granted under the
Stock Plan. The Committee may grant incentive stock options, non-
qualified options, stock appreciation rights ("SAR") and, on a
limited basis, grant stock awards. The terms and exercise prices
of options and SARs will be established by the Committee; except
that the exercise prices cannot be less than 100 percent of the
fair market value of a share of common stock on the date of
grant.
Private Offering Of Series A Preferred Stock
On April 21, 1999, the Board of Directors authorized an offering
of a minimum of 600,000 shares or a maximum of 2,000,000 shares
of 8% Series A Convertible Preferred Stock (see Note 6) at an
offering price of $2.00 per share. The Series A Preferred Stock
provides for a cumulative dividend of 8 percent per annum payable
semi-annually on June 30 and December 31 beginning December 31,
1999 out of funds legally available therefore. Dividends may be
paid in cash or common stock at the election of the Company. If
the Company fails to pay any dividend within 60 days of its due
date the conversion price will be adjusted by $0.25 per share.
The Series A Preferred Stock is convertible into shares of common
stock at an initial conversion price of $2.00 per share at the
election of the holder at any time and under limited
circumstances at the election of the Company.
In connection with the Offering, the Company agreed to pay First
Level Capital, Inc. (the "Placement Agent") a sales commission
equal to 10 percent of the gross proceeds from the sale of the
Series A Preferred Stock. The Company also agreed to pay to the
Placement Agent a non-accountable expense allowance equal to 3
percent of the gross proceeds. As additional compensation, the
Company agreed to sell to the Placement Agent at the closing of
the minimum number of shares offered 500,000 shares of the
Company's common stock at a price of $0.01 per share. The Series
A Preferred Stock was offered by the Placement Agent on a "best
efforts/ all-or-none" basis as to the first 600,000 shares with a
total subscription price of $1,200,000 and a "best efforts" basis
thereafter. The Company also agreed to enter into a two-year
consulting agreement with the Placement Agent. For investment
banking and advisory services provided to the Company, the
Placement Agent will receive $3,000 per month. The Placement
Agent upon completion of the offering may designate two members
of the Company's Board of Directors for two years.
As of July 16, 1999, the 2,000,000 shares of Series A Convertible
Preferred Stock have been sold with the Company receiving net
proceeds of $3,480,000.
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E-4
Exhibit No. 1
Form 10-SB
BUI, Inc.
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"),
is made as of March 15, 1999, by and between Buyers United
International, Inc., a Utah corporation (the "Company"), and BUI,
Inc., a Delaware corporation ("BUI"). BUI is hereinafter
sometimes referred to as the "Surviving Corporation," and
together with the Company are referred to as the "Constituent
Corporations". The Constituent Corporations have a common
address at 66 E. Wadsworth Park Dr., Suite 101, Draper, Utah
84020.
The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, no par value ("Company Common
Stock"), and the authorized capital stock of BUI consists of
20,000,000 shares of Common Stock, $0.0001 par value (the "BUI
Common Stock"), and 5,000,000 shares of Preferred Stock, $0.0001
par value (the "BUI Preferred Stock"). The directors of the
Constituent Corporations deem it advisable and to the advantage
of said corporations that the Company merge into BUI upon the
terms and conditions provided herein.
NOW, THEREFORE, the parties hereby adopt the plan of
reorganization encompassed by this Merger Agreement and hereby
agree that the Company shall merge into BUI on the following
terms, conditions and other provisions:
1. Terms and Conditions.
1.1 Merger. The Company shall be merged with and into BUI,
which shall be the surviving corporation effective at the earlier
of the date when this Merger Agreement is filed as part of the
required Articles of Merger with the Division of Corporations and
Commercial Code of the State of Utah or the date when a
Certificate of Ownership and Merger is filed with the Secretary
of State of the State of Delaware (the "Effective Date").
1.2 Succession. On the Effective Date, BUI shall succeed
to all of the rights, privileges, powers, immunities and
franchises and all the property, real, personal and mixed of the
Company, without the necessity for any separate transfer. BUI
shall thereafter be responsible and liable for all liabilities
and obligations of the Company, and the merger shall impair
neither the rights of creditors nor any liens on the property of
the Company.
1.3 Common Stock and Preferred Stock of the Company and
BUI. Upon the Effective Date, by virtue of the merger and
without any further action on the part of the Constituent
Corporations or their stockholders, each four shares of Company
Common Stock issued and outstanding immediately prior to the
Effective Date shall be changed and converted into and become one
fully paid and nonassessable share of BUI Common Stock;
1.4 Stock Certificates. On and after the Effective Date,
all of the outstanding certificates that prior to that time
represented shares of Company Common Stock shall be deemed for
all purposes to evidence ownership of and to represent the shares
of BUI Common Stock into which the shares of the Company
represented by such certificates have been converted as provided
herein and shall be so registered on the books and records of BUI
or its transfer agent. The registered owner of any such
outstanding stock certificate shall, until such certificate shall
have been surrendered for transfer or conversion or otherwise
accounted for to BUI or its transfer agents, have and be entitled
to exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the shares of
BUI evidenced by such outstanding certificate as provided above.
1.5 Options and Warrants. On the Effective Date: (a) BUI
will assume and continue the Long-Term Stock Incentive Plan of
the Company and any successor plan or plans, and the number of
shares of BUI Common Stock subject to the existing stock plan
assumed by BUI shall be 600,000 shares; (b) the outstanding and
unexercised portions of all options to buy Company Common Stock
shall become options for that number of shares of BUI Common
Stock equal to 25% of the number of shares purchasable under the
options to buy Company Common Stock, the exercise price for such
options to buy BUI Common Stock shall be 400% of the exercise
price under the options to buy Company Common Stock, there will
be no other changes in the terms and conditions of such options,
and BUI shall assume the outstanding and unexercised portions of
such options and the obligations of the Company with respect
thereto as modified hereby; and (c) the outstanding and
unexercised portions of all warrants to buy Company Common Stock
shall become warrants for that number of shares of BUI Common
Stock equal to 25% of the number of shares purchasable under the
warrants to buy Company Common Stock, the exercise price for such
warrants to buy BUI Common Stock shall be 400% of the exercise
price under the warrants to buy Company Common Stock, there will
be no other changes in the terms and conditions of such warrants,
and BUI shall assume the outstanding and unexercised portions of
such warrants and the obligations of the Company with respect
thereto as modified hereby.
1.6 Fractional Shares. BUI shall not issue any fractional
shares or interests in the BUI Common Stock or options or
warrants to purchase factional shares of BUI Common Stock. If
any stockholder, option holder, or warrant holder of the Company
would otherwise be entitled to a fractional share or the right to
buy a fractional share as a result of the provisions of this
Merger Agreement, BUI shall round the number of shares of the BUI
Common Stock to be issued or subject to the option or warrant up
to the nearest whole share.
1.7 Acts, Plans, Policies, Agreements, Etc. All corporate
acts, plans, policies, agreements, arrangements, approvals and
authorizations of the Company, its stockholders, Board of
Directors and committees thereof, officers and agents which were
valid and effective immediately prior to the Effective Date,
shall be taken for all purposes as the acts, plans, policies,
agreements, arrangements, approvals and authorizations of BUI and
shall be as effective and binding thereon as the same were with
respect to the Company.
2. Charter Documents, Directors and Officers
2.1 Certificate of Incorporation and By-Laws. The
Certificate of Incorporation and Bylaws of BUI as in effect
immediately prior to the Effective Date shall remain the
Certificate of Incorporation and Bylaws of BUI after the
Effective Date.
2.2 Directors and Officers. On the Effective Date, the
Board of Directors of BUI will consist of the members of the
Board of Directors of the Company immediately prior to the
Merger. The directors will continue to hold office as directors
of BUI for the same term for which they would otherwise serve as
directors of the Company. The individuals serving as executive
officers of the Company immediately prior to the Merger will
serve as executive officers of BUI upon the effectiveness of the
Merger.
3. Miscellaneous
3.1 Further Assurances. From time to time, and when
required by BUI or by its successors and assigns, there shall be
executed and delivered on behalf of the Company such deeds and
other instruments, and there shall be taken or caused to be taken
by it such further and other action, as shall be appropriate and
necessary in order to vest or perfect, or to conform of record or
otherwise, in BUI the title to and possession of all the
property, interests, assets, rights, privileges, immunities,
powers, franchises and authority of the Company and otherwise to
carry out the purposes of this Merger Agreement, and the
directors and officers of the Company are fully authorized in the
name and on behalf of the Company or otherwise to take any and
all such action and to execute and deliver any and all such deeds
and other instruments.
3.2 Amendment. At any time before or after approval by the
stockholders of the Company, this Merger Agreement may be amended
in any manner (except that any of the principal terms may not be
amended without the approval of the stockholders of the Company)
as may be determined in the judgment of the respective Boards of
Directors of the Company and BUI to be necessary, desirable or
expedient in order to clarify the intention of the parties hereto
or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 Abandonment. At any time before the Effective Date,
this Merger Agreement may be terminated and the merger may be
abandoned by the Board of Directors of the Company,
notwithstanding the approval of this Merger Agreement by the
stockholders of the Company, or the consummation of the merger
may be deferred for a reasonable period if, in the opinion of the
Board of Directors of the Company, such action would be in the
best interests of the Constituent Corporations.
3.4 Governing Law. This Merger Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware.
**********
IN WITNESS WHEREOF, this agreement has been signed as of the
date first-above written for and on behalf of the corporate
parties hereto by the undersigned thereunto duly authorized.
Buyers United International,
Inc.
(a Utah corporation)
ATTEST
By/s/ Paul Jarman, Secretary By /s/ Rod Smith,
President
BUI, Inc.
(a Delaware corporation)
ATTEST
By/s/ Paul Jarman, Secretary By /s/ Rod Smith,
President
SECRETARY'S CERTIFICATE
The undersigned, Paul Jarman, hereby certify: (1) that I am
the duly elected and qualified secretary of BUI, Inc., a Delaware
corporation ("BUI"), and the keeper of the records of BUI; (2)
that the foregoing Agreement and Plan of Merger was adopted by
the Board of Directors of BUI pursuant to Section 251(f) of the
General Corporation Law of the State of Delaware; and (3) that no
shares of the capital stock of BUI were issued prior to the
adoption by the Board of Directors of the resolution approving
the Agreement and Plan of Merger.
/s/ Paul Jarman, Secretary
E-5
Exhibit No. 2
Form 10-SB
BUI, Inc.
CERTIFICATE OF INCORPORATION
OF
BUI, INC.
ARTICLE I
NAME
The name of the Corporation is BUI, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT FOR SERVICE
The address of the Corporation's registered office in the
State of Delaware is in the county of New Castle, at 1013 Centre
Road, Wilmington, Delaware 10805. The name of its registered
agent at such address is Corporation Service Company.
ARTICLE III
CORPORATE PURPOSES
The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
1. Shares, Classes and Series Authorized.
The total number of shares of all classes of capital stock
that the Corporation shall have authority to issue is 25,000,000
shares. Stockholders shall not have any preemptive rights, nor
shall stockholders have the right to cumulative voting in the
election of directors or for any other purpose. The classes and
the aggregate number of shares of stock of each class that the
Corporation shall have authority to issue are as follows:
(a) 20,000,000 shares of Common Stock, $0.0001 par value
("Common Stock").
(b) 5,000,000 shares of Preferred Stock, $0.0001 par value
("Preferred Stock").
2. Powers and Rights of the Preferred Stock.
The Preferred Stock may be issued from time to time in one
or more series, with such distinctive serial designations as may
be stated or expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by the
Board of Directors; and in such resolution or resolutions
providing for the issuance of shares of each particular series,
the Board of Directors is also expressly authorized to fix: the
right to vote, if any; the consideration for which the shares of
such series are to be issued; the number of shares constituting
such series, which number may be increased (except as otherwise
fixed by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time by
action of the Board of Directors; the rate of dividends upon
which and the times at which dividends on shares of such series
shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or
classes or any other series of stock of the Corporation; whether
such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which dividends on shares of
such series shall be cumulative; the rights, if any, which the
holders of shares of such series shall have in the event of any
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
affairs of the Corporation; the rights, if any, which the holders
of shares of such series shall have to convert such shares into
or exchange such shares for shares of any other class or classes
or any other series of stock of the Corporation or for any debt
securities of the Corporation and the terms and conditions,
including price and rate of exchange, of such conversion or
exchange; whether shares of such series shall be subject to
redemption, and the redemption price or prices and other terms of
redemption, if any, for shares of such series including, without
limitation, a redemption price or prices payable in shares of
Common Stock; the terms and amounts of any sinking fund for the
purchase or redemption of shares of such series; and any and all
other designations, preferences, and relative, participating,
optional or other special rights, qualifications, limitations or
restrictions thereof pertaining to shares of such series'
permitted by law.
3. Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to
time authorize by resolution the issuance of any or all shares of
the Common Stock and the Preferred Stock herein authorized in
accordance with the terms and conditions set forth in this
Certificate of Incorporation for such purposes, in such amounts,
to such persons, corporations or entities, for such
consideration, and in the case of the Preferred Stock, in one or
more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the
stockholders, except as otherwise required by law. The capital
stock, after the amount of the subscription price, or par value,
has been paid in shall not be subject to assessment to pay the
debts of the Corporation.
ARTICLE V
BOARD OF DIRECTORS
The governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the
Bylaws of the Corporation, provided that the number of directors
may not be less than one nor more than fifteen. Effective upon
filing of this Certificate, the members of the board of
directors, consisting of three persons, shall be as follows:
Rod Smith 66 E. Wadsworth Park Dr.,
Suite 101
Draper, Utah 84020
C. Douglas Smith 66 E. Wadsworth Park Dr.,
Suite 101
Draper, Utah 84020
Daniel R. Ainge 66 E. Wadsworth Park Dr.,
Suite 101
Draper, Utah 84020
ARTICLE VI
POWERS OF BOARD OF DIRECTORS
The property and business of the Corporation shall be
controlled and managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized:
1. To make, alter, amend or repeal the Bylaws of the
Corporation; provided, that no adoption, amendment, or repeal of
the Bylaws shall invalidate any act of the board of directors
that would have been valid prior to such adoption, amendment, or
repeal;
2. To determine the rights, powers, duties, rules and
procedures that affect the power of the board of directors to
manage and direct the property, business, and affairs of the
Corporation, including the power to designate and empower
committees of the board of directors, to elect, appoint and
empower the officers and other agents of the Corporation, and to
determine the time and place of, and the notice requirements for
board meetings, as well as the manner of taking board action; and
3. To exercise all such powers and do all such acts as may be
exercised by the Corporation, subject to the provisions of the
laws of the State of Delaware, this Certificate of Incorporation,
and the Bylaws of the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify and may advance expenses to
its officers and directors to the fullest extent permitted by law
in existence either now or hereafter.
ARTICLE VIII
LIMITATION ON PERSONAL LIABILITY FOR DIRECTORS
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of a fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which
the director derived any improper personal benefit. If the
Delaware General Corporation Law is amended hereafter to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
ARTICLE IX
CERTIFICATE SUBJECT TO AMENDMENT
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute or by the Certificate of Incorporation, and except as
otherwise provided by this Certificate of Incorporation, all
rights conferred upon stockholders herein are granted subject to
this reservation.
ARTICLE X
INCORPORATOR
The sole incorporator of the Corporation is:
Rod Smith 66 E. Wadsworth Park Dr.,
Suite 101
Draper, Utah 84020
IN WITNESS WHEREOF, the undersigned, acting as the sole
incorporator of the Corporation, signs this Certificate of
Incorporation as his act and deed this 11th day of March, 1999.
/s/ Rod Smith
E-10
Exhibit No. 3
Form 10-SB
BUI, Inc.
BUI, INC.
CERTIFICATE OF DESIGNATION OF NUMBER, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL, AND OTHER SPECIAL
RIGHTS, AND THE QUALIFICATIONS LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware
BUI, INC., a corporation organized and existing under the
laws of the state of Delaware (the "Corporation"), in accordance
with Section 151(g) of the General Corporation Law of Delaware,
DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), fixes the total number of
shares of all classes of capital stock which the Corporation
shall have the authority to issue at Twenty-Five Million
(25,000,000) shares, of which Five Million (5,000,000) shares
shall be shares of Preferred Stock, par value $0.0001 per share
(herein referred to as "Preferred Stock"), and Twenty Million
(20,000,000) shares shall be shares of Common Stock, par value
$0.0001 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, if any, and with such designations,
preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or
revolutions providing for the issue thereof adopted by the Board
of Directors and as are not stated and expressed in the
Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on May 14, 1999, by unanimous written consent, duly
authorized and adopted the following resolutions providing for a
series to be designated "Series A Convertible Preferred Stock";
RESOLVED, that issue of a series of Preferred Stock, $0.0001
par value per share, of the Corporation consisting of
2,000,000 shares designated as "Series A Convertible
Preferred Stock", is hereby provided for, and the voting
power, designation, preferences and relative, participating,
optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such series shall be
as set forth below, and upon the effective date said series
shall be deemed to be included in and be a part of the
Certificate of Incorporation of the Corporation pursuant to
the provisions of Sections 104 and 151 of the General
Corporation Law of the State of Delaware:
SERIES A PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series A Convertible
Preferred Stock" (hereinafter referred to as the "Series A
Stock") and the number of authorized shares constituting the
Series A Stock is Two Million (2,000,000). The Series A Stock
shall be deemed a separate class of Preferred Stock, and shall be
apart from any other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series A Stock will be entitled to be
paid before any distribution or payment is made upon Junior
Securities (as defined below), an amount in cash equal to the
aggregate Liquidation Value (as defined below) of all shares of
Series A Stock outstanding, and the holders of Series A Stock
will not be entitled to any further payment. If upon any such
liquidation, dissolution, or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of
Series A Stock are insufficient to permit payment to such holders
of the aggregate amount which they are entitled to be paid, then
the entire assets to be distributed will be distributed ratably
among such holders based upon the aggregate Liquidation Value of
the Series A Stock held by each such holder. The Corporation
will mail written notice of such liquidation, dissolution, or
winding up not less then 30 days prior to the payment date stated
therein, to each record holder of Series A Stock. Neither the
consolidation or merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the
Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, will be deemed to be
liquidation, dissolution, or winding up of the Corporation within
the meaning of this Part 1.
Part 2. Dividends.
2A. Entitlement. The holders of Series A Stock shall be
entitled to receive cumulative dividends when and as declared by
the Corporation's Board of Directors out of funds available
therefor under applicable law. Such dividends shall be paid to
the holders of record at the close of business on the date
specified by the Board of Directors at the time such dividend is
declared; provided, however, that such date shall not be more
than sixty (60) days nor less than ten (10) days prior to each
respective Dividend Payment Date (as defined below under this
Part 2).
2B. Accrual Rate. Dividends on each share of Series A
Stock shall accrue cumulatively on a daily basis at the rate of
8.00% per annum of the Liquidation Value thereof, but not
including such portion of the Liquidation Value, if any, which
constitutes accrued and unpaid dividends, from and including the
date of issuance of such share to and including the date on which
the Redemption Price (as defined below) of such share is paid or
the date on which such share is converted into Common Stock.
Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues
any share of the Series A Stock will be deemed to be its "date of
issuance" regardless of the number of times transfer of any such
share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence any such share.
2C. Dividend Payment Dates. Dividends on the Series A
Stock shall be payable semi-annually on June 30 and December 31
of each year (the "Dividend Payment Dates"); provided, that the
first Dividend Payment Date shall be December 31, 1999. All
dividends which have accrued on each share of Series A Stock
outstanding during the period ending upon each such Dividend
Payment Date will be added to the Liquidation Value of such share
and will remain a part thereof until such dividends are paid.
2D. Manner of Payment. Dividends on the Series A Stock
shall be paid to the holders in cash or in-kind through the
issuance of Common Stock, as determined at the election of the
Corporation within sixty (60) days following each Dividend
Payment Date. If paid in-kind with Common Stock, the number of
shares issued to each holder shall be equal to the dollar amount
of the dividend divided by the average Market Price (as defined
below) per share of Common Stock over the five (5) trading days
immediately preceding the date on which the dividend is declared,
rounded up to the nearest whole share.
2E. Certain Restrictions. The Corporation shall not,
without the prior written consent of the holders of a majority of
Series A Stock, (i) declare, order or pay any dividend (other
than dividends payable solely in shares of stock) on any Junior
Securities or (ii) redeem any shares of Junior Securities, unless
and until the Corporation shall have redeemed all of the
outstanding Series A Stock or all shares of Series A Stock are
converted to Common Stock.
2F. Distribution of Partial Dividend Payments; Fractional
Shares. If at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Series A
Stock, such payment will be distributed ratably among the holders
of such Series A Stock based upon the aggregate accrued but
unpaid dividends on such Series A Stock held by each holder.
Each fractional share of Series A Stock outstanding, if any,
shall be entitled to a ratably proportionate amount of all
dividends to which each outstanding full share of such Series A
Stock is entitled hereunder.
Part 3. Conversion Rights.
3A. Holder Conversion Procedure. Subject to the provisions
set forth below, each share of Series A Stock shall be
convertible at the option of the holder thereof, in the manner
hereinafter set forth, into that number of fully paid and non-
assessable shares of Common Stock determined as set forth below.
Any holder of Series A Stock desiring to convert such shares into
shares of Common Stock shall surrender the certificate or
certificates for the shares being converted, duly endorsed or
assigned to the Corporation or in blank, at the principal office
of the Corporation or at the bank or trust company appointed by
the Corporation for that purpose, accompanied by a written notice
of conversion specifying the number of shares of Series A Stock
to be converted and the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be
issued. After the receipt of such notice of conversion and the
certificates for the Series A Stock converted, the Corporation
shall promptly issue and deliver or cause to be issued and
delivered to such holder a certificate or certificates for shares
of Common Stock resulting from such conversion. In case less
than all of the shares of Series A Stock represented by a
certificate are to be converted by a holder, upon such conversion
the Corporation shall also deliver or cause to be delivered to
such holder a certificate or certificates for the shares of
Series A Stock not so converted. The Corporation shall pay all
transfer agent fees and expenses payable upon the conversion of
Series A Stock.
3B. Company Conversion Procedure. Subject to the
provisions set forth below, each share of Series A Stock shall be
convertible at the option of the Company, in the manner
hereinafter set forth, into that number of fully paid and non-
assessable shares of Common Stock determined as set forth below.
The Company must convert all Series A Stock if it converts any
Series A Stock. The Company may elect to convert the Series A
Stock to Common Stock by resolution of the Board of Directors
("Conversion Resolution") duly adopted at a meeting of Directors
or by unanimous written consent of the Directors, if as of the
close of business on the Business Day immediately preceding
adoption of such resolution the Company Conversion Conditions (as
defined below) have been met. Written notice of conversion shall
be sent not less than five Business Days following the day on
which the Conversion Resolution is adopted to all holders of
record of the Series A Stock at their addresses appearing on the
books and records of the Corporation specifying the date of
conversion, which shall not be less than 20 calendar days
following the date such notice is given. Promptly after the date
of conversion set forth in the notice, each holder of the Series
A Stock shall surrender the certificate or certificates for the
shares to the Corporation at the principal office of the
Corporation or at the bank or trust company appointed by the
Corporation for that purpose. After the receipt of the
certificates for the Series A Stock converted, the Corporation
shall promptly issue and deliver or cause to be issued and
delivered to such holder a certificate or certificates for shares
of Common Stock resulting from such conversion. The Corporation
shall pay all transfer agent fees and expenses payable upon the
conversion of Series A Stock.
3C. Conversion Rate. Each share of Series A Stock shall be
convertible into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the
"Conversion Price" in effect at the time of conversion into the
"Conversion Value". The initial Conversion Price per share of
Series A Stock shall be $2.00. The Conversion Value per share of
Series A Stock shall be $2.00. The initial Conversion Price
shall be subject to adjustment as set forth in paragraph 3D.
3D. Conversion Price Adjustments of Preferred Stock. The
Conversion Price of the Series A Stock shall be subject to
adjustment from time to time as set forth below.
(1) Adjustment Provisions. If the Corporation shall issue,
after the date upon which any shares of Series A Stock were first
issued (the "Purchase Date"), any Additional Stock (as defined
below) without consideration or for a consideration per share
less than the Conversion Price in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price in effect
immediately prior to each such issuance shall forthwith (except
as otherwise provided in this clause (i)) be reduced to the price
per share at which the Corporation issued or sold, or is deemed
to have issued or sold, such shares of Common Stock. Except to
the limited extent provided for in subparagraphs 3D(1)(c)(iii)
and (iv), no adjustment of the Conversion Price pursuant to this
subparagraph 3D(1) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(a) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash
paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with
the issuance and sale thereof.
(b) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined in good faith by the Board of
Directors.
(c) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply
for all purposes of this subparagraph 3D(1)(c) and subparagraph
3D(1)(d):
(i) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction
of any conditions to exercisability, including without
limitation, the passage of time, but without taking into account
potential antidilution adjustments) of such options to purchase
or rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in the
manner provided in subparagraphs 3D(1)(a) and (b)), if any,
received by the Corporation upon the issuance of such options or
rights plus the minimum exercise price provided in such options
or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(ii) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of
time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any
such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the minimum additional consideration, if any, to be received
by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subparagraphs 3D(1)(a) and (b)).
(iii) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration
payable to the Corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible
or exchangeable securities, (excluding a change resulting solely
from the antidilution provisions thereof if such change results
from an event which gives rise to an antidilution adjustment
under this paragraph 3D), the Conversion Price, to the extent in
any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
(iv) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price, to
the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the
options or rights related to such securities.
(v) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subparagraphs 3D(1)(c)(i) and (ii)shall be appropriately adjusted
to reflect any change, termination or expiration of the type
described in either subparagraphs 3D(1)(c)(iii) and (iv).
(d) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to
subparagraphs 3D(1)(c)) by the Corporation after the Purchase
Date other than
(i) Common Stock issued pursuant to a transaction
described in subparagraphs 3D(1)(e) hereof;
(ii) shares of Common Stock issuable or issued
pursuant to a stock option, warrant, conversion right, or
purchase right outstanding as of the Purchase Date; or
(iii) Common Stock issued or issuable upon
conversion of the Series A Stock.
(e) In the event the Corporation should at any time or
from time to time after the Purchase Date fix a record date for
the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities
or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional
shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Series A Stock shall
be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of the Series A Stock
shall be increased in proportion to such increase in the
aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(f) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion
Price for the Series A Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion
of each share of the Series A Stock shall be decreased in
proportion to such decrease in outstanding shares.
(2) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other
persons, evidences of indebtedness issued by the Corporation or
other persons, assets (excluding cash dividends) or options or
rights not referred to in subparagraph 3D(1), then, in each such
case for the purpose of this subparagraph 3D(2), the holders of
the Series A Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the
number of shares of Common Stock of the Corporation into which
their shares of Series A Stock are convertible as of the record
date fixed for the determination of the holders of Common Stock
of the Corporation entitled to receive such distribution.
(3) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than
a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this paragraph 3D)
provision shall be made so that the holders of the Series A Stock
shall thereafter be entitled to receive upon conversion of the
Series A Stock the number of shares of stock or other securities
or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled
on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of
this paragraph 3D with respect to the rights of the holders of
the Series A Stock after the recapitalization to the end that the
provisions of this paragraph 3D (including adjustment of the
Conversion Price then in effect and the number of shares issuable
upon conversion of the Series A Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(4) Dividend Payment Adjustment. In the event the
Corporation fails to pay any dividend within sixty (60) days
following the applicable Dividend Payment Date, the Conversion
Price then in effect shall be reduced by subtracting from it the
"Default Amount." The initial Default Amount shall be $0.25, and
the Default Amount will be decreased or increased in the same
manner as adjustment of the Conversion Price described in
subparagraphs 3D(1)(e) and (f).
(5) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of
this paragraph 3D and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A Stock against impairment.
(6) No Fractional Shares and Certificate as to Adjustments.
No fractional shares shall be issued upon the conversion of any
share or shares of the Series A Stock, and the number of shares
of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon
such conversion shall be determined on the basis of the total
number of shares of Series A Stock the holder is at the time
converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(7) Notice of Adjustment. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to
this paragraph 3D, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of
Series A Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series A Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (a) such adjustment and readjustment,
(b) the Conversion Price at the time in effect, and (c) the
number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion
of a share of Series A Stock.
(8) Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend)
or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the
Corporation shall mail to each holder of Series A Stock, at least
twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(9) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the
Series A Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all outstanding shares of the Series A Stock; and if at any time
the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Stock, in addition to such
other remedies as shall be available to the holder of the Series
A Stock, the Corporation will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including,
without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to
these provisions.
(10) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Stock
shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Corporation.
3E. Effect of Conversion. As of the date the Corporation
receives notice of conversion from the holder of the Series A
Stock under paragraph 3A, above, or the third calendar day
following the day on which notice of conversion by the Company to
the holders of Series A Stock under paragraph 3B is deposited in
the U.S. Mail with first class postage prepaid (a "Conversion
Date"), all rights pertaining to the Series A Stock will cease,
and such Series A Stock will not be deemed to be outstanding.
All certificates representing the Series A Stock subject to
conversion will represent only the right to receive Common Stock
of the Corporation under this Part 3 and payment of all accrued
and unpaid dividends as of the Conversion Date.
3F. Converted Shares. Any shares of Series A Stock which
at any time have been converted shall be canceled, may not be
reissued as Series A Stock, and shall be returned to the status
of authorized and unissued shares of Preferred Stock without
designation as to series.
Part 4. Voting Rights.
The Series A Stock shall have no voting rights, except as
required in the specific instance by the General Corporation Law
of Delaware and except the right to approve by majority vote of
the holders of the Series A Stock: the authorization and issuance
of any class or series of Preferred Stock senior to the Series A
Stock; any amendment, modification, or repeal of the Certificate
of Incorporation of the Corporation if the powers, preferences,
or special rights of the Series A Stock would be adversely
affected; and, the imposition of any restriction on the Series A
Stock, other than restrictions arising under the General
Corporation Law of Delaware or the resolution of the Board of
Directors approving the Series A Stock.
Part 5. Redemption.
5A. Redemption Price. For each share of Series A Stock
which is to be redeemed, the Corporation will be obligated on the
Redemption Date (as defined below) to pay to the holder thereof
(upon surrender by such holder at the Corporation's principal
office or to the Corporation's transfer agent of the certificates
representing such shares of Series A Stock) an amount in
immediately available funds equal to the Liquidation Value plus
all accrued dividends as of the Redemption Date.
5B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series A Stock to each
record holder of Series A Stock not more than sixty (60) nor less
than thirty (30) days prior to the date on which such redemption
is to be made. The date specified in such notice for redemption
is herein referred to as the "Redemption Date."
5C. Termination of Rights. On the Redemption Date all
rights pertaining to the Series A Stock, including, but not
limited to, any right of conversion, will cease, and such Series
A Stock will not be deemed to be outstanding. All certificates
representing the Series A Stock subject to redemption will
represent only the right to receive payment in accordance with
the provisions of this Part 5.
5D. Redeemed or Otherwise Acquire Shares. Any shares of
Series A Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series A
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
5E. Optional Redemption. The Corporation may, at any time
on or after January 1, 2005, redeem all or any portion of the
Series A Stock.
Part 6. Definitions.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in Salt Lake City,
Utah are authorized by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Conversion Conditions" consist of the following conditions:
(i) The shares of Common Stock issuable on conversion
of the Series A Stock are registered for resale under the
Securities Act of 1933, or are eligible for sale under Rule
144(k) promulgated under the Securities Act of 1933; and
(ii) The Market Price for the Common Stock during a
period of thirty (30) consecutive trading days is not less
than $4.00 per share.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock.
"Liquidation Value" of any Series A Stock as of any
particular date will be equal to $2.00 per share.
"Market Price" of the Common Stock on any relevant date
shall be determined as follows:
(i) If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but
is traded on the Nasdaq National Market, the Market Price
shall be the mean between the highest closing "bid"
quotation of a share of Common Stock on such date as
reported by the Nasdaq National Market or any successor
system.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national securities exchange,
then the Market Price shall be the closing selling price per
share on the date in question on the securities exchange, as
such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale
of Common Stock on such exchange on the date in question,
then the Market Price for that date shall be the closing
selling price on the exchange on the last preceding date for
which such quotation exists.
(iii) If the Common Stock is not listed on such
date on any national securities exchange nor included in the
Nasdaq National Market, but is traded in the over-the-
counter market, the highest closing "bid" quotation of a
share of Common Stock on such date as reported on the Nasdaq
Smallcap Market or the NASD OTC Bulletin Board, as
applicable.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Rod Smith, its President, and
attested to by Paul Jarman, its Secretary, this 23rd day of June,
1999.
BUI, INC.
By /s/ Rod Smith, President
ATTEST
By /s/ Paul Jarman, Secretary
E-22
Exhibit No. 4
Form 10-SB
BUI, Inc.
BYLAWS OF
BUI, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of
the Corporation shall be in the county of New Castle, at 1013
Centre Road, Wilmington, Delaware 10805. The name of its
resident agent at such address is Corporation Service Company.
Section 2. Other Offices. Other offices may be
established by the Board of Directors at any place or places,
within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders
shall be held either at the principal executive office or any
other place within or without the State of Delaware which may be
designated either by the Board of Directors pursuant to authority
hereinafter granted to said Board, or by the written consent of
all stockholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the
Corporation; provided, however, that if no place is designated or
so fixed, stockholder meetings shall be held at the principal
executive office of the Corporation.
Section 2. Annual Meetings. The annual meetings of the
stockholders shall be held each year on a date and a time
designated by the Board of Directors. At the annual meeting of
stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought
before an annual meeting, business must be specified in the
Notice of Meeting given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors or otherwise properly
brought before the meeting by a stockholder. For business to be
properly brought before the annual meeting by a stockholder,
including the nomination of a director, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the Corporation not more than five business days after
the giving of notice of the date and place of the meeting to the
stockholders. A stockholder's notice to the Secretary shall
inform as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business,
(iii) the class and numbers of shares of the Corporation which
are beneficially owned by the stockholder and (iv) any material
interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the
procedures set forth in this Section. The chairman of the annual
meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any
such business not properly before the meeting shall not be
transacted.
Section 3. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes whatsoever, may be
called at any time by the Chairman of the Board, the President or
by a majority of the Board of Directors, or by such other person
as the Board of Directors may designate.
For business to be properly brought before a special meeting
by a stockholder, including the nomination of a director, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the
principal executive offices of the Corporation not more than five
business days after the giving of notice of the date and place of
the meeting to the stockholders. A stockholder's notice to the
Secretary shall inform as to each matter the stockholder proposes
to bring before a special meeting (i) a brief description of the
business desired to be brought before the special meeting and the
reasons for conducting such business at the special meeting, (ii)
the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Section 4. Notice of Stockholders' Meetings. Written
notice of each annual or special meeting signed by the President
or a Vice President, or the Secretary, or an Assistant Secretary,
or by such other person or persons as the Directors shall
designate, shall be delivered personally to, or shall be mailed
postage prepaid, to each stockholder of record entitled to vote
at such meeting. If mailed, the notice shall be directed to the
stockholder at his address as it appears upon the records of the
Corporation, and service of such notice by mail shall be complete
upon such mailing, and the time of the notice shall begin to run
from the date it is deposited in the mail for transmission to
such stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a
partnership, shall constitute delivery of such notice to such
corporation, association or partnership. All such notices shall
be delivered or sent to each stockholder entitled thereto not
less than ten nor more than sixty days before each annual or
special meeting, and shall specify the purpose or purposes for
which the meeting is called, the place, the day and the hour of
such meeting.
Any stockholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or
after the meeting.
Section 5. Voting. At all meetings of stockholders,
every stockholder entitled to vote shall have the right to vote
in person or by written proxy the number of shares standing in
his own name on the stock records of the Corporation. There
shall be no cumulative voting. Such vote may be viva voce or
ballot; provided, however, that all elections for Directors must
be by ballot upon demand made by a stockholder at any election
and before the voting begins.
Section 6. Quorum. The presence in person or by proxy
of the holders of a majority of the shares entitled to vote at
any meeting shall constitute a quorum for the transaction of
business. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 7. Ratification and Approval of Actions at
Meetings. Whenever the stockholders entitled to vote at any
meeting consent, either by: (a) A writing on the records of the
meeting or filed with the Secretary; (b) Presence at such meeting
and oral consent entered on the minutes; or (c) Taking part in
the deliberations at such meeting without objection; the doings
of such meeting shall be as valid as if had at a meeting
regularly called and noticed. At such meeting, any business may
be transacted which is not excepted from the written consent or
to the consideration of which no objection for want of notice is
made at the time. If any meeting be irregular for want of notice
or of such consent, provided a quorum was present at such
meeting, the proceedings of the meeting may be ratified and
approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having
the right to vote at such meeting. Such consent or approval of
stockholders may be by proxy or attorney, but all such proxies
and powers of attorney must be in writing.
Section 8. Proxies. At any meeting of the stockholders,
any stockholder may be represented and vote by a proxy or proxies
appointed by an instrument in writing, which instrument shall be
filed with the Secretary of the Corporation. In the event that
any such instrument in writing shall designate two or more
persons to act as proxies, a majority of such persons present at
the meetings, or, if only one shall be present, then that one
shall have and may exercise all of the powers conferred by such
written instrument upon all of the persons so designated unless
the instrument shall otherwise provide. No such proxy shall be
valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is
to continue in force, which in no case shall exceed seven years
from the date of its execution. Subject to the above, any proxy
duly executed is not revoked and continues in full force and
effect until an instrument revoking it or a duly executed proxy
bearing a later date is filed with the Secretary of the
Corporation.
Section 9. Action Without a Meeting. Any action which
may be taken by the vote of stockholders at a meeting, may be
taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power;
provided that if any greater proportion of voting power is
required for such action at a meeting, then such greater
proportion of written consents shall be required. This general
provision for action by written consent shall not supersede any
specific provision for action by written consent contained in the
Delaware General Corporation Law. In no instance where action is
authorized by written consent need a meeting of stockholders be
called or noticed.
ARTICLE III
DIRECTORS
Section 1. Powers. Incorporation, these Bylaws, and the
provisions of the Delaware General Corporation Law as to action
to be authorized or approved by the stockholders, and subject to
the duties of Directors as prescribed by these Bylaws, all
corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation must be managed
and controlled by, the Board of Directors. Without prejudice to
such general powers, but subject to the same limitations, it is
hereby expressly declared that the Directors shall have the
following powers:
First. To select and remove all officers, agents and
employees of the Corporation, prescribe such powers and duties
for them as may not be inconsistent with law, the Certificate of
Incorporation or the Bylaws, fix their compensation and require
from them security for faithful service.
Second. To conduct, manage and control the affairs and
business of the Corporation, and to make such rules and
regulations therefor not inconsistent with law, the Certificate
of Incorporation or the Bylaws, as they may deem best.
Third. To change the registered office of the Corporation
in the State of Delaware from one location to another, and the
registered agent in charge thereof, as provided in Article I,
Section 1, hereof; to fix and locate from time to time one or
more subsidiary offices of the Corporation within or without the
State of Delaware, as provided in Article I, Section 2, hereof,
to designate any place within or without the State of Delaware,
for the holding of any stockholders' meeting or meetings; and to
adopt, make and use a corporate seal, and to prescribe the forms
of certificates of stock, and to alter the form of such seal and
of such certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at
all times comply with the provisions of law.
Fourth. To authorize the issuance of shares of stock of the
Corporation from time to time, upon such terms as may be lawful,
in consideration of cash, services rendered, personal property,
real property or leases thereof, or in the case of shares issued
as a dividend, against amounts transferred from surplus to
capital.
Fifth. To borrow money and incur indebtedness for the
purpose of the Corporation, and to cause to be executed and
delivered therefor, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidence of debt and securities therefor.
Sixth. To make the Bylaws of the Corporation, subject to
the Bylaws, if any, adopted by the stockholders.
Seventh. To, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the
Corporation, which, to the extent provided in the resolution or
resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers on which the Corporation
desires to place a seal. Such committee or committees shall have
such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Number and Qualification of Directors. The
number of Directors constituting the whole Board shall be not
less than one nor more than fifteen. The first Board shall
consist of three directors. Thereafter, within the limits above
specified, the number of Directors shall be determined by
resolution of the Board of Directors or by the stockholders at
the annual meeting. All directors must be at least 18 years of
age. Unless otherwise provided in the Certificate of
Incorporation, directors need not be stockholders.
Section 3. Election, Classification and Term of Office.
Each Director shall be elected at each annual meeting of
stockholders by a plurality of votes cast at the election, but if
for any reason the Directors are not elected at the annual
meeting of stockholders, each Director may be elected at any
special meeting of stockholders by a plurality of votes cast at
the election. Each Director shall hold office until his
successor is elected and qualified.
In the event of any increase or decrease in the authorized
number of Directors, each Director then serving as such shall
nevertheless continue as a Director until the expiration of his
current term, or his earlier resignation, removal from office or
death.
Section 4. Vacancies. Vacancies in the Board of
Directors may be filled by a majority of the remaining Directors,
though less than a quorum, or by a sole remaining Director, and
each Director so elected shall hold office until his successor is
elected at an annual or a special meeting of the stockholders.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of
any Director, or if the authorized number of Directors is
increased.
If the Board of Directors accepts the resignation of a
Director tendered to take effect at a future time, the Board or
the stockholder shall have power to elect a successor to take
office when the resignation is to become effective, and such
successor shall hold office during the remainder of the resigning
Director's term of office.
Section 5. Place of Meeting. Regular meetings of the
Board of Directors shall be held at any place within or without
the State of Delaware as designated from time to time by
resolution of the Board or by written consent of all members of
the Board. In the absence of such designation regular meetings
shall be held at the principal executive office of the
Corporation. Special meetings of the Board may be held either at
a place so designated or at the principal executive office.
Members of the Board, or any committee designated by the
Board, may participate in a meeting of such Board or committee by
means of a conference telephone network or a similar
communications method by which all persons participating in the
meeting can hear each other. Such participation shall constitute
presence in person at such meeting. Each person participating in
such meeting shall sign the minutes thereof, which minutes may be
signed in counterparts.
Section 6. Organization Meeting. Immediately following
each annual meeting of stockholders, the Board of Directors shall
hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business. Notice of
such meetings is hereby dispensed with.
Section 7. Special Meetings. Special meetings of the
Board of Directors for any purpose or purposes may be called at
any time by the Chairman of the Board, President or by any two or
more Directors.
Written notice of the time and place of special meetings
shall be delivered personally to the Directors or sent to each
Director by mail or other form of written communication (such as
by telegraph, Federal Express package, or other similar forms of
written communication), charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation, or if
it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the
Directors are regularly held. In case such notice is mailed or
otherwise communicated in writing, it shall be deposited in the
United States mail or delivered to the appropriate delivering
agent at least seventy-two hours prior to the time of the holding
of the meeting. In case such notice is Personally delivered, it
shall be so delivered at least twenty-four hours prior to the
time of the holding of the meeting. Such mailing, personal
delivery or other written communication as above provided shall
be due, legal and personal notice to such Director.
Section 8. Notice of Adjournment. Notice of the time
and place of holding an adjourned meeting need not be given to
absent Directors if the time and place be fixed at the meeting
adjourned.
Section 9. Ratification and Approval. Whenever all
Directors entitled to vote at any meeting consent, either by: (a)
A writing on the records of the meeting or filed with the
Secretary; (b) Presence at such meeting and oral consent entered
on the minutes; or (c) Taking part in the deliberations at such
meeting without objection; the doings of such meeting shall be as
valid as if had at a meeting regularly called and noticed. At
such meeting any business may be transacted which is not excepted
from the written consent or to the consideration of which no
objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the
proceedings of the meeting may be ratified and approved and
rendered likewise valid and the irregularity or defect therein
waived by a writing signed by all Directors having the right to
vote at such meeting.
Section 10. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all the members
of the Board or of such committee. Such written consent shall be
filed with the minutes of proceedings of the Board or committee.
Section 11. Quorum. A majority of the authorized number
of Directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter
provided. Every act or decision done or made by a majority of
the Directors present at a meeting duly assembled at which a
quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the
Certificate of Incorporation.
Section 12. Adjournment. A quorum of the Directors may
adjourn any Directors' meeting to meet again at a stated day and
hour provided, however, that in the absence of a quorum, a
majority of the Directors present at any Directors' meeting,
either regular or special, may adjourn from time to time until a
quorum shall be present.
Section 13. Fees and Compensation. The Board shall have
the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at
each meeting of the Board and may be paid a fixed sum for
attendance at each meeting of the Board or a stated salary as
Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity as an officer,
agent, employee or otherwise, and receiving the compensation
therefor. Members of committees may be compensated for attending
committee meetings.
Section 14. Removal. Any Director may be removed from
office with or without cause by the vote of stockholders
representing not less than two-thirds of the issued and
outstanding capital stock entitled to voting power.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation
shall be a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of
Directors, one or more additional Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, a
Chairman of the Board, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this
Article. Officers other than the Chairman of the Board need not
be Directors. One person may hold two or more offices.
Section 2. Election. The officers of this Corporation,
except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be
chosen annually the Board of Directors and each shall hold his
office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and
qualified.
Section 3. Subordinate Officers, Etc. The Board of
Directors may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are
provided in these Bylaws or as the Board of Directors may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be
removed, either with or without cause, by a majority of the
Directors at the time in office. Any officer may resign at any
time by giving written notice to the Board of Directors, the
President or the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such
notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in the Bylaws for
regular appointments to such office.
Section 6. Chairman of the Board. The Chairman of the
Board, if there be such a position, shall preside at all meetings
of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed by these Bylaws.
Section 7. President. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, the President shall, subject to the
control of the Board of Directors, have general supervision,
direction and control of the business and officers of the
Corporation. In the absence of the Chairman of the Board, or if
there be none, he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. He
shall be ex officio a member of all committees, including the
executive committee, if any, and shall have the general powers
and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or by these
Bylaws.
Section 8. Vice-President. In the absence or disability
of the President, the Vice Presidents, in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, shall perform all
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 Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors or these Bylaws.
Section 9. Secretary. The Secretary shall keep, or
cause to be kept, a book of minutes at the principal executive
office or such other place as the Board of Directors may order,
of all meetings of Directors, committees and stockholders, with
the time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of
those present at Directors' and committee meetings, the number of
shares present or represented at stockholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal executive office (1) a share register, or a duplicate
share register, revised annually, showing the names of the
stockholders, alphabetically arranged, and their places of
residence, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation; (2) a copy of the Certificate of Incorporation
and all amendments thereto certified by the Secretary of State;
and (3) a copy of the Bylaws and all amendments thereto certified
by the Secretary.
The Secretary shall give, or cause to be given, notice of
all the meetings of the stockholders, committees and Board of
Directors required by the Bylaws or by law to be given, and he
shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
Section 10. Treasurer. The Treasurer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus
and surplus arising from a reduction of stated capital, shall be
classified according to source and shown in a separate account.
The books of account shall at all times be open to inspection by
any Director.
The Treasurer shall deposit all monies and other valuables
in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, shall render to the President and
Directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or
the Bylaws.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The
Board of Directors may fix a day, not more than sixty (60) days
prior to the holding of any meeting of stockholders, and not
exceeding thirty (30) days preceding the date fixed for the
payment of any dividend or distribution or for the allotment of
rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of
the stockholders entitled to notice of and to vote at any such
meeting, or entitled to receive any such dividend or
distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of
shares, and in such case only stockholders of record on the date
so fixed shall be entitled to notice of and to vote at such
meetings, or to receive such dividend, distribution or allotment
of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
Corporation after any record date is fixed as aforesaid. The
Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of any such
period.
Section 2. Inspection of Corporate Records.
Stockholders shall have the right to inspect such corporate
records at such times and based upon such limitations of such
rights as may be set forth in the Delaware General Corporation
Law from time to time.
Section 3. Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 4. Contract, Etc., How Executed. The Board of
Directors, except as otherwise provided in these Bylaws may
authorize any officer or officers, agent or agents to enter into
any contract, deed or lease or execute any instrument in the name
of and on behalf of the Corporation, and such authority may be
general or confined to specific instances; and unless so
authorized by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
to render it liable for any purpose or to any amount.
Section 5. Certificates of Stock. A certificate or
certificates for certificated shares of the capital stock of the
Corporation shall be issued to each stockholder when any such
shares are fully paid up. All such certificates shall be signed
by the Chairman of the Board, President or a Vice President, and
by the Treasurer, Secretary or an Assistant Secretary, or be
authenticated by facsimiles of their respective signatures;
provided, however, that every certificate authenticated by a
facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and by a registrar, which registrar
cannot be the Corporation itself.
Certificates for certificated shares may be issued prior to
full payment under such restrictions and for such purposes as the
Board of Directors or the Bylaws may provide; provided, however,
that any such certificate so issued prior to full payment shall
state the amount remaining unpaid and the terms of payment
thereof.
The Board of Directors is hereby authorized, pursuant to the
provisions of Delaware General Corporation Law Section 158, to
issue uncertificated shares of some or all of the shares of any
or all of its classes or series.
Section 6. Representation of the Shares of Other
Corporation. The President or any Vice President, and the
Secretary or Assistant Secretary, of this Corporation are
authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to
vote or represent on behalf of this Corporation any and all
shares held by this Corporation in any other corporation or
corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of
attorney duly executed by said officers.
ARTICLE VI
AMENDMENTS
Section 1. Power of Stockholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote of
stockholders entitled to exercise a majority of the voting power
of the Corporation or by the written assent of such stockholders.
Section 2. Power of Directors. Subject to the right of
stockholders as provided in Section 1 of this Article VI to
adopt, amend or repeal Bylaws, Bylaws may be adopted, amended or
repealed by the Board of Directors.
ARTICLE VII
TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
Section 1. Validity of Contracts and Transactions. No
contract or transaction between the Corporation and one or more
of its Directors or officers, or between the Corporation and any
other corporation, firm, association, or other organization in
which one or more of its Directors or officers are Directors or
officers or are financially interested, shall be void or voidable
solely for this reason, or solely because the Director or officer
is present at or participates in the meeting of the Board of
Directors or committee that authorizes or approves the contract
or transaction, or because their votes are counted for such
purpose, provided that:
(a) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the
committee and noted in the minutes, and the Board of Directors or
committee, in good faith, authorizes the contract or transaction
in good faith by the affirmative vote of a majority of
disinterested directors, even though the disinterested directors
are less than a quorum;
(b) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved
or ratified in good faith by the majority of shares entitled to
vote, counting the votes of the common or interested directors or
officers; or
(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized or approved.
Section 2. Determining Quorum. Common or interested
directors may be counted in determining the presence of a quorum
at a meeting of the board of directors or of a committee which
authorizes, approves or ratifies the contract or transaction.
ARTICLE VIII
INSURANCE AND OTHER FINANCIAL ARRANGEMENTS
The Corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who 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 for any
liability asserted against him and liability and expenses
incurred by him in his capacity as a Director, officer, employee
or agent, or arising out of his status as such, whether or not
the Corporation has the authority to indemnify him against such
liability and expenses. The insurance or other financial
arrangements may be provided by the Corporation or by any other
person or entity approved by the Board of Directors including a
subsidiary of the corporation.
Such other financial arrangements made by the Corporation
may include the following:
(a) The creation of a trust fund;
(b) The establishment of a program of self-insurance;
(c) The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the
Corporation; or
(d) The establishment of a letter of credit, guaranty or
surety. No financial arrangement may provide protection for a
person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with
respect to the advancement of expenses or indemnification ordered
by a court as provided in Article IX hereof.
ARTICLE IX
INDEMNIFICATION
Section 1. Action Not By Or On Behalf Of Corporation.
The Corporation shall 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 (other than 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), 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 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 an 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, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 2. Action By Or On Behalf Of Corporation. The
Corporation shall 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 he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that
indemnification may not be made for any claim, issue or matter as
to which such a person shall have 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 determines upon application that, in
view of all of the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
Section 3. Successful Defense. To the extent that a
Director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 1 or 2 of this Article
IX, or in defense of any claim, issue or matter therein, he must
be indemnified by the Corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense.
Section 4. Determination Of Right To Indemnification In
Certain Circumstances. Any indemnification under Section I or 2
of this Article IX, unless ordered by a court or advanced
pursuant to this Article IX, must be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is
proper in the circumstances. The determination must be made by
the Stockholders, the Board of Directors by a majority vote of a
quorum consisting of Directors who were not parties to the act,
suit or proceeding, or if a majority vote of a quorum of
Directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion, or if
a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. Advance Payment of Expenses. Expenses of
officers and Directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the Corporation as
they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the Corporation as
authorized in this Article. The provisions of this subsection
(5) of this Article IX shall not affect any rights to advancement
of expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
Section 6. Not Exclusive.
(a) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to any other section
of this Article IX or any provision of law:
(i) does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any statute,
bylaw, agreement, vote of stockholders or disinterested Directors
or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
2 of this Article IX or for the advancement of expenses made
pursuant to this Article IX may not be made to or on behalf of
any Director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of
action; and
(ii) continues for a person who has ceased to be a Director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
(b) Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any Director, officer,
employee or agent of the Corporation providing indemnification
for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from
any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, that
arises by reason of the fact that such person 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, to the full extent
allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute intentional
misconduct, fraud, or a knowing violation of law and was material
to the cause of action.
Section 7. Certain Definitions. For the purposes of
this Article IX, (a) any Director, officer, employee or agent of
the Corporation who shall serve as a director, officer, employee
or agent of any other corporation, joint venture, trust or other
enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is
or was in any way interested, or (b) any Director, officer,
employee or agent of any subsidiary corporation, joint venture,
trust or other enterprise wholly owned by the Corporation, shall
be deemed to be serving as such Director, officer, employee or
agent at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all
other instances where any person shall serve as director,
officer, employee or agent of another corporation, joint venture,
trust or other enterprise of which the Corporation is or was a
stockholder or creditor, or in which it is or was otherwise
interested, if it is not otherwise established that such person
is or was serving as such director, officer, employee or agent at
the request of the Corporation, the Board of Directors of the
Corporation may determine whether such service is or was at the
request of the Corporation, and it shall not be necessary to show
any actual or prior request for such service. For purposes of
this Article IX references to a corporation include all
constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person
who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, joint venture, trust or other
enterprise shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving
corporation as he would if he had served the resulting or
surviving corporation in the same capacity. For purposes of this
Article IX, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a Director, officer,
employee or agent of the Corporation which imposes duties on, or
involves services by, such Director, officer, employee, or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article IX.
E-40
Exhibit No. 5
Form 10-SB
BUI, Inc.
STOCK OPTION AGREEMENT
Option for the Purchase of 100,000 Shares of Common Stock
Par Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Rod
Smith (the "Optionee") is entitled to purchase from BUI,
INC. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 100,000 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.00
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 100,000 common shares
shall vest and become exercisable at any time commencing on
March 1, 1999, and continuing through June 1, 2010.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, INC.
By /s/ Paul Jarman,
Treasurer
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Rod Smith
STOCK OPTION AGREEMENT
Option for the Purchase of 291,250 Shares of Common Stock
Par Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Rod
Smith (the "Optionee") is entitled to purchase from BUI,
INC. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 291,250 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.00
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 291,250 common shares
shall vest and become exercisable at any time commencing on
April 1, 1999, and continuing through March 1, 2008.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, INC.
By /s/ Paul Jarman,
Treasurer
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Rod Smith
E-46
Exhibit No. 6
Form 10-SB
BUI, Inc.
STOCK OPTION AGREEMENT
Option for the Purchase of 55,622 Shares of Common Stock Par
Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Gary
Smith (the "Optionee") is entitled to purchase from BUI,
INC. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 55,622 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.024
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 55,622 common shares shall
vest and become exercisable at any time commencing on
October 1, 1996, and continuing through October 15, 2000.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, INC.
By /s/ Paul Jarman,
Treasurer
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Gary Smith
STOCK OPTION AGREEMENT
Option for the Purchase of 27,500 Shares of Common Stock Par
Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Gary Smith
(the "Optionee") is entitled to purchase from BUI, INC. (the
"Company"), on the terms and conditions hereinafter set
forth, all or any part of 27,500 shares ("Option Shares")
of the Company's common stock, par value $0.001 (the "Common
Stock"), at the purchase price of $2.00 per share ("Option
Price"). Upon exercise of this option in whole or in part,
a certificate for the Option Shares so purchased shall be
issued and delivered to the Optionee, upon presentation and
surrender to the Company of the duly executed form of
purchase attached hereto accompanied by payment of the
purchase price of each share purchased either in cash or by
certified or bank cashier's check payable to the order of
the Company. If less than the total option is exercised, a
new option of similar tenor shall be issued for the
unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 27,500 common shares shall
vest and become exercisable at any time commencing on June
1, 1998, and continuing through December 31, 2003.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, INC.
By /s/ Rod Smith,
President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Gary Smith
E-52
Exhibit No. 7
Form 10-SB
BUI, Inc.
STOCK OPTION AGREEMENT
Option for the Purchase of 111,243 Shares of Common Stock
Par Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Doug
Smith (the "Optionee") is entitled to purchase from BUI,
Inc. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 111,243 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.696
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 55,622 common shares shall vest
and become exercisable at any time commencing on May 1,
1997, and continuing through May 1, 2010.
2. This option to purchase 18,540 common shares shall vest
and become exercisable at any time commencing on May 1,
1998, and continuing through May 1, 2010.
3. This option to purchase 18,540 common shares shall vest
and become exercisable at any time commencing on May 1,
1999, and continuing through May 1, 2010.
4. This option to purchase 18,541 common shares shall vest
and become exercisable at any time commencing on May 1,
2000, and continuing through May 1, 2010.
5. The Optionee acknowledges that the shares subject to
this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
6. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
7. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
8. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
9. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
10. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
11. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
12. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
13. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, Inc.
By /s/ Rod Smith, President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Doug Smith
STOCK OPTION AGREEMENT
Option for the Purchase of 81,319 Shares of Common Stock Par
Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Doug
Smith (the "Optionee") is entitled to purchase from BUI,
Inc. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 81,319 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.00
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 81,319 common shares shall
vest and become exercisable at any time commencing on March
1, 1999, and continuing through June 1, 2010.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, Inc.
By /s/ Rod Smith, President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Doug Smith
E-53
Exhibit No. 8
Form 10-SB
BUI, Inc.
STOCK OPTION AGREEMENT
Option for the Purchase of 111,243 Shares of Common Stock
Par Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Paul
Jarman (the "Optionee") is entitled to purchase from BUI,
Inc. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 111,243 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.696
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 55,622 common shares shall vest
and become exercisable at any time commencing on May 1,
1997, and continuing through May 1, 2010.
2. This option to purchase 18,540 common shares shall vest
and become exercisable at any time commencing on May 1,
1998, and continuing through May 1, 2010.
3. This option to purchase 18,540 common shares shall vest
and become exercisable at any time commencing on May 1,
1999, and continuing through May 1, 2010.
4. This option to purchase 18,541 common shares shall vest
and become exercisable at any time commencing on May 1,
2000, and continuing through May 1, 2010.
5. The Optionee acknowledges that the shares subject to
this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
6. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
7. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
8. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
9. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
10. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
11. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
12. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
13. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, Inc.
By /s/ Rod Smith, President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Paul Jarman
STOCK OPTION AGREEMENT
Option for the Purchase of 87,015 Shares of Common Stock Par
Value $0.001
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES THAT THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, Paul
Jarman (the "Optionee") is entitled to purchase from BUI,
Inc. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of 87,015 shares
("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $2.00
per share ("Option Price"). Upon exercise of this option in
whole or in part, a certificate for the Option Shares so
purchased shall be issued and delivered to the Optionee,
upon presentation and surrender to the Company of the duly
executed form of purchase attached hereto accompanied by
payment of the purchase price of each share purchased either
in cash or by certified or bank cashier's check payable to
the order of the Company. If less than the total option is
exercised, a new option of similar tenor shall be issued for
the unexercised portion of the options represented by this
Agreement. Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within 10 business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such
exercise. Such certificate or certificates shall be deemed
to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the
date of the surrender of the purchase form.
This option is granted subject to the following
further terms and conditions:
1. This option to purchase 87,015 common shares shall
vest and become exercisable at any time commencing on March
1, 1999, and continuing through June 1, 2010.
2. The Optionee acknowledges that the shares subject
to this option have not and will not be registered as of the
date of exercise of this option under the Securities Act or
the securities laws of any state. The Optionee acknowledges
that this option and the shares issuable on exercise of the
option, when and if issued, are and will be "restricted
securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the
Securities Act and any other applicable state registration
requirements.
3. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall
be subject to adjustment from time to time subject to the
following terms. If the outstanding shares of Common Stock
of the Company are increased, decreased, changed into or
exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall
make an appropriate and proportionate adjustment in the
number or kind of shares, and the per-share Option Price
thereof, which may be issued to the Optionee under this
Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option
shall not be exercisable with respect to a fraction of a
share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the
number of shares subject to this option shall rounded up to
the nearest whole share.
4. The Company covenants and agrees that all Option
Shares which may be delivered upon the exercise of this
option will, upon delivery, be free from all taxes, liens,
and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to
any income tax liability of the Optionee and the Company
may, in its discretion, withhold such amount or require the
Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any
income tax withholding obligation under federal or state
law.
5. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to
cover the number of Option Shares issuable upon the exercise
of this and all other options of like tenor then
outstanding.
6. This option shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever, except the
rights herein expressed, and no dividends shall be payable
or accrue in respect of this option or the interest
represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that,
this option shall be exercised..
7. The holder of this option, by acceptance hereof,
acknowledges and agrees that this option is not transferable
by the Optionee except by will or the laws of descent or
distribution. The Company may deem and treat the registered
owner of this option as the absolute owner hereof for all
purposes and shall not be affected by any notice to the
contrary.
8. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall
not be construed as rendering any other provisions contained
herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision were
not contained herein.
9. This Agreement shall be governed by and construed
in accordance with the internal laws of the state of Utah,
without regard to the principles of conflicts of law
thereof.
10. Except as otherwise provided herein, this
Agreement shall be binding on and inure to the benefit of
the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives,
assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option
to be executed by the signature of its duly authorized
officer, effective this 15th day of January 1998.
BUI, Inc.
By /s/ Rod Smith, President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to
the terms and conditions set forth in the option.
/s/ Paul Jarman
E-59
Exhibit No. 9
Form 10-SB
BUI, Inc.
BUYERS UNITED INTERNATIONAL, INC.
LONG-TERM STOCK INCENTIVE PLAN
SECTION 1
GENERAL
1.1.Purpose. The Buyers United International, Inc., Long-
Term Stock Incentive Plan (the "Plan") has been established by
Buyers United International, Inc. (the "Company") to (i) attract
and retain persons eligible to participate in the Plan; (ii)
motivate Participants, by means of appropriate incentives, to
achieve long-range goals; (iii) provide incentive compensation
opportunities that are competitive with those of other similar
companies; and (iv) further identify Participants' interests with
those of the Company's other shareholders through compensation
that is based on the Company's common stock; and thereby promote
the long-term financial interest of the Company and the
Subsidiaries, including the growth in value of the Company's
equity and enhancement of long-term shareholder return.
1.2.Participation. Subject to the terms and conditions of
the Plan, the Committee shall determine and designate, from time
to time, from among the Eligible Persons (including transferees
of Eligible Persons to the extent the transfer is permitted by
the Plan and the applicable Award Agreement), those persons who
will be granted one or more Awards under the Plan, and thereby
become "Participants" in the Plan. In the discretion of the
Committee, a Participant may be granted any Award permitted under
the provisions of the Plan, and more than one Award may be
granted to a Participant. Awards may be granted as alternatives
to or replacement of awards outstanding under the Plan, or any
other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or
a portion of which is acquired by the Company or a Subsidiary).
1.3.Operation, Administration, and Definitions. The
operation and administration of the Plan, including the Awards
made under the Plan, shall be subject to the provisions of
Section 4 (relating to operation and administration).
Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 6 of the
Plan).
SECTION 2
OPTIONS AND SARS
2. 1. Definitions.
(a) The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price established by
the Committee. Options granted under this Section 2 may be
either Incentive Stock Options ("ISOs") or Non-Qualified
Options ("NQOs"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock
option" described in section 422(b) of the Code. An "NQO"
is an Option that is not intended to be an "incentive stock
option" as that term is described in section 422(b) of the
Code.
(b) A stock appreciation right (an "SAR") entities the
Participant to receive, in cash or Stock (as determined in
accordance with subsection 2.5), value equal to (or
otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of
exercise; over (b) an Exercise Price established by the
Committee.
2.2. Exercise Price. The "Exercise Price" of each Option
and SAR granted under this Section 2 shall be established by the
Committee or shall be determined by a method established by the
Committee at the time the Option or SAR is granted; except that
the Exercise Price shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.
2.3. Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods
as may be established by the Committee.
2.4. Payment of Option Exercise Price. The payment of the
Exercise Price of an Option granted under this Section 2 shall be
subject to the following:
(a) Subject to the following provisions of this subsection 2.4,
the full Exercise Price for shares of Stock purchased upon
the exercise of any Option shall be paid at the time of such
exercise (except that, in the case of an exercise
arrangement approved by the Committee and described in
paragraph 2.4(c), payment may be made as soon as practicable
after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering,
by either actual delivery of shares or by attestation,
shares of Stock acceptable to the Committee, and valued at
Fair Market Value as of the day of exercise, or in any
combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of
the Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise.
2.5. Settlement of Award. Shares of Stock delivered
pursuant to the exercise of an option or SAR shall be subject to
such conditions, restrictions and contingencies as the Committee
may establish in the applicable Award Agreement. Settlement of
SARs may be made in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The
Committee, in its discretion, may impose such conditions,
restrictions and contingencies with respect to shares of Stock
acquired pursuant to the exercise of an Option or an SAR as the
Committee determines to be desirable.
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions.
(a) A "Stock Unit" Award is the grant of a right to receive
shares of Stock in the future.
(b) A "Performance Share" Award is a grant of a right to receive
shares of Stock or Stock Units which is contingent on the
achievement of performance or other objectives during a
specified period.
(c) A "Restricted Stock" Award is an grant of shares of Stock,
and a "Restricted Stock Unit" Award is the grant of a right
to receive shares of Stock in the future, with such shares
of Stock or right to future delivery of such shares of Stock
subject to a risk of forfeiture or other restrictions that
will lapse upon the achievement of one or more goals
relating to completion of service by the Participant, or
achievement of performance or other objectives, as
determined by the Committee.
3.2. Restrictions on Stock Awards. Each Stock Unit Award,
Restricted Stock Award, Restricted Stock Unit Award and
Performance Share Award shall be subject to the following:
(a) Any such Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall
determine. The Committee may designate whether any such
Award being granted to any Participant are intended to be "
performance-based compensation" as that term is used in
section 162(m) of the Code. Any such Awards designated as
intended to be "performance-based compensation" shall be
conditioned on the achievement of one or more Performance
Measures. For Awards intended to be "performance-based
compensation," the grant of the Awards and the establishment
of the Performance Measures shall be made during the period
required under Code section 162(m). The "performance
measures" that may be used by the Committee for such Awards
shall be based on one or more of the following, as selected
by the Committee:
(i) operating profits (including EBITDA), net
profits, earnings per share, profit returns and margins,
revenues, shareholder return and/or value, stock price, or
working capital, which may be measured on a Company,
Subsidiary, or business unit basis; or
(ii) any one or more of the performance criteria
set forth in the next preceding paragraph (i) measured on
the basis of a relative comparison of entity performance to
the performance of a peer group of entities or other
external measure of the selected performance criteria;
provided, that profit, earnings, and revenues used for any
performance measure shall exclude: gains or losses on
operating asset sales or dispositions; litigation or claim
judgments or settlements; accruals for historic
environmental obligations; effect of changes in tax law or
rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured
catastrophic property losses; the cumulative effect of
changes in accounting principles; and any extraordinary non-
recurring items as described in Accounting Principles Board
Opinion No. 30.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the
shareholders of the Company in the manner required by the laws of
the state of Utah, the Plan shall be effective as of March 11,
1999 (the "Effective Date"); provided, however, that to the
extent that Awards are granted under the Plan prior to its
approval by shareholders, the Awards shall be contingent on
approval of the Plan by the shareholders of the Company. The
Plan shall be unlimited in duration and, in the event of Plan
termination, shall remain in effect as long as any Awards under
it are outstanding; provided, however, that, to the extent
required by the Code, no ISO may be granted under the Plan on a
date that is more than ten years from the date the Plan is
adopted or, if earlier, the date the Plan is approved by
shareholders.
4.2. Shares Subject to Plan. The shares of Stock for which
Awards may be granted under the Plan shall be subject to the
following:
(a) Subject to the following provisions of this subsection 4.2,
the maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be
2,400,000.
(b) To the extent that any shares of Stock covered by an Award
are not delivered to a Participant or beneficiary because the
Award is forfeited or canceled, or the shares of Stock are not
delivered because the Award is settled in cash or used to satisfy
the applicable tax withholding obligation, such shares shall not
be deemed to have been delivered for purposes of determining the
maximum number of shares of Stock available for delivery under
the Plan.
(c) If the exercise price of any stock option granted under the
Plan or any Prior Plan is satisfied by tendering shares of Stock
to the Company (by either actual delivery or by attestation),
only the number of shares of Stock issued net of the shares of
Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock available for
delivery under the Plan.
(d) Subject to paragraph 4.2(e), the following additional
maximums are imposed under the Plan.
(i) The maximum number of shares of stock that may be
issued by Options intended to be ISOs shall be 2,400,000
shares.
(ii) The maximum number of shares of Stock that may be
issued in conjunction with Awards granted pursuant to
Section 3 (relating to Stock Awards) shall be 120,000
shares.
(iii) The maximum number of shares that may be covered
by Awards granted to any one individual pursuant to Section
2 (relating to Options and SARs) shall be 120,000 shares
during any.
(iv) No more than 120,000 shares of Stock may be subject to
Stock Unit awards, Restricted Stock Awards, Restricted Stock
Unit Awards and Performance Share Awards that are intended
to be "performance-based compensation" (as that term is used
for purposes of Code section 162(m)) granted to any one
individual during any one-calendar-year period (regardless
of when such shares are deliverable).
(e) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), the Committee may adjust
Awards to preserve the benefits or potential benefits of the
Awards. Action by the Committee may include: (i) adjustment
of the number and kind of shares which may be delivered
under the Plan; (ii) adjustment of the number and kind of
shares subject to outstanding Awards; (iii) adjustment of
the Exercise Price of outstanding Options and SARs; and (iv)
any other adjustments that the Committee determines to be
equitable.
4.3. General Restrictions. Delivery of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under
the Plan or make any other distribution of benefits under
the Plan unless such delivery or distribution would comply
with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or
similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the
issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable
rules of any stock exchange.
4.4. Tax Withholding. All distributions under the Plan are
subject to withholding of all applicable taxes, and the Committee
may condition the delivery of any shares or other benefits under
the Plan on satisfaction of the applicable withholding
obligations. The Committee, in its discretion, and subject to
such requirements as the Committee may impose prior to the
occurrence of such withholding, may permit such withholding
obligations to be satisfied through cash payment by the
Participant, through the surrender of shares of Stock which the
Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the
Plan.
4.5. Use of Shares. Subject to the overall limitation on
the number of shares of Stock that may be delivered under the
Plan, the Committee may use available shares of Stock as the form
of payment for compensation, grants or rights earned or due under
any other compensation plans or arrangements of the Company or a
Subsidiary, including the plans and arrangements of the Company
or a Subsidiary assumed in business combinations.
4.6. Dividends and Dividend Equivalents. An Award
(including without limitation an Option or SAR Award) may provide
the Participant with the right to receive dividend payments or
dividend equivalent payments with respect to Stock subject to the
Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made
currently or credited to an account for the Participant, and may
be settled in cash or Stock as determined by the Committee. Any
such settlements, and any such crediting of dividends or dividend
equivalents or reinvestment in shares of Stock, may be subject to
such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited
amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments,
the delivery of shares of Stock, the granting of replacement
Awards or combination thereof as the Committee shall determine.
Any Award settlement, including payment deferrals, may be subject
to such conditions, restrictions and contingencies, as the
Committee shall determine. The Committee may permit or require
the deferral of any Award payment, subject to such rules and
procedures as it may establish, which may include provisions for
the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash
due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for
that Subsidiary by the Participant. Any disputes relating to
liability of a Subsidiary for cash payments shall be resolved by
the Committee.
4.8 Transferability. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as
designated by the Participant by will or by the laws of descent
and distribution.
4.9 Form and Time of Elections. Unless otherwise specified
herein, each election required or permitted to be made by any
Participant or other person entitled to benefits under the Plan,
and any permitted modification, or revocation thereof, shall be
in writing filed with the Committee at such times, in such form,
and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
4.10 Agreement With Company. An Award under the Plan shall
be subject to such terms and conditions, not inconsistent with
the Plan, as the Committee shall, in its sole discretion,
prescribe. The terms and conditions of any Award to any
Participant shall be reflected in such form of written document
as is determined by the Committee. A copy of such document shall
be provided to the Participant, and the Committee may, but need
not require that the Participant shall sign a copy of such
document. Such document is referred to in the Plan as an "Award
Agreement" regardless of whether any Participant signature is
required.
4.11 Action by Company or Subsidiary. Any action required
or permitted to be taken by the Company or any Subsidiary shall
be by resolution of its board of directors, or by action of one
or more members of the board (including a committee of the board)
who are duly authorized to act for the board, or (except to the
extent prohibited by applicable law or applicable rules of any
stock exchange) by a duly authorized officer of such company.
4.12.Gender and Number. Where the context admits, words in
any gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
4.13.Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason
of participation in the Plan, acquire any right in or title
to any assets, funds or property of the Company or any
Subsidiary whatsoever, including, without limitation, any
specific funds, assets, or other property which the Company
or any Subsidiary, in their sole discretion, may set aside
in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the Stock
or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the
assets of the Company or any Subsidiary shall be sufficient
to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating
person the right to be retained in the employ of the Company
or any Subsidiary, nor any right or claim to any benefit
under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any rights as a shareholder of the
Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
4.14.Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information,
which the person acting on it considers pertinent and reliable,
and signed, made or presented by the proper party or parties.
SECTION 5
COMMITTEE
5.1. Administration. The authority to control and manage
the operation and administration of the Plan shall be vested in a
committee (the "Committee") in accordance with this Section 5.
The Committee shall be selected by the Board, and shall consist
solely of one or more members of the Board who are not employees.
If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the
Plan that would otherwise be the responsibility of the Committee.
5.2. Powers of Committee. The Committee's administration of
the Plan shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to select from among the
Eligible Persons those persons who shall receive Awards, to
determine the time or times of receipt, to determine the
types of Awards and the number of shares covered by the
Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards,
and (subject to the restrictions imposed by Section 6) to
cancel or suspend Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of
the material purposes of the Awards in jurisdictions outside
the United States, the Committee will have the authority and
discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions
outside of the United States.
(c) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, to determine the
terms and provisions of any Award Agreement made pursuant to
the Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on
all persons.
(e) In controlling and managing the operation and administration
of the Plan, the Committee shall take action in a manner
that conforms to the articles and by-laws of the Company,
and applicable state corporate law.
5.3. Delegation by Committee. Except to the extent
prohibited by applicable law or the applicable rules of a stock
exchange, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers
to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
5.4. Information to be Furnished to Committee. The Company
and Subsidiaries shall furnish the Committee with such data and
information as it determines may be required for it to discharge
its duties. The records of the Company and Subsidiaries as to a
Participant's employment, termination of employment, leave of
absence, reemployment and compensation shall be conclusive on all
persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish
the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
SECTION 6
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan,
provided that no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if
the Participant is not then living, the affected beneficiary),
adversely affect the rights of any Participant or beneficiary
under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments
pursuant to subject to subsection 4.2(e) shall not be subject to
the foregoing limitations of this Section 6.
SECTION 7
DEFINED TERMS
In addition to the other definitions contained herein, the
following definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit
granted under the Plan, including, without limitation, the
grant of Options, SARs, Stock Unit Awards, Restricted Stock
Awards, Restricted Stock Unit Awards and Performance Share
Awards.
(b) Board. The term "Board" shall mean the Board of Directors
of the Company.
(c) Code. The term "Code" means the Internal Revenue Code of
1986, as amended. A reference to any provision of the Code
shall include reference to any successor provision of the
Code.
(d) Eligible Person. The term "Eligible Person" shall mean any
director, officer, employee or consultant of the Company or
a Subsidiary. An Award may be granted to a person, in
connection with hiring, retention or otherwise, prior to the
date the person first performs services for the Company or
the Subsidiaries, provided that such Awards shall not become
vested prior to the date the person first performs such
services.
(e) Fair Market Value. For purposes of determining the "Fair
Market Value" of a share of Stock as of any date, the
following rules shall apply:
(i) If the principal market for the Stock is a national
securities exchange or the Nasdaq stock market, then the
"Fair Market Value" as of that date shall be the mean
between the lowest and highest reported sale prices of the
Stock on that date on the principal exchange which the Stock
is then listed or admitted to trading.
(ii) If sale prices are not available or if the principal
market for the Stock is not a national securities exchange
and the Stock is not quoted on the Nasdaq stock market, the
average between the highest bid and lowest asked prices for
the Stock on such day as reported on the NASDAQ OTC Bulletin
Board Service or by the National Quotation Bureau,
Incorporated or a comparable service.
(iii) If the day is not a business day, and as a result,
paragraphs (i) and (ii) next above are inapplicable, the
Fair Market Value of the Stock shall be determined as of the
last preceding business day. If paragraphs (i) and (ii)
next above are otherwise inapplicable, then the Fair Market
Value of the Stock shall be determined in good faith by the
Committee.
(f) Subsidiaries. The term "Subsidiary" means any company
during any period in which it is a "subsidiary corporation"
(as that term is defined in Code section 424(f)) with
respect to the Company.
(g) Stock. The term "Stock" shall mean shares of common stock
of the Company.
E-73
Exhibit No. 10
Form 10-SB
BUI, Inc.
COMMERCIAL LEASE (10-21-98)
THIS LEASE (the "Lease") dated this 4 day of November, 1998,
is entered into by and between DRAPER LAND LIMITED PARTNERSHIP
No.2, a Utah limited partnership ("Landlord"), and BUYERS UNITED
INTERNATIONAL, a Utah Corporation ("Tenant").
1. PREMISES.
(a) Description. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, for the term and subject to
the terms and conditions hereinafter set forth, to each and all
of which Landlord and Tenant hereby mutually agree, those certain
premises (the "Premises"), highlighted on Exhibit A attached
hereto, which include approximately 2,602 Rentable square feet of
office space (the exact Rentable square footage and location to
be determined by final space plan). The location of the Premises
is commonly known as: Building B, Suite 101, 66 East Wadsworth
Park Drive, Draper, Utah 84020.
(b) Additional Use. In addition, the Premises shall include
the appurtenant right to use, in common with others, the site,
parking and landscaped areas. Landlord shall provide Tenant, at
no additional charge, the use of 5 non-reserved parking stalls
per every 1,000 square feet of usable space.
(c) Acceptance of Premises. Unless otherwise notified by
Tenant within thirty (30) days of taking possession, by entry
hereunder Tenant accepts the Premises as being in the condition
in which Landlord is obligated to deliver the Premises. Tenant
shall at the end of the term and any extension herein surrender
to Landlord the Premises and all alterations, additions and
improvements thereto in the same condition as when received;
ordinary wear and tear, damage by fire, earthquake, or act of God
excepted. Landlord has no liability and has made no
representation to alter, improve, repair, or paint the Premises
or any part thereof, except as specified in Article 2(c), 2(d) &
6 herein.
2. TERM, OPTION, TENANT IMPROVEMENTS.
(a) Lease Term. The initial Lease Term shall be 66 months
and shall commence on December 20, 1998 ("Commencement Date"),
which Commencement Date is subject to the substantial completion
of Tenant Improvements. If Landlord is solely responsible for not
delivering possession of the Premises to Tenant within forty-five
(45) days of the Commencement Date, Tenant may upon ten (10) days
written notice terminate the Lease. In the event of Tenant's
termination due to late delivery, Landlord shall not be liable to
tenant for any damage of any kind resulting from such late
delivery or failure to deliver possession of the Premises.
(b) Option. Provided that Tenant is not in default under
the Lease (either at the time of exercise of the option or at the
time of the commencement of the option period), Tenant shall have
the option to extend the term of the Lease for one 5-Year period,
by delivering written notice to Landlord exercising this option
no later than one hundred fifty (150) days prior to the
expiration of the existing Lease Term. Tenant shall possess the
Premises during the option period upon same terms and conditions
of the Lease except that Base Rent under Article 4(a) herein will
be increased
for the first year of the option period to 95% of the then
current effective market rate for similar space in similar
condition in the surrounding area. In no event will the Base Rent
for the option period be less than the Base Rent during the final
year of the initial Lease Term.
(c) Base Building Improvements. At Landlord's sole cost and
expense, Landlord shall design, construct and install the
Building's roof and structural elements ("Shell"), shall provide
basic utility access to and an initial HVAC unit for the
Premises, and shall design and construct the common areas of the
Premises and Building, as more specifically outlined in Exhibit B
- - Base Building Improvements (collectively "Base Building
Improvements"). Any improvements made to Building at the request
of Tenant beyond those specified in Exhibit B shall be considered
Tenant Improvements.
(d) Tenant Improvements. At execution of the Lease, Tenant
shall commence the building design, construction and installation
of agreed-upon Tenant Improvements as provided for in Exhibit C -
Tenant Improvements Construction With Tenant Improvement
Allowance (collectively "Tenant Improvements").
3. NON-OCCUPANCY OF IMPROVED SPACE.
In the event Tenant does not occupy the Premises, except as
provided for in the event of termination, and fails to pay Rents
as required in Article 4 of the Lease, all costs for Tenant
Improvements become due and payable upon invoicing by Landlord.
Further, such invoicing by Landlord does not waive any other
rights or remedies Landlord may have against Tenant for failure
to occupy.
4. RENT.
4.1 Base Rent. Total Base Rent shall be $12.50 per Rentable
square foot or $32,525.00+ subject to an annual increase as
provided below, payable as follows: $2,710.42+ per month payable
in advance on or before the 1st day of each month during the
duration of the Lease, with the first such monthly rental
payments, plus the one month's security deposit per Section 31,
being due upon the execution of the Lease. This Base Rent is
estimated herein since the square footage is approximated. The
exact Base Rent will be determined according to the square
footage stated in the final space plan. Any partial months shall
be prorated accordingly. Base Rent under this Article shall be
increased by 3.5% per year after the twelfth (12) month of the
Lease Term and each year thereafter including during any option
period (after adjustment to fair market value at the beginning of
the option period) as provided in section 2b. All Base Rent and
Additional Rent (collectively "Rents") shall be paid as follows,
unless otherwise directed in writing, to Prime Commercial
Management, 12257 South Business Park Drive, Suite 110, Draper,
UT 84020, Attn: Brent Shaw.
4.2 Operating Expenses. Tenant shall pay to Landlord during the
term hereof, in addition to the Base Rent, Tenant's Share, as
hereinafter defined, of all Operating Expenses, as hereinafter
defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "Tenant's Share" is defined, for purposes of this
Lease, as a fraction in which the numerator is the number of
rentable square feet in the Premises and the denominator is the
total number of rentable square feet in the Building. Based on
the approximate square footage of the Premises, Tenant's Share is
2.602 SF, or 3.8 %. The exact Tenant's Share will be calculated
when the exact square footage of the Premises is known.
(b) "Operating Expense" is defined, for purposes of
this Lease, as all costs incurred by Landlord, if any, for:
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) All common areas in or around the Building,
including parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways, driveways,
landscaped areas, striping, bumpers, irrigation systems, common
area lighting facilities and fences and gates;
(bb) Trash disposal services;
(cc) Tenant directories;
(dd) Fire detection systems including sprinkler
system maintenance and repair;
(ee) Security services;
(ft) Any expense allocated to the Building for
the maintenance, repair, insurance or taxes
applicable to Wadsworth Park Drive or other
common areas of the Wadsworth Industrial Park;
(gg) Any other service to be provided by
Landlord that is elsewhere in this Lease stated
to be an "Operating Expense;"
(ii) The cost of water, gas and electricity to service
common areas in or around the Building;
(iii) The cost of any property and/or liability
insurance obtained by Landlord pursuant to Article 13
hereof.
(iv) The cost of real estate property taxes for the
building.
(c) The inclusion of the improvements, facilities and
services set forth in Section 4.2(b)(i) of the definition of
Operating Expenses shall not be deemed to impose an obligation
upon Landlord to either have said improvements or facilities or
to provide those services unless Landlord already provides the
services, or Landlord has agreed elsewhere in this Lease to
provide the same or some of them.
(d) Tenant's Share of Operating Expenses shall be payable
by Tenant within ten (10) days after a reasonably detailed
statement of actual expenses is presented to Tenant by Landlord.
At Landlord's option, however, an amount may be estimated by
Landlord from time to time of Tenant's Share of annual Operating
Expenses and the same shall be payable monthly orquarterly, as
Landlord shall designate, during each twelve-month period of the
Lease term, on the same day as the Base Rent is due hereunder. In
the event that Tenant pays Landlord's estimate of Tenant's Share
of Operating Expenses as aforesaid, Landlord shall deliver to
Tenant within sixty (60) days after the expiration of each
calendar year a reasonably detailed statement showing Tenant's
Share of the actual Operating Expenses incurred during the
preceding year. If Tenant's payments under this paragraph during
said preceding year exceed Tenant's share as indicated on said
statement, Tenant shall be entitled to credit the amount of such
overpayment against Tenant's Share of Operating Expenses next
falling due. If Tenant's payments under this paragraph during
said preceding year were less than Tenant's Share as indicted on
said statement, Tenant shall pay to Landlord the amount of the
deficiency within ten (10) days after delivery by Landlord to
Tenant of said statement.
4.3 Additional Rent. All obligations payable by Tenant under
the Lease other than Base Rent are called "Additional Rent" and
shall include but not be limited to the costs of any Tenant
Improvements to be paid by Tenant, over the allowance given by
the Landlord, excess Operating Expenses and actual costs
associated with the usage of HVAC system and lights other than
during ordinary business hours and Insurance and Taxes.
Additional Rent shall be paid monthly with Base Rent pursuant to
the Lease, unless otherwise invoiced by Landlord.
4.4 Interest Late Charges Costs and Attorneys' Fees. If Tenant
fails to pay within ten (10) days of the date due any Rents which
Tenant is obligated to pay under the Lease, the unpaid amount
shall bear interest at twelve (12%) percent per annum. Tenant
acknowledges that any late payments of Rents shall cause Landlord
to lose the use of that money and incur costs and expenses not
contemplated under the Lease, including without limitation
administrative, collection and accounting costs, the exact amount
of which is difficult to ascertain. Therefore, in addition to
interest, any late payments shall be accompanied by a payment of
a late charge equal to five (5%) percent of the late Rents.
Further, as Additional Rent, Tenant shall be liable to Landlord
for costs and attorneys fees incurred as a result of late
payments or non-payments. Acceptance of any interest, late
charge, costs or attorneys' fees shall not constitute a waiver of
any default by Tenant nor prevent Landlord from exercising any
other rights or remedies under the Lease or at law.
5. USE.
(a) The Premises shall be used for general office space and
any other lawful purpose incidental to Tenant's business, and no
other, unless consented to in writing by Landlord. Tenant shall
not do or permit to be done in or about the Premises or Building
anything which is prohibited by or in any way in conflict with
any and all laws, statutes, ordinances, rules and regulations now
in force or which may hereafter be enacted or promulgated or
which is prohibited by the standard form of fire insurance
policy, or which will increase the existing rate of or affect any
fire or other insurance upon the Premises or Building or any of
its contents, or cause a cancellation of any insurance policy
covering the Premises or Building or any part thereof or any of
its contents. Tenant shall not handle, use, store or otherwise
put any hazardous material on the Premises, without first
notifying Landlord of its intention to do so and identifying the
hazardous material and safety plan which shall ensure that any
such hazardous material is properly controlled, safeguarded, and
disposed of, and obtaining Landlord's prior written consent,
which consent may be reasonably withheld and may be conditioned
upon absolute indemnification by Tenant and accompanying bond.
Tenant shall not do or permit anything to be done in or about the
Premises or Building which will in any way violate Rules or
Regulations reasonably promulgated by Landlord throughout the
Lease, obstruct or interfere with the rights of other tenants, or
injure them, or use or allow the Premises or Building to be used
for any improper, immoral, or unlawful purpose, nor shall Tenant
cause, maintain or permit any nuisance, in, on or about the
Premises or Building or commit or suffer to be committed any
waste in, on or about the Premises or Building.
(b) Tenant shall not use the name of the Building in which
the Premises are located, in connection with any business carried
on in said Premises (except as Tenant's address) without written
consent of Landlord.
(c) Tenant shall not manufacture, assemble or store
materials inside the common areas outside of Building.
6. LANDLORD AND TENANT SERVICES.
(a) Landlord is responsible to maintain the Premises and
Building (including the roof and structure). All Operating
Expenses, including but not limited to repairs, maintenance,
sewer, garbage, insurance, taxes, property management, common
area utilities and common area janitorial, and other operating
expenses ("Operating Expenses") on the Premises, Building, and
common areas shall be coordinated by Landlord but are the
financial responsibility of the Tenant through prorated billings.
Proration shall be on a square footage basis with all other
tenants and Tenant's proration shall be calculated by multiplying
the Operating Expenses by an equation, the numerator being the
Rentable square feet of the Premises and the denominator being
the total Rentable square feet of the Building. As soon as is
reasonably possible, but in any event within ninety (90) days
following the end of each calendar year, Landlord shall furnish
to Tenant a statement showing the Premises' and Building's actual
Operating Expenses for the preceding calendar year. In the case
of excess Operating Expenses, Tenant shall promptly remit its
prorata share of such excess to Landlord. Tenant may review at
his sole cost and expense any Operating Expenses prorated to
Tenant by Landlord, including assessed Real Estate Taxes as may
be statutorily allowed. Landlord shall make available the
applicable Operating Expenses' invoices and statements. However,
any such review must be requested and completed within sixty (60)
days of receipt of the annual statement.
(b) Tenant shall be responsible for the costs associated
with premises utilities, janitorial and usage of the HVAC and
lighting systems during times other than Ordinary Business Hours
as set forth in the Rules and Regulations including the costs of
installing and maintaining meters or other devices to record
after hour usage. Landlord may separately meter all utility usage
of Tenants premises.
7. ALTERATIONS.
(a) Tenant will not make or suffer to be made any
alterations, additions or improvements in excess of $1,000.00,
excluding the initial Tenant Improvements, (collectively
"Alterations") to or upon the Premises, Building, or any part
thereof, or attach any fixtures or equipment thereto, without
first obtaining Landlord's written approval, which shall not be
unreasonably withheld or delayed. Any Alterations to or upon the
Premises shall be made by Tenant at Tenant's sole cost and
expense and any contractor selected by Tenant to make the same
shall be subject to Landlord's reasonable prior written approval.
All such Alterations permanent in character, made in or upon the
Premises either by Tenant or Landlord, may at the option of
Landlord, become Landlord's property and, at the end of the term
or any extension hereof, shall remain on the Premises without
compensation to Tenant unless Landlord requests that Tenant
remove any such Alterations. Notwithstanding the above, Tenant's
work stations and other items of personal property shall remain
Tenant's property.
(b) Any Alterations shall, when completed, be of such a
character as not to lessen the value of the Premises or such
improvements as may be then located thereon. Any Alterations
shall be made promptly and in a good workmanlike manner and in
compliance with all applicable permits and authorizations and
building and zoning laws and with all other laws, ordinances,
orders, rules, regulations and requirements of all federal, state
and municipal governments, departments, commissions, boards and
offices. The costs of any such Alterations shall be paid by
Tenant, so that the Premises be free of liens, for services
performed, labor and material supplied or claimed to have been
supplied. Before any Alterations shall be commenced, Tenant shall
pay any increase in premiums on insurance policies (provided for
herein) or ensure adequate coverage is in place for all risks
related to the construction of such Alterations and the increased
value of the Premises.
8. LIENS.
Tenant shall keep the Premises and the Building free from
any mechanics' and/or materialmen's liens or other liens arising
out of any work performed, materials furnished or obligations
incurred by Tenant. Tenant shall notify Landlord in writing at
least seventy-two (72) hours before any work or activity is to
commence on the Premises which may give rise to such liens to
allow Landlord to post and keep posted on the Premises any
notices which Landlord may deem to be proper for the protection
of Landlord and the Premises from such liens.
9. DESTRUCTION OR DAMAGE.
(a) If the Premises is partially damaged by fire,
earthquake, or other Act of God, Landlord shall repair the same
at Landlord's expense, subject to the provisions of this Article
and provided such repairs can, in Landlord's reasonable opinion,
be made within sixty (60) days. During such repairs, the Lease
shall remain in full force and effect, except that if there shall
be damage to the Premises and such damage is not the result of
the negligence or willful misconduct of Tenant,Tenant1s
employees, agents, or invitees, an abatement of Rents shall be
allowed Tenant for such portion of Premises and period of time as
the Premises was unusable by Tenant.
(b) If in Landlord's reasonable opinion the partially
damaged Premises can be repaired, but not within sixty (60) days,
the Landlord may elect, upon written notice to Tenant within
thirty (30) days of such damages, to repair such damages over a
longer time period and continue the Lease in full force and
effect, but with Rents partially abated as provided in Article
9(a). In the event such repairs cannot be made within sixty (60)
days, Tenant shall have the option to terminate the Lease
provided that written notice is given to Landlord within thirty
(30) days of receipt of Landlord's notice stated in this
paragraph.
(c) If the partially damaged Premises is to be repaired
under this Article, Landlord shall repair such damages to the
Premises itself, and to the Tenant Improvements supplied by
Landlord herein. Except in the event of Landlord's gross
negligence or willful misconduct, Tenant shall be responsible.
for Tenant's equipment, furniture and fixtures, and other
alterations, additions and improvements made by Tenant to the
Premises and Building.
10. SUBROGATION.
Landlord and Tenant shall each, prior to Tenant's taking
possession or immediately after the execution of the Lease,
procure from each of the insurers under all policies of fire,
theft, public liability, workmen's compensation and other
insurance now or hereafter existing during the term and any
extension hereof and purchased by either of them insuring or
covering the Premises and/or Building or any portion thereof or
operations therein, a waiver of all rights of subrogation which
the insurer might otherwise, if at all, have against the other.
11. INDEMNIFICATION.
Tenant and Landlord hereby agree to indemnify and hold the
other party harmless from any damage to any property, including
the release of any hazardous materials, or injury to or death of
any person arising from the use of the Premises, Building, or
common areas by Tenant or the ownership, management or
maintenance of the Premises, Building, or common areas by
Landlord, except such as is caused by reason of the negligent or
willful act of the other party, its agents, employees or
contractors. The foregoing indemnity obligation of Tenant and
Landlord shall include reasonable fees, investigation costs and
all other reasonable costs and expenses incurred by Landlord or
Tenant from the first notice that any claim or demand is made,
except in the event of the other parry's negligence or willful
misconduct. The provisions of this Article shall survive the
Lease's termination with respect to any damage, injury or death
occurring prior to such termination.
12. COMPLIANCE WITH LEGAL REQUREMENTS.
Tenant shall, at its sole cost and expense, promptly comply
with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter
by in force, the requirements of any board of fire underwriters
or other similar body now or hereafter constituted, any direction
or occupancy certificate issued pursuant to any law by any public
officer or officers, as well as the provisions of all recorded
documents affecting the Premises, (collectively the "Applicable
Laws"), insofar as any thereof relate to or affect the use or
occupancy of the Premises, Building, or common areas, excluding
requirements of structural changes now related to or affected by
improvements made by or for Tenant.
Landlord shall, at its sole cost and expense, promptly
comply with all Applicable Laws, including the American with
Disabilities Act ("ADA"), insofar as any thereof relate to or
affect Landlord's obligations under the Lease, or its ownership
of the Premises, Building, or common areas, except for Tenant's
requirements in the immediately preceding paragraph herein.
13. INSURANCE.
(a) Commercial General Liability. Tenant shall, maintain a
Commercial General Liability policy including all coverage's
normally provided therein. Such policies shall specifically name
Landlord as an additional insured, with a cancellation period of
thirty (30) days prior written notice of an cancellation. A
Certificate of Insurance shall be provided to Landlord. All
polices of insurance shall be issued by responsible insurance
companies licensed to do business in the State of Utah.
The minimum limits of coverage acceptable are:
(i) $1,000,000 Each Occurrence Combined Single Limit
for Bodily Injury and Property Damage
and
(ii) $2,000,000 Annual Aggregate
(b) Premises and Building Insurance. Landlord shall insure
the Premises and Building, including Landlord supplied Core and
Shell and Tenant Improvements as deemed necessary in Landlord's
reasonable discretion. Tenant shall pay its prorata share for
such insurance as outlined in Article 6 herein, involving
Tenant's prorated share of Operating Expenses. All policies of
insurance shall be issued by responsible insurance companies
licensed to do business in the State of Utah.
(c) Tenant's Additional Insurance. Tenant may, at its sole
cost and expense, cause all equipment, machinery, furniture and
fixtures, personal property, and Tenant Improvements supplied by
Tenant from time to time used or intended to be used in
connection with the operation and maintenance of the Premises, to
be insured by Tenant against loss or damage. Tenant may, at its
sole cost and expense, obtain appropriate business interruption
coverage. Except for losses caused by Landlord's gross negligence
or willful misconduct, Landlord is in no way liable for any
uninsured Tenant's property.
14. ASSIGNMENT AND SUBLETTING.
In the event Tenant should desire to assign the Lease or
sublet the Premises, Tenant shall give Landlord written notice of
such desire at least thirty five (35) days in advance of the date
on which Tenant desires to make such assignment or sublease.
Landlord shall then have a period of twenty-one (21) days
following receipt of such notice within which to notify Tenant in
writing that Landlord elects either (i) to terminate the Lease as
of the date so specified by Tenant, in which event Tenant will be
relieved of all further obligations hereunder, or (ii) to permit
Tenant to assign or sublet such space, subject to prior written
approval of the proposed assignee by Landlord, such consent not
to be unreasonably withheld or delayed, so long as the use of the
Premises by the proposed assignee would be a permitted use and
the proposed assignee is of sound financial condition at least
equal to Tenant as determined in Landlord's reasonable
discretion. Landlord may refuse to consent to any assignment or
subletting if Landlord believes that the new Tenant would have a
negative impact on the Premises or the Building's other tenants.
If Landlord should fail to notify Tenant in writing of such
election within said twenty-one (21) day period, Landlord shall
have deemed to have waived option (i) above, but written approval
by Landlord of the proposed assignee shall still be required.
Failure by Landlord to approve a proposed assignee shall not
cause a termination of the Lease. Any rents or other
consideration realized by Tenant under any such sublease and
assignment in excess of the Rents hereunder, after amortization
of the reasonable costs of extra tenant improvements for which
Tenant has paid and reasonable subletting and assignment costs,
shall at Landlord's option, (i) be paid ninety percent (90%) to
Landlord and ten percent (10%) to Tenant, or (ii) be paid to the
Tenant. No assignment or subletting by Tenant shall relieve
Tenant of any obligation under the Lease. Any assignment or
subletting which conflicts with the provisions hereof shall be
void.
15. RULES.
Tenant shall faithfully observe and comply with all Rules
and Regulations reasonably promulgated by Landlord, in writing
and after reasonable notice, during the Term or any Option period
herein. Landlord must apply rules equitably against all Tenants,
but shall not be responsible to Tenant for the non-performance by
other Building tenants, or adjacent buildings' tenants, of any of
said Rules and Regulations. A copy of the Rules and Regulations
are attached as Exhibit D.
16. ENTRY BY LANDLORD.
The Landlord may enter the Premises or Building at
reasonable hours, upon 24 hours notice to Tenant to (a) inspect
the same, (b) show the same to prospective purchasers, lenders or
tenants, (c) determine whether Tenant is complying with all of
Tenant's obligations hereunder, (d) post notices of non-
responsibility or (e) make repairs required of Landlord under the
Lease, repairs to adjoining space or utility service, or make
repairs, alterations or improvements to the Building, provided
that all such work shall be done as promptly as possible and with
as little interference to Tenant as reasonably possible. Tenant
hereby waives any claim for damages for any inconvenience to or
interference with Tenant's business, any loss of occupancy or
quiet enjoyment of the Premises occasioned by such entry.
Landlord shall at all times have and retain a key to unlock all
doors in, on or about the Premises (excluding Tenant's vaults,
safes and similar areas designated in writing by Tenant). In the
event of an emergency, Landlord shall have the right to use any
and all means which Landlord may deem proper to enter the
Premises, without notice, for the limited purpose of abating as
possible said emergency. Such emergency entrance shall not be
construed or deemed to be a forcible or unlawful entry into or a
detainer of the Premises or an eviction, actual or constructive,
of Tenant from the Premises, or any portion thereof.
17. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events
("Events of Default") shall constitute a breach of the Lease by
Tenant: (a) if Tenant fails to pay Rents when and as the same
becomes due and payable and such failure continues for more than
ten (10) days after written notice thereof, or (b) if Tenant
fails to pay any other sum when and as the same becomes due and
payable and such failure continues for more than ten (10) days
after written notice thereof; or (c) if Tenant fails to perform
or observe any material term or condition of the Lease, such
failure continues for more than thirty (30) days after written
notice from Landlord, and Tenant does not within such period
begin with due diligence and dispatch the curing of such default,
or, having so began, thereafter fails or neglects to complete
with due diligence and dispatch the curing of such default; or
(d) if Tenant shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due or shall file a petition in bankruptcy,
or shall be adjudicated as bankrupt or insolvent, or shall file a
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, or shall file
any answer admitting or shall fail timely to contest the material
allegations of a petition filed against it in any such
proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or
any material part of its properties; or (e) if within sixty (60)
days after the commencement of any proceeding against Tenant
seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such proceeding
shall not have been dismissed, or if; within sixty (60) days
after the appointment without the consent or acquiescence of
Tenant, of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment shall not
have been vacated; or (f) vacation or abandonment of the Premises
for a continuous period in excess of fifteen (15) days after
initial occupancy, or (g) if the Lease or any estate of Tenant
hereunder shall be levied upon under any attachment or execution
and such attachment or execution is not vacated within thirty
(30) days of receipt thereof by Tenant.
18. TERMINATION UPON TENANT'S DEFAULT.
If an Event of Default shall occur, Landlord at any time
thereafter may give. a written
termination notice to Tenant, and on the date specified in such
notice (which shall not be less than three (3) days after
service) Tenant's right to possession shall terminate and the
Lease shall
terminate, unless on or before such date all Rents, arrearages
and other sums due by Tenant under the Lease, including
reasonable costs and attorneys' fees incurred by or on behalf of
Landlord, shall have been paid by Tenant and all other Events of
Default by Tenant shall have been fully cured to the satisfaction
of Landlord. Upon such termination, Landlord may recover from
Tenant:
(a) the worth at the time of award of the unpaid Rents
which had been earned at the time of termination; plus
(b) the worth at the time of award of the amount by which
the unpaid Rents which would have been earned after termination
until the time of award exceeds the amount of such Rents loss
that Tenant proves could have been reasonably avoided; plus
(c) the worth at the time of award of the amount by which
the unpaid Rents for the balance of the term of the Lease after
the time of award exceeds the amount of such Rents loss that
Tenant proves could be reasonably avoided; and plus
(d) any other amount reasonably necessary to compensate
Landlord for all the detriment proximately caused by Tenant's
failure to perform its obligations under the Lease or which in
the ordinary course of things would be likely to result
therefrom; and/or
(e) at Landlord's elections, such other amounts in addition
or in lieu of the foregoing as may be permitted from time to time
herein or by applicable law.
The "worth at the time of award" of the amounts referred to
in clauses (a) and ~) above is computed by allowing interest at
the rate of 10% per annum. The "worth at the time of award" of
the amount referred to in clause (c) above means the monthly sum
of the Rents under the Lease. Failure of Landlord to declare any
default immediately upon occurrence thereof, or delay in taking
any action in connection therewith, shall not waive such default,
but Landlord shall have the right to declare any such default at
any time thereafter.
19. CONTINUATION AFTER DEFAULT.
Even though Tenant has defaulted the Lease and abandoned the
Premises, the Lease shall continue in effect as long as Landlord
does not terminate Tenant's right to possession, and Landlord may
enforce all of its rights and remedies under the Lease, including
the right to recover the Rents as they become due under the
Lease. Acts of maintenance or preservation or efforts to relet
the Premises or the appointment of a receiver upon initiative of
Landlord to protect Landlord's interest under the Lease shall not
constitute a termination of Tenant's right to possession. If any
fixture, equipment, improvement, installation or appurtenance
shall be required to be removed from the Premises and/or Building
by Tenant, then Landlord (in addition to all other rights and
remedies) may, at its election by written notice to Tenant, deem
that the same has been abandoned by Tenant to Landlord, or
Landlord may remove and store the same and restore the Premises
to its original condition at the reasonable expense of Tenant, as
Additional Rent to be paid within ten (10) days after written
notice to Tenant of such expense.
20. LANDLORD'S DEFAULT.
If Landlord fails to perform or observe any of its material
Lease obligations herein and such failure continues for thirty
(30) days after written notice from Tenant, or such additional
time, if any, that is reasonably necessary to promptly and
diligently cure such failure after receiving written notice,
Landlord shall be in breach of the Lease (a "Default"). If
Landlord commits a Default, Tenant may pursue any remedies given
in the Lease or under law including terminating the lease and
seeking the return of any unused portion of the security deposit.
21. LANDLORD'S RIGHT TO CURE DEFAULTS.
All terms and provisions to be performed by Tenant under the
Lease shall be at Tenant's sole cost and expense and without any
abatement of Rents. If Tenant fails to pay any sum of money,
other than Rents, required hereunder or fails to perform any
other act required hereunder and such failure continues for
thirty (30) days after notice by Landlord, Landlord may, but
shall not be obligated, and without waiving or releasing Tenant
from any obligations of Tenant, make any such payment or perform
any such act on Tenant's part to be made or performed as provided
in the Lease. All sums paid by Landlord and all incidental costs
shall be deemed Additional Rent hereunder and shall be payable
within ten (10) days of written notice of such sums paid.
22. OTHER RELIEF.
Should any parry breach any of the covenants or agreements
made by that party herein, the parry committing the breach shall
pay all costs, expenses, expert witness fees, and reasonable
attorneys' fees which the other parry may incur in enforcing or
terminating this Lease, or in pursuing any other remedy provided
for hereunder or by applicable law, whether such remedy is
pursued by filing suit or otherwise, including, without
limitation, costs, expenses and fees incurred in successfully
defending against counterclaims or third parry claims and in any
successful appeals. In addition, should either parry hereto file
bankruptcy or be subject to involuntary bankruptcy proceedings,
that parry shall pay all costs, expenses, expert witness fees,
and reasonable attorneys fees incurred by other party hereto in
protecting its rights or remedies hereunder in said bankruptcy
proceeding.
The remedies provided for in the Lease are in addition to
any other remedies available to Landlord at law or in equity by
statute or otherwise.
23. ATTORNEYS' FEES.
Should either party breach any of the covenants or
agreements made by that party herein, the party committing the
breach shall pay all costs, expenses, expert witness fees, and
reasonable attorneys' fees which the other parry may incur in
enforcing or terminating this Lease, or in pursuing any other
remedy provided for hereunder or by applicable law, whether such
remedy is pursued by filing suit or otherwise, including, without
limitation, costs, expenses and fees incurred in successfully
defending against counterclaims or third party claims and in any
successful appeals. In addition, should either parry hereto file
bankruptcy or be subject to involuntary bankruptcy proceedings,
that parry shall pay all costs, expenses, expert witness fees,
and reasonable attorneys fees incurred by the other parry hereto
in protecting its rights or remedies hereunder in said bankruptcy
proceeding.
24. EMINENT DOMAIN.
If all or any part of the Premises shall be taken or
conveyed as a result of the exercise of the power of eminent
domain, the Lease shall terminate as to the part so taken as of
the date of taking, and, in the case of a partial taking, either
Landlord or Tenant shall have the right to terminate the Lease as
to the balance of the Premises by written notice to the other
within thirty (30) days after such date; provided, however, that
a condition to the exercise by Tenant of such right to terminate
shall be that the portion of the Premises taken or conveyed shall
be of such extent and nature as substantially to handicap, impede
or impair Tenant's use of the balance of the Premises. In the
event of any taking, Landlord shall be entitled to any and all
compensation, damages, income, rent awards or any interest
therein whatsoever which may be paid or made in connection
therewith, and Tenant shall have no claim against Landlord for
the value of any unexpired term of the Lease or otherwise,
provided that Tenant shall be entitled to any and all
compensation, damages, income, rent or awards paid for or on
account of Tenant's moving expenses, trade fixtures, equipment
and any leasehold improvements in the Premises, the cost of which
was borne by Tenant, to the extent of the then unamortized value
of such improvements for the remaining term of the Lease. In the
event of a taking of the Premises which does not result in a
termination of the Lease, the monthly rental herein shall be
apportioned as of the date of such taking so that thereafter the
rent to be paid by Tenant shall be in the ratio that the area of
the Premises not so taken bears to the total area of the Premises
prior to such taking.
25. SUBORDINATION, ATTORNMENT & NONDISTURBANCE; AND ESTOPPEL
CERTIFICATE.
At Landlord's request, Tenant agrees to execute,
acknowledge, and deliver within ten (10) days to Landlord a
Subordination, Attornment & Nondisturbance Agreement
("Subordination Agreement"), subject to Landlord's reasonably
proposed form(s). Such Subordination Agreement shall subordinate
the Lease to any ground lease, mortgage, deed of trust, or any
other hypothecation for security now or hereafter placed upon the
Premises, Building or common areas, or any part thereof, to any
and all advances made on the security, and to all renewals,
modification, consolidations, replacements and extensions
thereof, whether the Lease is dated prior or subsequent to the
date of said ground lease, mortgage, deed of trust or other
hypothecation or the date of recording thereof. Further, at
Landlord's request, Tenant agrees to execute, acknowledge, and
deliver within ten (10) days to Landlord an Estoppel Certificate,
subject to Landlord's reasonably proposed form(s). Such
Subordination Agreement and Estoppel Certificate may be relied
upon by any prospective purchaser, mortgagee, or beneficiary
under any ground lease, mortgage, deed of trust, or any other
hypothecation of the Premises, Building, or common areas, or any
part thereof. Notwithstanding such Subordination Agreement,
Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default under the Lease,
unless the Lease is otherwise terminated pursuant to its terms.
In the event that Tenant fails to execute, acknowledge, and
deliver to Landlord such Subordination Agreement and Estoppel
Certificate within ten (10) days of Landlord's request, the
parties herein expressly agree that Tenant shall be deemed in
default of the Lease without further notice. In such event, the
parties herein further expressly agree that the Subordination
Agreement and Estoppel Certificate are deemed to have been
executed by Tenant.
26. NOMERGER.
The voluntary Qr other surrender of the Lease by Tenant, or
a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord,
operate as an assignment to it of any or all such subleases or
subtenancies.
27. SALE.
In the event the original Landlord hereunder, or any
successor owner of the Premises, Building, and common areas shall
sell or convey the Premises, Building, and common areas, and the
purchaser assumes the obligations of Landlord under the Lease,
all liabilities and obligation on the part of the original
Landlord, or such successor owner, under the Lease accruing after
such Sale shall terminate, and thereupon all such liabilities and
obligations shall be binding upon the new owner. Tenant agrees to
attorn to such new owner.
28. NO LIGHT OR VIEW EASEMENT.
Any diminution or shutting off of light or view by any
structure erected on lands adjacent to the Building shall in no
way affect the Lease or impose any liability on Landlord.
29. HOLDING OVER.
If, without objection by Landlord, Tenant holds possession
of the Premises after expiration of the Term or any Option period
6f the Lease, Tenant shall become a tenant from month to month
upon the terms herein specified, but at a monthly Base Rent
equivalent to 125% of the Base Rent at the end of the term or
extension period pursuant to Article 4, payable in advance on or
before the 1st day of each month. All Additional Rent shall also
apply. Each party shall give the other notice at least one month
prior to the date of termination of such monthly tenancy of its
intention to terminate such tenancy.
30. ABANDONMENT.
If Tenant shall abandon or surrender the Premises, or be
dispossessed by process of law or otherwise, any personal
property belonging to Tenant and left on the Premises shall be
deemed to be abandoned, at the option of Landlord, except such
property as may be mortgaged to Landlord.
31. SECURITY DEPOSIT.
Tenant shall deposit with Landlord upon execution of the
Lease a security deposit in an amount equal to one month's Base
Rent during the last year of the Lease Term ("Security Deposit").
The Security Deposit shall be held by Landlord as security for
the faithful performance by Tenant of all of the provisions of
the Lease to be performed or observed by Tenant. In the event
Tenant fails to perform or observe any of the provisions of the
Lease to be performed or observed by it, then, at the option of
the Landlord, Landlord may (0ut shall not be obligated to do so)
apply the Security Deposit, or so much thereof as may be
necessary to remedy such default or to repair damages to the
Premises caused by Tenant. In the event Landlord applies any
portion of the Security Deposit to remedy any such default or to
repair damages to the Premises caused by Tenant, Tenant shall pay
to Landlord, within thirty (30) days after written demand for
such payment by Landlord, all monies necessary to restore the
Security Deposit up to the original amount. Any portions of the
Security Deposit remaining upon termination of the Lease shall be
returned.
32. WAIVER.
All waivers by either parry herein must be in writing and
signed by such parry. The waiver of any term or conditions herein
shall not be deemed to be a waiver of any subsequent breach of
the same or any other agreement, condition or provision herein
contained, nor shall any custom or practice which may grow upon
between the parties in the administration of the terms hereof be
construed to waive or to lessen the right of either parry to
insist upon the performance by the other parry in strict
accordance with said terms. The subsequent acceptance of Rents
hereunder by Landlord shall not be deemed to be a waiver of any
breach by Tenant of any term or condition of the Lease,
regardless of Landlord's knowledge of such breach at the time of
acceptance of such Rents.
33. NOTICES.
All notices and demands which may or are required to be
given by either parry to the other under the Lease shall be in
writing and shall be deemed to have been fully given when
deposited in the United States mail, certified or registered,
postage prepaid, and addressed as follows: to Tenant at 13750
South Wadsworth Park Drive, Draper, UT 84020, or to such other
place as Tenant may from time to time designate in a notice to
Landlord; to Prime Commercial Management, 12257 South Business
Park Drive, Suite 110, Draper, Utah 84020, Attn: Brent Shaw, or
to such other place as Landlord may from time to time designate
in a notice to Tenant, or in the case of Tenant, delivered to
Tenant at the Premises. Tenant hereby appoints as its agent to
receive the service of all dispossessory or distraint proceedings
and notices hereunder the person in charge of or occupying the
Premises at the time, and if no person shall be in charge of or
occupying the same, then service may be made by attaching same on
the main entrance of the Premises.
34. COMPLETE AGREEMENT.
There are no oral agreements between Landlord and Tenant
affecting the Lease, and the Lease supersedes and cancels any and
all previous negotiations, arrangements, brochures, agreements
and understandings, if any, between Landlord and Tenant with
respect to the subject matter of the Lease. The Lease may not be
altered, changed or amended, except by an instrument in writing
signed by both parties hereto.
35. AUTHORITY.
The person(s) executing the Lease on behalf of the parties
herein hereby covenants and warrants that (a) such party is a
duly authorized and validly existing entity under the laws in
which it was formed, (b) such parry has and is qualified to do
business in Utah, (c) such entity has full right and authority to
enter into the Lease, and (d) each person executing the Lease on
behalf of such entity is authorized to do so.
36. GUARANTEE OF LEASE.
Tenant guarantees, upon execution of the Lease, to occupy
the Premises. Any failure to occupy the Premises does not release
the Tenant from the obligation of paying Rents or any other terms
set forth herein.
37. MISCELLANEOUS.
(a) The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. If there be more than
one Tenant, the obligations hereunder imposed upon Tenant shall
be joint and several.
(b) Time is of the essence on the Lease and each and all of
its terms and conditions.
(c) The terms and conditions herein shall apply to and
bind the heirs, executors, administrators, successors and assigns
of the parties hereto.
(d) The captions of the Lease are solely to assist the
parties and are not a part of the terms or conditions of the
Lease.
(e) The Lease shall be governed by and construed in
accordance with the laws of the State of Utah, and is deemed to
be executed within the State of Utah.
38. SEVERABILITY.
If any term provision of the Lease, or the application
thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of the Lease, or the
application of such provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not
be affected thereby, and each provision of the Lease shall be
valid and shall be enforceable to the extent permitted by law.
39. BROKERS.
Landlord is represented by Kip Wadsworth and Tenant is
represented by Brandon Fugal of Caldwell Banker Commercial.
Agreed-upon commissions shall be due and payable in two separate
payments. The first payment, consisting of 50% of the commission,
shall be due and payable upon execution of the lease. The-second
payment shall be due and payable upon occupancy of the space by
the tenant.
40. OPTION OF EXPANSION OR TERMINATION OF LEASE.
(a) Provided Tenant is not in default under the Lease,
Tenant shall, by written notice to Landlord no later than (180)
one hundred and eighty days prior to the Tenants expected date of
expansion, given written notification to Landlord of the
additional space requirement. Upon receipt of written notice
Landlord will try, to the best of his abilities, within reason,
to accommodate the needed expansion space either within Wadsworth
Business Park or in another development owned by Landlord. In the
event the Landlord is successful in accommodating the expansion
space this lease, at the option of the Tenant, may be terminated
upon the Commencement Date of the new expansion lease.
(b) If the Landlord is unable to accommodate the
expansion space, Tenant may terminate this Lease but only after
the first anniversary of the Lease's commencement date. If the
Lease is terminated Tenant is required to pay Landlord the next
six months of rent, in a lump sum payment, at the time of
termination.
(c) Reimbursement for Portion of Commissions and
Tenant Improvement Costs. In the event that this Lease is
terminated prior to the end of the lease, Tenant shall reimburse
to Landlord the unamortized balance of the Tenant Improvement
Allowance and of any fees or commissions paid by Landlord to any
broker or agent in connection with this Lease plus interest
thereon at the rate of 10% per annum from Commencement Date of
this lease until the date paid. In calculating the unamortized
portion of said costs, it shall be assumed that they are
amortized over the Lease Term on a straight line basis. Payment
of the unamortized balance shall be due immediately upon
termination of this Lease.
IN WITNESS WHEREOF, the parties have executed the Lease
dated the day and year first above written.
TENANT, LANDLORD,
BUYERS UNITED INTERNATIONAL. DRAPER LAND LIMITED
PARTNERSHIP NO.2
/s/ /s/
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