UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report: 1/3/96
THE CANTON INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
I-9418 87-0509512
(Commission File Number) (IRS Employer Identification Number)
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(Address of principal executive offices)
(801) 575-8073
(Registrant's telephone number, including area code)
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ITEM 1. Changes in Control of Registrant
On October 24, 1995 and December 6, 1995, the board of directors (the
"Board") of The Canton Industrial Corporation, a Nevada corporation (the
"Company"), approved the terms of two stock option agreements (the
"Agreements"), that provide for the purchase of the Company's common stock (the
"Common Stock"). The Agreements were formally accepted on December 22, 1995 by
Investment Sanctuary Corporation, a Utah corporation ("ISC"), and A-Z
Professional Consultants, Inc., a Utah corporation ("A-Z").
The options granted to ISC serve as consideration for consulting
services and other advice previously rendered by ISC's agent, Richard Surber.
The services relate to the Company's growth strategy, potential business
relations and regulatory filings. The options granted to A-Z serve as
consideration for the forgiveness of debt and consulting services rendered
pursuant to prior contracts between the Company and A-Z. Those services include
and relate to the generation of new clients, expansion of existing clients
services and the Company's long term business plan. The options granted to ISC
and A-Z also encourage their continued assistance in the Company's affairs.
The terms of the Stock Option Agreements are as follows:
Investment Sanctuary Corporation
ISC was granted the right and Option to purchase all or any part of a
quantity of shares equivalent to 25% of the Company's issued and
outstanding shares of Common Stock; the exercise price of each share
obtained pursuant to the Agreement is fifty-nine cents ($0.59), which
was the market price of the Common Stock on October 24, 1995; the Option
may be exercised in whole or in part, at any time prior to 12:00 P. M.
on October 24, 2000; all Common Stock issued Company pursuant to the
Agreement to ISC shall be restricted pursuant to Rule 144 of the
Securities Act of 1933, as amended.
A-Z Professional Consultants, Inc.
A-Z was granted the right and Option to purchase all or any part of a
quantity of shares equivalent to 26% of the Company's issued and
outstanding shares of Common Stock; the exercise price of each share
obtained pursuant to the Agreement is fifty-nine cents ($0.59), which
was the market price of the Common Stock on October 24, 1995; the Option
may be exercised in whole or in part, at any time prior to 12:00 P. M.
on October 24, 2000; all Common Stock issued Company pursuant to the
Agreement to A-Z shall be restricted pursuant to Rule 144 of the
Securities Act of 1933, as amended.
As of January 3, 1996, neither ISC nor A-Z have exercised any of their
respective rights under the Agreements and do not directly own any shares of the
Company's Common Stock. However, Richard Surber, the sole shareholder of ISC and
president of both ISC and A-Z, as well as the chief executive officer of the
Company, personally owns 137,240 shares or 2.39 % of the Company's Common Stock.
Allen Wolfson, the sole shareholder of A-Z and the uncle of Mr. Surber
personally owns 160,000 shares or 2.79% of the Company's Common Stock
<PAGE>
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On December 30, 1995, the Company recieved the resignation notice of
its independent auditor Smith & Company.
Neither of Smith & Company's reports on the financial statements for
the past two years contained an adverse opinion or disclaimer of opinion, or was
modified as to uncertainty, audit scope or accounting principles. However, the
financial statements included in the Company's annual report on Form 10-KSB for
the year ended December 31, 1993, prepared by Smith & Company, included a single
sentence expressing Smith & Company's doubt as to the Company's ability to
continue as a going concern.
There were no disagreements between Smith & Company and the Company on
any matter of accounting principles, financial statement disclosure or auditing
scope or procedure during the two most recent fiscal years and subsequent
period.
On January 2, 1996, the Company's Board engaged Andersen, Andersen &
Strong, L.C. to serve as the Company's new independent auditors. Andersen &
Strong are located at:
Andersen, Andersen & Strong, L.C.
Certified Public Accountants and Business Consultants
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
There were no consultations with the newly engaged accountant during
the last two fiscal years or subsequent interim period regarding any of the
information in Item 304(a)(2)(i) or 304(a)(2)(ii).
Item 7. Financial Statements and Exhibits
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the
Index to Exhibits beginning on page 5 of this Form 8-K, which is hereby
incorporated by this reference.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 3, 1996
The Canton Industrial Corporation
By: /s/ Steven A. Christensen, President
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
MATERIAL CONTRACTS
10(i)(a) 6 Consulting Agreement dated August 30, 1995, between the
Company and A-Z Professional Consultants, Inc.
10(i)(b) 15 Stock Option Agreement dated December 22, 1995, granted
by the Company to A-Z Professional Consultants, Inc.
10(i)(c) 18 Stock Option Agreement dated December 22, 1995, granted
by the Company to Investment Sanctuary Corporation.
CHANGE IN CERTIFYING ACCOUNTANTS
16(i)(a) 21 Letter dated December 30, 1995, from Smith & Company,
Certified Public Accountants, notifying the Company of
their resignation as the Company's Certified
Independent Auditors.
16(i)(b) 22 Letter dated December 30, 1995, from Smith & Company,
Certified Public Accountants, confirming the fact that
the relationship between the Company and Smith &
Company has ceased.
16(i)(c) 23 Letter dated January 2, 1996, from Andersen, Andersen
and Strong confirming their engagement as the
Certified Independent Auditors of the Company.
16(i)(d) 25 Letter dated January 3, 1996 from Smith & Company,
stating that they are in agreement with the statements
contained in this Current Report on Form 8-K.
CONSULTING AGREEMENT
This Consulting Agreement is made effective this 30 day of August, 1995
by and between A-Z Professional Consultants, Inc. (hereinafter "Consultant") a
Utah corporation with offices at 268 West 400 South, Suite 310, Salt Lake City,
Utah 84101, and The Canton Industrial Corporation, Inc., a Nevada corporation
(hereinafter "Client" or "Canton") with offices at 268 West 400 South, Suite
300, with respect to the following:
RECITALS
WHEREAS, Consultant is in the business of providing marketing and
general business consulting services to privately held and publicly-held
corporations, and has successfully provided said services in the past on behalf
of Canton; and
WHEREAS, Client desires to retain Consultant to provide advice and to
consult with Client's management concerning its growth strategy, potential
business relations, its financial relations, public relations, communication
relations, general obligations, and other matters connected to Client's
business.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
1. Engagement of Consultant.
Client hereby retains Consultant to assist it by: (a) introducing
Client to potential business partners; (b) introduce Client to potential
acquisition or merger candidates in the form of business opportunities known to
Consultant; (c) investigate and make recommendations to Client relating to the
purchase, management, financing and acquisition of real property and business
opportunities; (d) provide information and counsel relative to procurement of
information, and assets through barter exchanges; and, (e) assisting Client in
the development of a practical and effective financial public relations program,
including but not limited to the following:
* Introduction to the Client of business opportunities,
acquisition of assets opportunities, merger candidates
currently known to Consultant, or providing information by
Consultant which is directed at increasing Client's overall
value;
* Searching for acquisitions of operations and assets which
may aid Client in becoming a more profitable concern; and
* Assisting Client in formulation of responses to requests for
information from Investment Advisory Newsletters, which actual
responses shall be made by Client.
And Consultant shall additionally provide any services that the Client
shall request from time to time, all of which foregoing services are
collectively referred to herein as the "Consulting Services."
<PAGE>
2. Compensation.
A. Client shall pay Consultant a monthly consulting fee of 40,000
shares of 144 restricted common stock of The Canton Industrial Corporation,
which may be registered under an S-8 or other available registration.
B. Client will provide Consultant with reasonable office space (as
determined by the Board), along with secretarial services at no cost to
Consultant during the term of this agreement.
C. Consultant shall receive a commission of 10% on any transactions
(whether said transactions are in cash or kind) which Consultant is instrumental
in bringing into the company, when and as actually received by the Client.
3. Term of Agreement, Extensions and Renewals.
This Consulting Agreement shall have an initial term of one (1) year
(the "Initial Consulting Period") from the date above written. Thereafter, this
Agreement may be extended on a month to month basis (the "Extension Period") by
mutual agreement of the parties executed in writing specifying the compensation
for the Extension Period. Notice of an extension shall be made by giving written
notice, at least ten (10) days prior to the end of the Initial Consulting
Period, or any subsequent extension period. In the event of termination neither
party shall have any further rights or obligations hereunder after the effective
date of such termination except for the obligation of Client to reimburse the
reasonable costs and expenses of Consultant, which shall continue until paid in
full by Client.
4. Termination of Agreement by the Client.
Despite anything to the contrary contained in this Agreement hereunder,
Client may terminate this Agreement if any of the following events occur:
A. Failure to Follow Instructions. Client can terminate this
Agreement upon approval of a simple majority the Board of
Directors, if the Consultant fails to follow Client's
instructions. Client must advise Consultant that the
Consultant's actions or inactions are unacceptable and give
Consultant a reasonable time (30 days) to comply. If
Consultant fails to comply, or at a later time makes the same
unacceptable action or inaction it can be terminated hereunder
by Client's service of notice of termination to Consultant.
B. Breach of Consultant's Duties. Client can terminate this
Agreement if, in the sole judgment of the Board of Directors,
Consultant's actions or conduct would make it unreasonable to
require Client to retain Consultant. Such acts include, but
are not limited to, dishonesty, illegal activities, activities
harmful to the reputation of the Client, or activities which
may create civil or criminal liability for the Client.
C. Sale of Clients Assets. The sale of substantially all of
Client's assets to a single purchaser or group of associated
purchasers.
D. Termination of Client's Business. Client's bona fide
decision to terminate its business and liquidate its assets.
E. Consultant's incapacity to perform. Consultant's agreement
shall remain in full force and effect for the duration of this
Agreement. However, if Consultant is unable to provide his
services during any time this Agreement covers, payments
attributable or otherwise payable to Consultant under the
terms and conditions of this Agreement shall be temporarily
abated, and void during the period of Consultant's incapacity,
and shall not be subject to a future claim.
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5. Confidential Information.
In consideration for the Client entering into this Agreement,
Consultant agrees that certain items and methods of business used in the
Client's business are secret, confidential, unique, and valuable. Both parties
agree much of the information described in this paragraph has been produced by
the joint efforts of the parties, at great cost and over a long period of time.
The parties agree that disclosure of any proprietary, non public information to
anyone other than Client's officers, agents, or authorized employees will cause
Client irreparable injury. Said proprietary and "inside information" includes,
but is not limited to:
A. Non public financial information, accounting information,
plans of operations, and plans of possible mergers or
acquisitions prior to the public announcement;
B. Customer lists, call lists, consultant lists, business
contact lists and other confidential customer data; or
C. Memoranda, notes, records concerning the technical, legal
and procedural processes conducted by Client.
6. Due Diligence.
Client has heretofore supplied and delivered to Consultant all
requested information relating to its business, so as to enable Consultant to
verify or substantiate any information necessary to enter into this agreement.
7. Best Efforts Basis.
Consultant agrees that it will at all times faithfully and to the best
of its' experience, ability and talents, perform all the duties that may be
required of and from Consultant pursuant to the terms of this Agreement.
Consultant does not guarantee that its efforts will have any impact on Client's
business or that any subsequent financial improvement will result from
Consultant's efforts. Client understands and acknowledges that the success or
failure of Consultant's efforts may be predicated on Client's assets and
operating results.
8. Client's Right to Approve Transactions.
Client expressly retains the right to approve of disapprove, in its
sole discretion, each and every transaction introduced by Consultant that
involves Client as a party to any agreement, including a sale of all or
substantially all of its assets. Consultant and Client mutually agree that
Consultant is not authorized to enter into any agreements on behalf of Client.
9. Client Under No Duty or Obligation to Accept or Close on any
Transactions.
It is mutually understood and agreed that Client is not obligated to
accept or close any promotional proposal, financing arrangements, purchase
agreements, or acquisition or merger transactions submitted by Consultant to
Client.
<PAGE>
10. Place of Services.
The Consulting Services contemplated to be performed by Consultant
pursuant to this Agreement will be performed through Consultant's offices,
however, it is understood and expected that Consultant may make contacts with
persons and entities in any other places deemed appropriate by Consultant.
Additionally, since time is of the essence in many of the transactions Client
undertakes, Client agrees to provide Consultant with office space, if reasonably
available, wherever Client may located it's offices from time to time.
11. Costs and Expenses.
Consultant shall be reimbursed for all reasonable pre-approved
out-of-pocket expenses, filing fees, copy and mailing expenses, and credit card
expenses that Consultant may incur on Clients behalf in performing Consulting
Services under this Agreement.
12. Work Stoppage or Early Termination.
Notwithstanding anything to the contrary contained herein, Client shall
have the right at any time to direct Consultant to cease work or abandon its
efforts on Client's behalf, and to refrain from commencing any new work or
providing any further Consulting Services hereunder.
13. Non-Exclusive Services.
Client acknowledges that Consultant is currently providing services of
the same or similar nature to other parties and Client agrees that Consultant is
not prevented or barred from rendering services of the same nature or a similar
nature to any other individual or entity so long as this does not constitute a
usurpation of a corporate opportunity or an undisclosed conflict of interest.
Consultant understands and agrees that Client shall not be prevented or barred
from retaining other persons or entities to provide services of the same or
similar nature as those provided by Consultant. Consultant will advise Client of
its position with respect to any activity, employment, business arrangement or
potential conflict of interest which may be relevant to this Agreement.
14. All Prior Agreements Terminated.
This Agreement constitutes the entire understanding of the parties with
respect to the engagement of Consultant, and all prior agreements and
understandings with respect thereto are hereby terminated and shall be of no
force effect.
15. Representations and Warranties of Client.
Client hereby represents and warrants to Consultant that:
A. Corporate Existence. Client is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Nevada, with corporate power to own
property and carry on its business as it is now being
conducted.
<PAGE>
B. Financial Statements. Client has or will cause to be
delivered concurrent with the execution of this Agreement,
copies of its Disclosure Documents (as defined below) which
accurately set forth the financial condition of Client as of
the respective dates of such documents.
C. No Conflict. This Agreement has been duly executed by
Client and the execution and performance of this Agreement
will not violate, or result in a breach of, or constitute a
default in any agreement, instrument, judgment, decree or
order to which Client is a party or to which Client is
subject, nor will such execution and performance constitute a
violation or conflict of any fiduciary duty to which Client is
subject.
16. Representations and Warranties of Consultant.
Consultant hereby represents and warrant to Client that:
A. Prior Experience. Consultant has experience in the areas of
the consulting services to be performed hereunder.
B. Information. No representation or warranty contained
herein, nor any statement in any document, certificate or
schedule furnished, or to be furnish pursuant to this
Agreement by Consultant, or in connection with the transaction
contemplated hereby, contains or contained any untrue
statement of material fact to the best of Consultants
knowledge and belief.
C. Inside Information - Securities Laws Violations. In the
course of the performance of his duties, Consultant may become
aware of information which may be considered "inside
information" within the meaning of the Federal Securities
Laws, Rules and Regulations. Consultant acknowledges that its
use of such information to purchase or sell securities of
Client, its subsidiaries or affiliates, or other parties with
whom Client is transacting business, or to transmit such
information to any other party with a view to buying, selling
or otherwise dealing in Client's securities is prohibited by
law and would constitute a breach of this Agreement and,
notwithstanding the provisions of this Agreement, will result
in the immediate termination of the Agreement. Consultant
agrees that if any violation occurs in regard to this section,
it shall indemnify Client for any charges or claims made
against Client as a result of said breach by Consultant.
D. Agreement does not contemplate corrupt practice, domestic
or foreign. All payments under this Agreement constitute
compensation for services performed under this Agreement, and
all payments, and the use of said payments by Consultant, do
not and shall not, constitute an offer, payment or promise, or
authorization of payment of any money or gift to an official
or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These
payments may not be used to influence any act or decision of
an official, party or candidate to use his/her/its influence
with a government to assist Client in obtaining, retaining, or
directing business to Client or any person or other corporate
entity. As used in this paragraph, the term "official" means
any officer or employee of a government, or any person acting
in an official capacity for or on behalf of any government;
the term "government" includes any department, agency, or
instrumentality of a government.
<PAGE>
E. Reliance upon Representations. The information provided
pursuant to this Agreement may be relied upon by Client as
true and correct as of the date of delivery of any shares
received by Consultant as payment for services hereunder.
Further, Consultant additionally represents that it
understands that:
(i) the information contained herein will be relied upon
for the purposes of Client entering into this Agreement;
and
(ii) that the shares of Canton's Common Stock received by
Consultant as payment for services hereunder, will not be
registered or free trading shares. In this regard,
Consultant represents and warrants that:
(a) Consultant will not sell, transfer or otherwise
dispose of the Canton's Common Stock shares without the
prior written consent of the Company, and only in
compliance with applicable Federal and state securities
acts, rules and regulations; and
(b) Consultant is fully aware of the applicable
limitations on the resale of the Shares being acquired
by Consultant; and
(c) by reason of Consultant's knowledge and experience
with financial, securities and business matters in
general, and investments in particular, Consultant is
capable of evaluating the merits and risks of this
Agreement, and in bearing the economic risks of an
investment in the shares obtained herein, as well as
the economic risk involved in the company in general,
and fully understands the speculative nature of such
securities and the possibility of such loss; and
(d) the present financial condition of Consultant is
such that Consultant is not under any present or
contemplated future need to dispose of any portion the
Shares to satisfy an existing or contemplated
undertaking, need or indebtedness; and
(e) any and all certificates representing the shares,
prior to registration of such shares, and any and all
securities issued in replacement thereof or in exchange
therefore, shall bear the following legend, if issued
prior to the effectiveness of a Registration Statement,
which Consultant has read and understands:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is
defined in Rule 144 of the Act. The shares may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective Registration Statement under
the Act or pursuant to an exemption from registration
under the Act, the availability of which is to be
established to the satisfaction of the Company."
<PAGE>
G. Subsequent Events. Consultant will notify Client if,
subsequent to the date hereof, either party incurs obligations
which could compromise its efforts and obligations under this
Agreement.
H. Disclosure of Affiliation with Subsidiaries and/or
Affiliates of Client. Consultant has heretofore disclosed that
it is associated with, affiliated with, or has a 5% or greater
ownership interest in several of the Client's subsidiaries,
affiliates, and or other organizations with which Client
conducts business transactions, or in which Client has an
interest.
17. Consultant is Not an Agent or Employee.
Consultant's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to be acting as the employee or agent of Client or otherwise represent or bind
Client. For the purposes of this Agreement, Consultant is an independent
contractor, and in such capacity is responsible for all workmen's compensation
coverage for its employees, all withholding taxes, and federal and state taxes.
All final decisions with respect to the acts of Client, whether or not made
pursuant to, or in reliance on, information or advice furnished by Consultant
hereunder, shall be those of Client and Consultant shall under no circumstances
be liable for any expense incurred or loss suffered by Client as a consequence
of such action or decisions.
18. Miscellaneous.
A. Authority. The execution and performance of this Agreement
have been duty authorized by all requisite corporate action.
This Agreement constitutes a valid and binding obligation of
the parties hereto.
B. Amendment. This Agreement may be amended or modified at any
time, and in any manner, but only by an instrument in writing
executed by the parties hereto.
C. Waiver. All the rights and remedies of either party under
this Agreement are cumulative and not exclusive of any other
rights and remedies provided bylaw. No delay or failure on the
part of either party in the exercise of any right or remedy
arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party,
where required hereunder, to any act or occurrence, shall not
be deemed to be a consent to any other act or occurrence.
D. Assignment:
(i) Neither this Agreement nor any right created by it
shall be assignable by either party;
(ii) Nothing in this Agreement, expressed or implied, is
intended to confer upon any person, other than the parties
and their successors, any rights or remedies under this
Agreement.
<PAGE>
E. Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the Unites
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal or when sent by facsimile
transmission, provided that the communication is addressed:
(i) In the case of Consultant to:
A-Z Professional Consultants, Inc.
Richard Surber
268 West 400 South, Suite 310
Salt Lake City, Utah 84101
Telephone: (801) 575-8047
Facsimile: (801) 575-8092
(ii) In the case of Client, to:
The Canton Industrial Corporation, Inc.
Steven A. Christensen
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Telephone: (801) 575-8073
Facsimile: (801) 575-8340
or to such other person or address designated by Client or
Consultant to receive notice.
F. Headings and Captions. The headings of paragraphs are
included solely for convenience. If a conflict exists between
any heading and the text of this Agreement, the text shall
control.
G. Entire Agreement. This instrument and the exhibits to this
instrument contain the entire Agreement between the parties
with respect to the transaction contemplated by the Agreement.
It may be executed in any number of counterparts but the
aggregate of the counterparts together constitute only one and
the same instrument.
H. Effect of Partial Invalidity. In the event that any one or
more of the provisions contained in this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but
this Agreement shall be constructed as if it never contained
any such invalid, illegal or unenforceable provisions, unless
such determination renders the Agreement void by reason of
impossibility of performance.
I. Controlling Law. The validity, interpretation, and
performance of this Agreement shall be controlled by and
construed under the laws of the State of Utah, the state in
which this Agreement is being executed.
<PAGE>
J. Attorney's Fees. If any action at law or in equity,
including an action for declaratory relief, is brought to
enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover actual
attorney's fee from the other party. The attorney's fees may
be ordered by the court in the trial of any action described
in this paragraph or may be enforced in a separate action
brought for determining attorney's fees.
K. Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
L. Mutual Cooperation. The parties hereto shall cooperate with
each other to achieve the purpose of this Agreement, and shall
execute such other and further documents and take such other
and further actions as may be necessary or convenient to
effect the transactions described herein.
M. Further Actions. At and time and from time to time, each
party agrees, at its or their expense, to take actions and to
execute and deliver documents as may be reasonably necessary
to effectuate the purposes of this Agreement.
N. No Third Party Beneficiary. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person,
other than the parties hereto and their successors, any rights
or remedies under or by reason of this Agreement, unless this
Agreement specifically states such intent.
O. Facsimile Counterparts. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the
other party, the party who receives the transmission may rely
upon the electronic facsimile a signed original of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 5th
day of December, NUNC PRO TUNC, August 30, 1995.
A-Z Professional Consultants, Inc. The Canton Industrial Corporation
By: /s/ Richard Surber By: /s/ Steven A. Christensen
Richard Surber, President Steven A. Christensen, President
STOCK OPTION
This Stock Option Agreement is made effective this 22 day of December,
1995 by and between A-Z Professional Consultants, Inc. (hereinafter "Optionee")
a Utah corporation with offices at 268 West 400 South, Suite 305, Salt Lake
City, Utah 84101, and The Canton Industrial Corporation, Inc., a Nevada
corporation (hereinafter "Company" or "Canton") with offices at 268 West 400
South, Suite 300, with respect to the following:
RECITALS
WHEREAS, Optionee is in the business of providing marketing and general
business consulting services to privately held and publicly-held corporations;
and
WHEREAS, Company desires to compensate Optionee for advice and
consultation with Company's management concerning its growth strategy, potential
business relations, its financial public relations communication obligations,
and other matters connected to Company's business; and
WHEREAS, Optionee has refrained from collecting certain commissions,
stock payments and monies due to Optionee from Company pursuant to prior
contracts with the Company; and
WHEREAS, Optionee and its employees, including, but not limited to
Richard Surber who has acted as the past President of Canton, and who is a
current Director on the Board of Directors for Canton, and who is additionally
acting as the Chief Executive Officer for Canton, have provided, and continue to
provide valuable information, and business contacts.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, the parties agree as
follows:
Execution of this Agreement constitutes good and sufficient
consideration for the Option granted hereunder. Additionally, consideration for
the Option granted hereunder is acknowledged in the forbearance by Optionee of
pursuing payments of stock and monies due Optionee under prior agreements with
Company.
GRANT
1. Grant of Option. The Company hereby grants Optionee the right and
option ("Option") to purchase all or any part of up to 26% of the
issued and outstanding shares of The Canton Industrial Corporation's
Common Stock, as of the date of this Agreement, on the terms and
conditions set forth herein and subject to the provisions of this Stock
Option.
2. Exercise Price. The Option price of the shares of Common Stock which
are subject to this Option (the "Option Shares") shall be fifty-nine
cents ($.59) per share.
3. Term of Option. This Option may be exercised, in whole or in part, at
any time prior to 12:00 Midnight, Mountain Standard Time, on the date
that is five years from the date of , 1995.
4. Persons Entitled to Exercise. During the Optionee's lifetime, this
Option can only be exercised by the Optionee, unless Company receives a
written notarized assignment by Optionee which shall be valid only in
the following fashion, to wit: 50% of any remaining option rights by
the David Michael Irrevocable Trust, and 50% of any remaining option
rights by the Alexandr W. Senkovski Irrevocable Trust. Neither this
Option nor any right hereunder shall be subject to lien, attachment,
execution, or similar process.
<PAGE>
5. Method of Exercising. This Option may be exercised in accordance with
all the terms and conditions set forth in this Option, by delivery of a
notice of exercise, a form of which is attached hereto as Exhibit "A"
and incorporated herein by this reference, setting forth the number of
Options to be exercised along with either:
(a) A certified check or bank check payable to the order of
the Company in the amount of the full exercise price of the
Common Stock being purchased; or,
(b) Other consideration acceptable to the Company, which
consideration shall be first approved by the Board of
Directors, with the sole exclusion of a promissory note.
6. Availability of Shares. During the term of this option, the Company
shall reserve for issuance the number of shares of Common Stock
required to satisfy this Option.
7. Adjustments to Number of Shares. The number of shares of Common Stock
subject to this Option shall be adjusted to take into account any stock
splits, stock dividends, or recapitalization of the Common Stock. The
total number of shares available under this Option shall be satisfied
upon the Optionee acquiring a total of 26% of Canton's issued and
outstanding stock at any time prior to the final termination date of
this Option, and/or any extensions thereto. Subsequent to such time as
the Optionee has purchased, and, or otherwise acquired shares totalling
26% of the issued and outstanding shares of Canton, the Optionee will
not thereafter be entitled to exercise additional options on Canton
stock, i.e., if Canton, prior to or subsequent to the Optionee's
exercise of a total of 26% of the outstanding shares of Canton, issues
or authorizes additional shares, the Optionee is not entitled to
additional options.
8. Limitation on Exercise. If the Board of Directors of the Company, in
their sole discretion, shall determine that it is necessary or
desirable to list, register, or qualify the Common Stock under any
state or federal law, this Option may not be exercised, in whole or
part, until such listing, registration, or qualification shall have
been obtained free of any conditions not acceptable to the board of
directors, within a reasonable time frame.
9. Restrictions on Transfer. Neither this Option, nor the securities
covered thereby, have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities statutes.
The Optionee acknowledges that unless a registration statement with
respect to this Option is filed and declared effective by the
Securities and Exchange Commission, and the appropriate state governing
agency, the Option has or will be issued in reliance on specific
exemptions from such registration requirements for transactions by an
issuer not involving a public offering and specific exemptions under
the state statutes. In some states, specific conditions must be met, or
the approval of the state's security regulatory authority may be
required before an offer or sale. The Company is under no obligation to
register the Option with the Securities and Exchange Commission or any
state agency. If rule 144 is available (and no assurance is given that
it will be), only routine sales of the Option in limited amounts can be
made after holding the securities for two years from the acquisition
date of the Securities, as determined under rule 144(d), and in
accordance with the terms and conditions of rule 144. Neither the
Company, its registrar or its transfer agent, will dispose of the
Securities without proper registration or exemptions. The Company and
its registrar and transfer agent will maintain a stop transfer order
against the transfer of the shares obtained pursuant to this Option and
any certificate representing the Option shares shall bear a legend in
substantially the following form so restricting the sale or other
transfer thereof:
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT.
10. Record Owner. The Company may deem the Optionee as the absolute owner
of this Option for all purposes.
11. Shareholder's Rights. The Optionee shall have shareholder rights with
respect to the Option shares only when it has exercised this Option to
purchase those shares and fully paid for such shares.
12. Validity and Construction. The validity and construction of this
Agreement shall be governed by the laws of the State of Utah.
13. Attorney's Fees. If any action at law or in equity, including an action
for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to
recover actual attorney's fee from the other party. The attorney's fees
may be ordered by the court in the trial of any action described in
this paragraph or may be enforced in a separate action brought for
determining attorney's fees.
IN WITNESS WHEREOF, the parties have executed this Option.
DATED this 22day of December, 1995.
The Canton Industrial Corporation
By: Steven A. Christensen
Title: President
Accepted:
By: /s/ Richard D. Surber
Title: President
STOCK OPTION
This Stock Option Agreement is made effective this 22 day of December,
1995 by and between Investment Sanctuary Corporation (hereinafter "Optionee") a
Utah corporation with offices at 268 West 400 South, Suite 305, Salt Lake City,
Utah 84101, and The Canton Industrial Corporation, Inc., a Nevada corporation
(hereinafter "Company" or "Canton") with offices at 268 West 400 South, Suite
300, with respect to the following:
RECITALS
WHEREAS, Optionee is in the business of providing marketing and general
business consulting services to privately held and publicly-held corporations;
and
WHEREAS, Company desires to compensate Optionee for advice and
consultation with Company's management concerning its growth strategy, potential
business relations, its financial public relations communication obligations,
and other matters connected to Company's business; and
WHEREAS, Optionee's agent, Richard Surber, has acted as the past
President of Canton, is a Director on the Board for Canton, and is acting as the
Chief Executive Officer for Canton, and has an intimate knowledge of the
Company's business.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, the parties agree as
follows:
By executing this Agreement as consideration, the Optionee is being
issued this new option to purchase up to a maximum of 25% of the Common stock of
Company's issued and outstanding Common Stock, as of the date of this Agreement,
based on the following premises:
GRANT
1. Grant of Option. The Company hereby grants Optionee the right and
option ("Option") to purchase all or any part of the above described
25% of the issued and outstanding shares of The Canton Industrial
Corporation's Common Stock, on the terms and conditions set forth
herein and subject to the provisions of this Stock Option.
2. Exercise Price. The initial exercise price of the shares of Common
Stock which are subject to this Option (the "Option Shares") shall be
fifty-nine cents ($.59) per share. Thereafter, on the anniversary date
of this Agreement, if Optionee has not exercised all of his option
rights pursuant to this Agreement, the parties agree that the Option
will be automatically renewed annually on the same terms and conditions
as set forth herein, up to four additional years.
3. Term of Option. This Option may be exercised, in whole or in part, at
any time prior to 12:00 Midnight, Mountain Standard Time, on the date
that is one year from the date of , 1995 with annual extensions up to a
total of five years.
4. Persons Entitled to Exercise. During the Optionee's lifetime, this
Option can only be exercised by the Optionee, or its assigns. Neither
this Option nor any right hereunder shall be subject to lien,
attachment, execution, or similar process.
<PAGE>
5. Method of Exercising. This Option may be exercised in accordance with
all the terms and conditions set forth in this Option and any Stock
Option Plan, by delivery of a notice of exercise, a form of which is
attached hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of Options to be exercised along
with either:
(a) A certified check or bank check payable to the order of
the Company in the amount of the full exercise price of the
Common Stock being purchased; or
(b) Other consideration acceptable to the Company, which
consideration shall be approved by the Board of Directors,
with the exception of the exclusion of a promissory note as
payment, which shall not be acceptable.
6. Availability of Shares. During the term of this option, the Company
shall reserve for issuance the number of shares of Common Stock
required to satisfy this Option.
7. Adjustments to Number of Shares. The number of shares of Common Stock
subject to this Option shall be adjusted to take into account any stock
splits, stock dividends, or recapitalization of the Common Stock. The
total number of shares available under this Option shall be satisfied
upon the Optionee exercising a total of 25% of Canton's issued and
outstanding stock at any time prior to the final termination date of
this Option, and/or any extensions thereto. At such time as the
Optionee has purchased, or otherwise acquired 25% of the issued and
outstanding shares of Canton, the Optionee will not thereafter be
entitled to exercise additional options on Canton stock, i.e., if
Canton, subsequent to the Optionee's exercise of a total of 25% of the
outstanding shares of Canton, issues or authorizes additional shares,
the Optionee is not entitled to additional options.
8. Limitation on Exercise. If the Board of Directors of the Company, in
their sole discretion, shall determine that it is necessary or
desirable to list, register, or qualify the Common Stock under any
state or federal law, this Option may not be exercised, in whole or
part, until such listing, registration , or qualification shall have
been obtained free of any conditions not acceptable to the board of
directors.
9. Restrictions on Transfer. Neither this Option, nor the securities
covered thereby, have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities statutes.
Optionee acknowledges that unless a registration statement with respect
to the Option is filed and declared effective by the Securities and
Exchange Commission and the appropriate state governing agency, the
Option has or will be issued in reliance on specific exemptions from
such registration requirements for transactions by an issuer not
involving a public offering and specific exemptions under applicable
state statutes. In some states, specific conditions must be met, or the
approval of the state's security regulatory authority may be required
before an offer or sale. The Company is under no obligation to register
the Option with the Securities and Exchange Commission or any state
agency. If rule 144 is available (and no assurance is given that it
will be), only routine sales of the Option in limited amounts can be
made after holding the securities for two years from the acquisition
date of the Securities, as determined under rule 144(d), and in
accordance with the terms and conditions of rule 144. Neither the
Company, its registrar or its transfer agent, will dispose of the
Securities without proper registration or exemptions. The Company and
its registrar and transfer agent will maintain a stop transfer order
against the transfer of the shares obtained pursuant to this Option and
any certificate representing the Option shares shall bear a legend in
substantially the following form so restricting the sale or other
transfer thereof:
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER
THE SECURITIES ACT.
10. Record Owner. The Company may deem the Optionee as the absolute owner
of this Option for all purposes.
11. Shareholder's Rights. The Optionee shall have shareholder rights with
respect to the Option shares only when it has exercised this Option to
purchase those shares and fully paid for such shares.
12. Validity and Construction. The validity and construction of this
Agreement shall be governed by the laws of the State of Utah.
13. Attorney's Fees. If any action at law or in equity, including an action
for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to
recover actual attorney's fee from the other party. The attorney's fees
may be ordered by the court in the trial of any action described in
this paragraph or may be enforced in a separate action brought for
determining attorney's fees.
IN WITNESS WHEREOF, the parties have executed this Option.
DATED this 22 day of December, 1995.
The Canton Industrial Corporation
By: /s/ Steven A. Christensen
Title:President
Accepted:
By: /s/ Richard D. Surber
Title: President
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
December 30, 1995
Mr. Steve Christensen
The Canton Industrial Corporation
268 West 400 South, Suite 300
Salt Lake City, UT 84101
Dear Mr. Christensen:
Effective December 30, 1995, we will cease our services as your accountants. We
have reached this decision reluctantly and after substantial deliberation
because of our time commitments to other clients.
We wish to remind you that you have unpaid invoices totaling $2,029.20. We
expect payment in full of all of these invoices as soon as possible.
You should take immediate steps to retain a new accounting firm as there are a
number of accounting matters that require immediate attention. Those matters
include:
1. Timely completion of your audit for your Form 10-K filing.
We will cooperate with your new accountants in addressing these and other
matters. To facilitate that process, please send us a letter authorizing us to
make disclosures to your new accountants. Without such a letter, we are
ethically prohibited from communicating with others regarding your company's
affairs.
We look forward to helping you make a smooth transition with your new
accountants.
Very truly your,
Smith & Company
/s/ R. N. Smith
By: R.N. Smith
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
December 30, 1995
Mr. Steve Christensen
The Canton Industrial Corporation
268 West 400 South, Suite 300
Salt Lake City, UT 84101
RE: Auditor relationship
Dear Mr. Christensen:
This is to confirm that the client-auditor relationship between The Canton
Industrial Corporation (SEC File No. I-9418) and Smith & Company has ceased,
effective December 30, 1995.
Very truly yours,
Smith & Company
By: /s/ R. N. Smith
cc: SECPS Letter File
U.S. Securities & Exchange Commission
Mail Stop 9-5
450 Fifth Street, Northwest
Washington, DC 20549
ANDERSEN, ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Members SEC Practice Section of the AICPA
January 2, 1996
The Canton Industrial Corporation and Subsidiaries
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
We are pleased to confirm our understanding of the services we are to provide
for Canton Industrial Corporation and Subsidiaries.
We will audit the balance sheet as of December 31, 1995, and the related
statements of operations, stockholders' equity, and cash flows for the year
ended.
Our audit will be made in accordance with generally accepted auditing standards
and will include tests of your accounting records and other procedures we
consider necessary to enable us to express an unqualified opinion that your
financial statements are fairly presented, in all material respects, in
conformity with generally accepted accounting principles. If our opinion is
other than unqualified, we will fully discuss the reasons with you in advance.
Our procedures will include tests of documentary evidence supporting the
transactions recorded in the accounts, tests of the physical existence of
inventories, and direct confirmation of receivables and certain other assets and
liabilities by correspondence with selected customers, creditors, and banks. We
will request written representations from your attorneys as part of the
engagement, and they may bill you for responding to this inquiry. At the
conclusion of our audit, we will also request certain written representations
from you about the financial statements and related matters.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements; therefore, our audit will involve
judgement about the number of transactions to be examined and the areas to be
tested. Also, we will plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
However, because of the concept of reasonable assurance and because we will not
perform a detailed examination of all transactions, there is a risk that
material errors, irregularities, or illegal acts, including fraud or
defalcations, may exist and not be detected by us. Our responsibility as
auditors is limited to the period covered by our audit and does not extend to
any later periods for which we are not engaged as auditors.
<PAGE>
We understand that you will provide us with the basic information required for
our audit and that you are responsible for the accuracy and completeness of that
information. We will advise you about appropriate accounting principles and
their application and will assist in the preparation of your financial
statements, but the responsibility for the financial statements remains with
you. This responsibility includes the maintenance of adequate records and
related internal control policies and procedures, the selection and application
of accounting principles, and the safeguarding of assets.
Our audits are not specifically designed and cannot be relied on to disclose
reportable conditions, that is significant deficiencies in the design or
operation of the internal control structure. However, during the audit, if we
believe management practices can be improved, we will communicate them to you in
a separate letter.
As part of our engagement, we will also prepare the state and federal
corporation income tax returns for 1995.
Our fees for these services will be based on the actual time spent at our
standard hourly rates, plus out-of-pocket costs such as report production,
typing, postage, etc. Our standard hourly rates vary according to the degree of
responsibility involved and the experience level of the personnel assigned to
your audit. Our invoices for these fees will be rendered each month as work
progresses and are payable on presentation. Based on our preliminary estimates,
the fee should be approximately $7,500.00 for the audits and tax returns. Our
procedure is to request a retainer on a first-time engagement. Accordingly, we
would appreciate it if you would tender a check for $1,000 as acknowledgment of
your acceptance of the terms of the engagement. This estimate is based on
anticipated cooperation from your personnel and the assumption that unexpected
circumstances will not be encountered during the audit. If significant
additional time is necessary, we will discuss it with you and arrive at a new
fee estimate before we incur the additional costs.
We appreciate the opportunity to be of service to you and believe this letter
accurately summarized the significant terms of our engagement. If you have any
questions, please let us know. If you agree with the terms of our engagement as
described in this letter, please sing the enclosed copy and return it to us, and
this letter will continue in effect until canceled by either party.
Very truly yours,
/s/ ANDERSEN, ANDERSEN & STRONG
RESPONSE:
This letter correctly sets forth the understanding of The Canton Industrial
Corporation.
Officer's signature: Title: Date:
/s/ Susan S. Waldrop, Chief Financial Officer 1/2/96
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
January 3, 1996
SECPS Letter File
U. S. Securities & Exchange Commission
Mail Stop 9-5
450 Fifth Street, Northwest
Washington, DC 20549
RE: The Canton Industrial Corporation - SEC File No. I-9418
Ladies and Gentlemen:
We have read Item 4 of the Form 8-K for The Canton Industrial Corporation dated
January 3, 1996, and agree with the statements contained therein.
Very truly yours,
Smith & Company
By: /s/ Richard N. Smith
