ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Pacific
WebWorks outstanding common stock of each person or group known by us to own
beneficially more than 5% of our outstanding common stock; each of our
executive officers; each of our directors; and all executive officers and
directors as a group.
Beneficial ownership is determined according to the rules of the SEC and
generally includes voting or investment power with respect to securities.
Except as indicated by footnote, the persons named in the table below have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. The inclusion of any shares as
beneficially owned does not constitute an admission of beneficial ownership of
those shares. The percentage of beneficial ownership is based on 18,337,475
outstanding as of March 8, 2001 shares of common stock.
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
--------------------------- -------------------- -------------------
LVT Associates, LLC
2247 Emerson
Salt Lake City, Utah 84108 1,375,000 7.5%
Net Strategic Investments, LLC
1986 E. Falcon Hill Circle
Sandy, Utah 84092 1,117,500 (1) 6.1%
DIRECTORS AND OFFICERS
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
-------------------------- ---------------------- -------------------
Christian R. Larsen 1,117,500 (1) 6.1%
1760 Fremont Drive
Salt Lake City, Utah 84104
Kenneth W. Bell 259,491 (2) 1.4%
1760 Fremont Drive
Salt Lake City, Utah 84104
Benjamin A. Black 500,000 2.7%
1760 Fremont Drive
Salt Lake City, Utah 84104
Tomas R. Eldredge 27,273 (3) Less than 1%
1760 Fremont Drive
Salt Lake City, Utah 84104
Tom Hill 553,056 3.0%
2481 Valleywood Drive
San Bruno, California 94066
Allan E. Oepping 725,000 4.0%
1760 Fremont Drive
Salt Lake City, Utah 84104
All executive officers and 3,182,320 17.3%
directors as a group
(1) Mr. Larsen has acquired an ownership interest in Net Strategic
Investments.
(2) Includes 80,610 shares held by Mr. Bell, 141,002 shares owned jointly with
his spouse and 37,879 options exercisable within 60 days. The options
were approved by our board of directors in March 2001 to replace already
existing Logio options. The new options have been converted at a one to
6.6 ratio for the number of shares granted. Exercise prices for these
options are at $0.875
25
(3) Represents options to purchase Pacific WebWorks, Inc. common stock that
have been approved by our board of directors in March 2001 to replace
already existing Logio options. The 27,273 options have been converted at
a one to 6.6 ratio for the number of shares granted. Exercise prices for
these options are at $0.875.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions we have either
engaged in since the beginning of our past fiscal year or propose to engage in
involving our executive officers, directors more than 5% stockholders, or
immediate family members of such persons:
On April 4, 2000 we signed a reorganization agreement to acquire all of
the outstanding shares of IntelliPay, Inc., a Delaware corporation. As a
result of this transaction Tom J. Hill, the President of IntelliPay, was
appointed to our board of directors.
On October 31, 2000 we signed a reorganization agreement to acquire all
of the outstanding shares of Logio, Inc. Kenneth W. Bell was President, CEO
and director of Logio and Thomas R. Eldredge was Logio's Chief Financial
Officer. While the acquisition was being completed, Kenneth Bell was
appointed as our Chief Executive Officer and interim Director and Thomas
Eldredge was appointed as Secretary/Treasurer and Chief Financial Officer.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(1) Financial Statements
Independent auditors report....................................... F-3
Consolidated Balance Sheets as of December 31, 2000 and
December 31, 1999............................................... F-4
Consolidated Statements of Operations for Years Ended
December 31, 2000, 1999 and 1998 ............................... F-6
Consolidated Statements of Stockholder's Equity for Years
Ended December 31, 2000, 1999 and 1998.......................... F-7
Consolidated Statements of Cash Flows for Years Ended
December 31, 2000, 1999 and 1998 ................................ F-8
Notes to Consolidated Financial Statements ........................F-10
(2) All schedules of the Registrant for which the provision is made in the
applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable, or have
been disclosed in the Notes to Consolidated Financial Statements, and
therefore, have been omitted.
(3) Exhibits
Exhibit
Number Description
------ -----------
2.1 Agreement and Plan of Reorganization between Pacific WebWorks and
IntelliPay, dated April 4, 2000 (Incorporated by reference to
exhibit No. 2.1for Pacific WebWork's Form 8-K, filed April 19,
2000.)
2.2 Agreement and Plan of Reorganization between Pacific WebWorks and
Logio, dated October 31, 2000 (Incorporated by reference to
exhibit No. 2.1 for Pacific WebWork's Form 8-K, filed November 14,
2000.)
3.1 Articles of Incorporation of Asphalt Associates, Inc.
(Incorporated by reference to exhibit No. 3.1 for Pacific
WebWork's Form 10, as amended, file No. 0-26731, filed July 16,
1999.)
3.2 Articles of Merger for Asphalt Associates, Inc., dated January 6,
1999 (Incorporated by reference to exhibit No. 2.1 for Pacific
WebWork's Form 10, as amended, file No. 0-26731, filed July 16,
1999.)
3.3 Articles of Share Exchange, filed February 8, 2001.
26
3.4 Amended and Restated Bylaws of Pacific WebWorks, Inc.
(Incorporated by reference to exhibit No. 3.2 for Pacific
WebWork's Form 10, as amended, file No. 0-26731, filed July 16,
1999.)
10.1 Master Service Agreement between Electric Lightware, Inc., and
Utah WebWorks, Inc., dated February 2, 1998. (Incorporated by
reference to exhibit No. 10.1 for Pacific WebWork's Form 10, as
amended, file No. 0-26731, filed July 16, 1999.)
10.2 Internet Access Agreement, Addendum to Master Service Agreement
between Electric Lightwave, Inc., and Utah WebWorks, Inc., dated
February 2, 1998 (Incorporated by reference to exhibit No. 10.2
for Pacific WebWork's Form 10, as amended, file No. 0-26731, filed
July 16, 1999.)
10.3 Form of Employment Agreement with management (Incorporated by
reference to exhibit No. 10.3 for Pacific WebWork's Form 10, as
amended, file No. 0-26731, filed July 16, 1999.)
10.4 Lease Agreement between Utah WebWorks, Inc. and Westgate Business
Center, dated January 11, 1999 (Incorporated by reference to
exhibit No. 10.6 for Pacific WebWork's Form 10, as amended, file
No. 0-26731, filed July 16, 1999.)
10.5 Strategic Reseller Agreement with U.S. Merchant Systems
(Incorporated by reference to exhibit No. 10.9 for Pacific
WebWork's Form 10, as amended, file No. 0-26731, filed July 16,
1999)
10.8 Purchase Agreement between Pacific WebWorks and U.S. Merchant
Systems, Inc., dated February 22, 1999 (Incorporated by reference
to exhibit No. 2.3 for Pacific WebWork's Form 10-K, filed March
10, 2000)
10.9 Registration Rights Agreement between Pacific WebWorks and Midwest
First National, Inc. and Condiv Investments, Inc. and Columbia
Financial Group, dated February 22, 2000 (Incorporated by
reference to exhibit No. 10.11 for Pacific WebWorks's Form S-1
Registration Statement, File No. 333-38026, effective June 12,
2000.)
10.10 Lease Agreement between Pacific WebWorks and Principal Property
Management, LLC, dated January 1, 2001.
21.1 Subsidiaries of Pacific WebWorks.
(b) Reports on Form 8/K
On November 14, 2000 we filed a report on Form 8-K under Item 2 and 7
regarding the Agreement and Plan of Reorganization between Pacific WebWorks
and Logio, Inc. We filed pro forma financial statements for he period ended
September 30, 2000 and the year ended December 31, 1999. On January 3, 2001
we amended this Form 8-K and filed financial statements for Logio for the nine
month period ended September 30, 2000 and 1999 and fiscal years ended December
31, 1999 and 1998, along with pro forma financial statements for the years
ended December 31, 1999 and for the nine month period ended September 30,
2000.
On December 20, 2000 we filed an amended report on Form 8-K under Item 5
regarding the effective date of our registration statement on Form S-4 related
to the registration of the acquisition shares. We amended this 8-K on
December 22, 2000.
On February 5, 2001 we filed a report on Form 8-K under Item 5 regarding
Logio stockholder approval of the acquisition agreement.
On March 13, 2001 we filed a report on Form 8-K under Item 5 regarding
the listing of our common stock on the Berlin Exchange.
27
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Pacific WebWorks, Inc.
3/30/01 /s/ Christian R. Larsen
Date:_______________ By:_____________________________________
Christian R. Larsen,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934.
This report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
3/30/01 /s/ Kenneth W. Bell
Date: ____________ By:_____________________________________
Kenneth W. Bell
Chief Executive Officer and Director
3/30/01 /s/ Thomas R. Eldredge
Date: ____________ By:_____________________________________
Thomas R. Eldredge
Secretary/Treasurer and Chief
Financial Officer
3/30/01 /s/ Allan E. Oepping
Date: ____________ By: ____________________________________
Allan E. Oepping
Director
3/30/01 /s/ Benjamin A. Black
Date: ____________ By: ____________________________________
Benjamin A. Black
Director
3/30/01 /s/ Tom J. Hill
Date: ____________ By: ____________________________________
Tom J. Hill
Director
Certified Public Accountants
P.O. Box 540216 Office (801)292-8756
North Salt Lake, Utah 84054 FAX (801) 292-8809
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Pacific WebWorks, Inc.
Salt Lake City, UT
We have audited the accompanying consolidated balance sheets of Pacific
WebWorks, Inc. and Subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pacific
WebWorks, Inc. as of December 31, 2000 and 1999 and the consolidated results
of their operations and cash flows for the years ended December 31, 2000,
1999, and 1998 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has had recurring operating
losses and is dependent upon financing to continue operations. These factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the Note
2. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Chisholm & Associates
Chisholm & Associates
North Salt Lake, Utah
March 2, 2001
Pacific WebWorks, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
December 31,
2000 1999
-------------- -------------
Current assets
Cash and Cash Equivalents $ 163,801 $ 153,898
Accounts Receivable (less allowance of
$88,487 and $3,798 respectively) 257,492 101,429
Employee Receivable 2,469 4,578
Prepaid Expenses 275,022 16,333
Accounts Receivable - Related Party - 6,800
Notes Receivable - Related Party - 166,046
-------------- -------------
Total Current Assets 698,784 449,084
-------------- -------------
Property and Equipment, Net - at cost 374,259 171,393
-------------- -------------
Other Assets
Deposits 17,250 5,250
Goodwill, less accumulated amortization 4,041,226 -
Computer Software Costs, less
accumulated amortization 3,008 4,832
Software Development Costs, less
accumulated amortization 270,495 -
-------------- -------------
Total Other Assets 4,331,979 10,082
-------------- -------------
Total Assets $ 5,405,022 $ 630,559
============== =============
The accompanying notes are an integral part of these financial statements.
-4-
Pacific WebWorks, Inc. and Subsidiaries
Consolidated Balance Sheets
(Continued)
Liabilities and Stockholders' Equity
December 31,
2000 1999
-------------- -------------
Current Liabilities
Current Maturities of Long-Term Obligation $ 2,425 $ -
Accounts Payable 611,950 74,550
Accrued Expenses 390,209 70,177
Deferred Revenue 1,811,020 -
Note Payable - Related Party 250,000 -
Notes Payable 216,580 500,000
-------------- -------------
Total Current Liabilities 3,282,184 644,727
-------------- -------------
Capital Lease Obligation, less Current Maturities $ 670 -
-------------- -------------
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of
$.001 par value, issued and outstanding
15,008,342 shares in 2000 and 10,395,679
shares in 1999 15,008 10,396
Additional Paid-in-Capital 10,153,603 2,762,188
Accumulated Deficit (8,046,443) (2,786,752)
-------------- -------------
Total Stockholders' Equity 2,122,168 (14,168)
-------------- -------------
Total Liabilities and Stockholders' Equity $ 5,405,022 $ 630,559
============== =============
The accompanying notes are an integral part of these financial statements.
-5-
Pacific WebWorks, Inc. and Subsidiaries
Consolidated Statements of Operations
For the
Years Ended
December 31,
2000 1999 1998
------------- ------------- -------------
Net Revenues $ 4,954,384 $ 305,628 $ 172,395
Cost of Sales 811,506 42,874 188,974
------------- ------------- -------------
Gross Profit 4,142,878 262,754 (16,579)
------------- ------------- -------------
Expenses:
Selling Expenses 4,802,397 406,917 30,180
Research & Development 1,044,842 320,479 11,949
Depreciation & Amortization 1,095,261 30,572 13,151
Options & Warrants issued for
compensation and services 28,366 1,242,584 -
General & Administrative 2,375,252 786,740 67,845
------------- ------------- -------------
Total Operating Expenses 9,346,118 2,787,292 123,125
------------- ------------- -------------
Loss from Operations (5,203,240) (2,524,538) (139,704)
Other Income (Expenses)
Interest Expense (70,440) (19,243) (10,761)
Interest Income 13,989 1,246 -
Loss on Investment - (25,000) -
------------- ------------- -------------
Net Loss $ (5,259,691) $ (2,567,535) $ (150,465)
============= ============= =============
Net Loss Per Common Share -
Basic and Diluted $ (.40) $ (0.27) $ (0.03)
============= ============= =============
Weighted average shares outstanding 13,140,360 9,632,500 5,000,000
============= ============= =============
The accompanying notes are an integral part of these financial statements.
-6-
Pacific WebWorks, Inc.
Consolidated Statement of Stockholders' Equity
For the Years ended December 31, 2000, 1999 and 1998
Additional
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
------------- ---------- ------------ ------------- -------------
Balance, December 31, 1997 5,000,000 $ 5,000 $ 5,000 $ (68,752) $ (58,752)
Net loss December 31, 1998 - - - (150,465) (150,465)
------------- ---------- ------------ ------------- -------------
Balance, December 31, 1998 5,000,000 5,000 5,000 (219,217) (209,217)
Reverse merger & reorganization
adjustment 5,000,000 5,000 995,000 - 1,000,000
September 1999, shares issued for
insurance policy at $1.43 per
share, valued at $20,000 14,000 14 19,986 - 20,000
December 1999, shares issued for
payment on notes payable of
$500,000 at $1.31 per share 381,679 382 499,618 - 500,000
Consulting compensation for
warrants issued - - 1,242,584 - 1,242,584
Net loss December 31, 1999 - - - (2,567,535) (2,567,535)
------------- ---------- ------------ ------------- -------------
Balance, December 31, 1999 10,395,679 10,396 2,762,188 (2,786,752) (14,168)
January 2000, shares issued for
equity of World Commerce Network,
LLC at $2.00 per share 4,663 4 9,176 - 9,180
April 2000, shares issued to acquire
Intellipay, Inc. at $1.80 per share 2,400,000 2,400 4,317,600 - 4,320,000
June 2000, shares issued for payment
on notes payable of $1,000,000 at
$2.50 per share 400,000 400 999,600 - 1,000,000
June 2000, shares issued for payment
on notes payable of $1,040,000
at $1.00 per share 1,040,000 1,040 1,036,496 - 1,037,536
August 2000, shares issued for
insurance policy at $1.44
per share 18,000 18 25,927 - 25,945
September 2000, shares issued for
payment on notes payable of
$600,000 at $1.00 per share 600,000 600 599,400 - 600,000
October 2000, shares issued for cash
at $2.50 per share 150,000 150 374,850 - 375,000
Consulting Compensation for
warrants issued - - 13,216 - 13,216
Compensation for stock options granted - - 15,150 - 15,150
Net loss December 31, 2000 - - - (5,259,691) (5,259,691)
------------- ---------- ------------ ------------- -------------
Balance, December 31, 2000 15,008,342 $ 15,008 $10,153,603 $ (8,046,443) $ 2,122,168
============== ========== ============ ============= =============
The accompanying notes are an integral part of these financial statements.
7
Pacific WebWorks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the
Years Ended
December 31,
2000 1999 1998
------------- ------------- -------------
Cash Flows from Operating Activities:
Net Loss $ (5,259,691) $ (2,567,535) $ (150,465)
Adjustments to reconcile net loss
to net cash used in operations
(net of acquisitions of WCN and
Intellipay):
Depreciation & Amortization 1,095,261 30,572 13,151
Warrants & Options issued for
compensation and services 28,366 1,255,800 -
Bad Debt 111,731 - 4,055
Common stock issued for insurance 25,945 20,000 -
Loss on Investment - 25,000 -
Change in assets and liabilities:
Accounts receivable (150,025) (94,779) 13,828
Accounts receivable -
related party 6,800 (6,800) -
Prepaid expenses (258,689) (29,549) -
Accounts Payable and
accrued expenses 478,775 121,064 (755)
Deferred Revenue 1,821,378 - -
------------- ------------- -------------
Net Cash Flows used in Operating
Activities (2,100,149) (1,246,227) (120,186)
------------- ------------- -------------
Cash Flows from Investing Activities:
Cash paid for property and equipment (250,373) (148,135) (12,675)
Cash paid for deposits (12,000) - (5,250)
Cash paid for investment - (25,000) -
Cash acquired in acquisitions 9,718 - -
Cash from escrow - 750,000 -
Cash paid to related party - (166,046) -
------------- ------------- -------------
Net Cash provided by (used in)
Investing Activities (252,655) 410,819 (17,925)
------------- ------------- -------------
Cash Flows from Financing Activities:
Cash from debt financing 2,006,580 980,000 381,300
Issuance of stock for cash 375,000 - -
Principle payments on Debt
financing (18,873) - (239,323)
------------- ------------- -------------
Net Cash Flows provided by
Financing Activities 2,362,707 980,000 141,977
------------- ------------- -------------
Net increase in cash 9,903 144,592 3,866
Cash and Cash Equivalents,
beginning of period 153,898 9,306 5,440
------------- ------------- -------------
Cash and Cash Equivalents,
end of period $ 163,801 $ 153,898 $ 9,306
============= ============= =============
Supplemental Cash Flow Information
Cash Paid for:
Interest $ 29,213 $ 1,400 $ 14,262
Taxes $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
8
Pacific WebWorks, Inc.
Consolidated Statements of Cash Flows
(continued)
Supplemental Non-Cash Disclosures:
During 1999, 14,000 shares of common stock were issued at $1.43 per share for
a $20,000 insurance policy.
During 1999, 381,679 shares of common stock were issued at $2.62 per share in
payment of a $500,000 notes payable.
During 1999, 400,000 warrants were issued for non-employee services performed
during the year. These warrants are valued at $1,255,800.
For 1999, the Company's share of the recognized loss in the joint venture is
$25,000.
During 2000, 18,000 shares of common stock were issued at $1.44 per share for
a $25,945 insurance policy.
During 2000, 400,000 shares of common stock were issued to a related party at
$2.50 per share in payment of a $1,000,000 notes payable.
During 2000, 1,640,000 shares of common stock were issued to a related party
at $1.00 per share in payment of $1,637,536 notes payable and accrued
interest.
During 2000, compensation expense of $15,150 was recorded for stock options
granted to employees.
During 2000, compensation expense of $13,216 was recorded for services
received for warrants.
The accompanying notes are an integral part of these financial statements.
9
Pacific WebWorks, Inc.
Notes to The Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Pacific WebWorks, Inc., ("the Company") was organized under the laws
of the state of Nevada on May 18, 1987 as Asphalt Associates, Inc. On
December 31, 1998 the board of directors changed the name of the Company to
Pacific Webworks, Inc. On January 11, 1999, the Company merged with Utah
Webworks, Inc., a Utah corporation organized April 10, 1997. The share
exchange with Utah Webworks was accounted for as a reverse merger, therefore
all financial information prior to January 11, 1999 is that of the accounting
survivor being Utah Webworks. Pacific Webworks is currently engaged in
developing, selling and servicing computer and internet related software and
hardware products.
Acquisition of World Commerce Network, LLC
Effective January 1, 2000, the Company issued 4,663 shares of its
common stock to U.S. Merchant Systems, Inc. for 1% of the outstanding stock
of World Commerce Network, LLC (WCN). The shares were valued at $9,180. The
issuance increased the Company's ownership in WCN to 51% and WCN therefore
became a subsidiary of the Company. In June 2000, the Company paid $100 for
49% of the outstanding shares of WCN, thereby making WCN a wholly owned
subsidiary of the Company. The operations of WCN have been consolidated with
the Company's operations effective January 1, 2000. Prior to the additional
1% purchase, the Company owned 50% of WCN and recorded its investment using
the equity method. The balance at December 31, 1999 was $0.
Acquisition of Intellipay, Inc.
On April 4, 2000, the Company completed an Agreement and Plan of
Reorganization with Intellipay, Inc. a private Delaware corporation
(Intellipay). The Company issued 2,400,000 shares of common stock valued at
$4,320,000 for all of the outstanding shares of Intellipay. Thereby
Intellipay became a wholly owned subsidiary of the Company. The transaction
was recorded using the purchase method of accounting.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of net loss per share of common stock is based on the
weighted average number of shares outstanding during each period presented.
Potentially issuable common shares totaling 1,107,606 from the exercise of
stock options and warrants were excluded from the calculation of diluted loss
per share because their effects were anti-dilutive.
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------ -----------
For the year ended December 31, 2000:
Income (loss) from operations $(5,203,240)
------------
Basic EPS
Income (loss) to common stockholders $(5,259,691) 13,140,360 $ (.40)
============ ============ ===========
10
Pacific WebWorks, Inc.
Notes to The Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (continued)
c. Earnings (Loss) Per Share (continued)
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------ -----------
For the year ended December 31, 1999:
Income (loss) from operations $(2,524,538)
------------
Basic EPS
Income (loss) to common stockholders $(2,567,535) 9,632,500 $ (.27)
============ ============ ===========
For the year ended December 31, 1998:
Income (loss) from operations $ (139,704)
------------
Basic EPS
Income (loss) to common stockholders $ (150,465) 5,000,000 $ (.03)
============ ============ ============
The following is the calculation for Weighted-average common shares
used in basic and dilutive net loss per common share:
Year ended December 31,
2000 1999 1998
------------ ------------ ------------
Common shares outstanding during
the entire period 10,395,679 5,000,000 5,000,000
Weighted-average common shares
issued during the period 2,744,681 4,632,500 -
Weighted-average common shares
used in basic EPS 13,140,360 9,632,500 5,000,000
Dilutive effects of potential
common shares - - -
------------ ------------ ------------
Weighted-average number of common
shares and dilutive potential
common stock used in diluted EPS 13,140,360 9,632,500 5,000,000
------------ ------------ ------------
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
11
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (continued)
e. Provision for Income Taxes
At December 31, 2000, the Company has net operating loss
carryforwards totaling approximately $8,046,443 that may be offset against
future taxable income through 2013. No tax benefit has been reported in the
2000 financial statements since the loss carryforwards are offset by valuation
allowance of the same amount.
Deferred tax assets and the valuation account is as follows at
December 31, 2000 and 1999:
f. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities, and revenues involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
g. Revenue Recognition
The Company recognizes income and expense on the accrual basis of
accounting. The Company receives revenues from the sales of access to its
web-based applications, the performance of consulting and training and from
the continual hosting of its clients' web sites. The initial term of all
agreements into which the company enters with its clientele for its web-based
applications is one year. The revenues related to these contracts are,
therefore, recognized ratably over the initial term of the contract. The
monthly charges related to hosting and gateway access are recognized when
billed in accordance with SOP 97-2 as services are performed. Any additional
consulting fees or training fees, outside of the initial contract, related to
any Visual WebTools products are recognized as the service is delivered
h. Recently Adopted Accounting Pronouncements/Deferred Revenue
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accouting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 clarifies application of generally accepted accounting
principles to revenue transactions. The Company changed its accounting method
during 2000 to conform to the views of the SEC staff as documented in SAB 101.
The change involves that of accounting for up-front fees and, in accordance
with SAB 101, the Company is amortizing such fees over one year, which
generally represents the longer of the contractual period or the expected life
of the customer relationship. There is no cumulative effect adjustment for
the change in 2000 as there were not significant up-front fees relating to the
change prior to January 1, 2000. Pursuant to this new accounting policy the
Company has deferred revenue of $1,821,378 at December 31, 2000. The Company
has also deferred commissions paid in connection with deferred revenues and
has recorded prepaid expenses of $275,022 at December 31, 2000.
12
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (continued)
i. Depreciation
Depreciation of property and equipment is provided on the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the periods ended December 31, 2000 and 1999 is
$126,708 and $28,572, respectively.
j. Major Customers
During 1999 and 1998 the Company had major customers that
individually accounted for 10% or more of the annual sales. During 1998, four
customers generated sales in the amount of $118,744 or 68% of total sales as
follows:
Customer Sales %
--------- ------- ------
A 28,161 16
B 21,271 12
C 24,422 14
D 44,890 26
During 1999, two customers generated sales in the amount of $124,344
or 41% of total sales as follows:
Customer Sales %
--------- ------- ------
A 64,535 21
B 59,809 20
During 2000, the Company had no major customers.
k. Impairment of Long Lived Assets
Fixed assets are evaluated periodically by management and if impaired
are written down to the fair market value.
l. Consolidation Policy
The December 31, 2000 financial statements are consolidated financial
statements including the accounts of Pacific Webworks, Inc., World Commerce
Network, LLC, and Intellipay, Inc. All Intercompany transactions and accounts
have been eliminated in the consolidation.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has had
recurring operating losses since inception and is dependent on financing to
continue operations. The financial statements do not include any adjustment
that might result from the outcome of this uncertainty. It is management's
plan to continue to refine its operations by taking steps to reduce the
Company's burn rate, solicit funding, and increase cash sales.
13
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 3 - Property and Equipment
Property and Equipment consists of the following at December 31, 2000
and 1999:
During 1999, the Company received $980,000 cash and $20,000 of
equipment from a company. In December 1999, $500,000 of the note was
converted to 381,679 restricted shares of the company's common stock. The
remaining balance of $500,000 was converted to 500,000 shares of common stock
during 2000.
During 2000, the Company received cash of $216,580 from a
corporation. The note is non-interest bearing and due upon demand.
NOTE 5 - Notes Payable - Related Party
During 2000, the Company received cash of $250,000 from Principal
Funding Group, a shareholder. The note bears interest at 13% and is due
within one year.
NOTE 6 - Lease Obligation
The Company has a capital lease obligation to a corporation for a
copier. The lease requires monthly payments of $286 through April 2002, bears
interest at 10%, and is secured by the copier. The lease obligation due at
December 31, 2000 is $3,095.
Future minimum lease payments are as follows at December 31, 2000:
2001 $ 3,423
2002 1,144
----------
Total Obligation 4,567
Less: Portion representing interest (1,472)
----------
Total Principle Obligation 3,095
Less: Current Maturities (2,425)
----------
Total Long Term Principle Obligation $ 670
==========
14
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 7 - Stockholders' Equity
During January 2000, the Company issued 4,663 shares of its common
stock at $2.00 per share for 1% of the outstanding stock of World Commerce
Network, LLC.
During April 2000, the Company issued 2,400,000 shares of its common
stock at $1.80 per share for all of outstanding stock of Intellipay, Inc.
During June 2000, the Company issued 400,000 shares of its common
stock at $2.50 per share for payment on notes payable of $1,000,000.
During June 2000, the Company issued 1,040,000 shares of its common
stock at $1.00 per share for payment on notes payable and accrued interest of
$1,037,536.
During August 2000, the Company issued 18,000 shares of its common
stock at $1.44 per share for an insurance policy valued at $25,945.
During September 2000, the Company issued 600,000 shares of its
common stock at $1.00 per share for payment on notes payable of $600,000.
During October 2000, the Company issued 150,000 shares of its common
stock at $2.50 per share for cash of $375,000. These shares were issued to
honor warrants that were exercised.
NOTE 8 - Computer Software Costs
On May 7, 1997, the Company entered into an agreement for assignment
of a security interest and judgement from a bank for various software service
codes and other technology they held. Pursuant to FASB 86, the Company
capitalized these costs because the purchased software had alternative future
use, being an integral part of the internet software design product sold to
the public. Costs of maintaining the product is charged to expense when
incurred. The Company paid $10,000 for the transfer of these software tools
and is amortizing them over a five year life. Amortization expense is $1,824,
$2,001 and $2,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
NOTE 9 - Software Development Costs
Software development costs represent costs incurred for internally
developed software. Pursuant to SOP 98-1, the Company capitalizes costs
incurred during the application development stage (designing, coding,
installing, and testing) or its software development. Costs incurred during
the preliminary project stage and post-implementation and operation stage are
expensed as incurred. The Company capitalized $772,448 in 1999. The costs
are being amortized over a three year period and amortization expense charged
to operations in 2000 and 1999 was $274,824 and $274,827, respectively.
15
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 10 - Reverse Merger / Stock Split
Effective January 11, 1999, Pacific Webworks, Inc. (a public
Company) entered into an agreement and Plan of Reorganization with Utah
Webworks, Inc., (a private company). The agreement provides for the merger of
the Company into Utah Webworks to be treated as a reverse merger, thus making
Utah Webworks the accounting survivor. Pursuant to the agreement the Company
issued 5,000,000 shares of common stock to the shareholders of Utah Webworks
for all shares of their Company. Because the historical financial information
in these financial statements prior to the reverse merger (January 11, 1999)
is that of the accounting acquirer (Utah Webworks), a 5,000 for 1 forward
stock split adjustment has been retroactively applied to the shares of Utah
Webworks, to show the effects of the reverse merger. The 5,000,000 share
reorganization adjustment represents the shares held by the shareholders of
the public company. The management of the Company resigned and the management
and board of Utah Webworks filled the vacancy. Utah Webworks is in the
business of software development for computer and internet systems. The
public company had cash in escrow of $750,000 and a note receivable from Utah
Webworks of $250,000 as its only assets. The cash and note receivable were
contributed to Utah Webworks as an investment in subsidiary advanced for
operations. This business combination was accounted for using the purchase
method.
NOTE 11 - Investment in Joint Venture
During 1999, the Company became a 50% member in World Commerce
Network, LLC (WCN). For 1999, WCN had a net loss of $281,341, of which,
$140,671 should be recognized by the Company. However, since the Company
contributed only $25,000 in capital, the loss on investment was limited to
this amount. The Company's book value in this investment at December 31, 1999
was $0. In January 2000, the Company acquired an additional 1% interest and
began accounting for this investment using the consolidation method and
changed from the equity method. In June 2000 the Company acquired the
remaining 49% of WCN, thus it is a wholly owned subsidiary of the Company at
December 31, 2000. WCN has been consolidated for the entire year 2000.
NOTE 12 - Related Party
During 1999, $166,046 was recognized as a note receivable from World
Commerce Network, LLC (WCN). There was no provision for interest and the
balance was due within the next twelve months. Additionally as of December
31, 1999, there was an accounts receivable of $6,800 due from WCN. However, in
2000, the Company acquired all remaining outstanding stock of WCN and it
became a wholly owned subsidiary of the Company. These receivables became
intercompany and were eliminated in consolidation at December 31, 2000.
During 2000, the Company received cash of $250,000 from Principal
Funding Group, a shareholder. The note bears interest at 13% and is due
within one year.
16
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 13 - Stock Warrants
At January 1999, the Company had outstanding warrants to purchase
400,000 shares of the Company's common stock at prices ranging from $2.50 to
$6.00 per share. The warrants became exercisable in January 1999 and expire
in January 2004. The warrants are exercisable as follows:
150,000 warrants at $2.50
100,000 warrants at $3.50
100,000 warrants at $4.50
50,000 warrants at $6.00
The warrants were issued to a public relations firm for promotional
services to be provided for one year from issue date. The Company accounted
for these warrants per FASB 123 using the Black-Scholes model on the date the
warrants became measurable per EITF 96-18. The measurement dates are as
follows: 133,000 warrants on January 28, 1999, 67,000 warrants of July 27,
1999 and the remaining 200,000 on November 27, 1999. The resulting valuation
for the warrants is $1,255,800 of which $1,242,584 was amortized in 1999. The
balance of $13,216 was amortized during the year 2000 and is recorded a
deferred compensation at December 31, 1999. During 2000, warrants were
exercised in the amount of 150,000 shares for cash of $375,000.
NOTE 14 - Commitments and Contingencies
The Company is committed to an operating lease for office space.
The lease requires the Company to pay monthly rent of $5,800 and expires in
December 2001.
Future minimum lease payments are as follows:
2001 69,600
-------------
Total $ 69,600
=============
NOTE 15 - Fair Value of Financial Instruments
Unless otherwise indicated, the fair values of all reported assets
and liabilities which represent financial instruments (none of which are held
for trading purposes) approximate the carrying values of such instruments.
17
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 16 - Incentive Stock Option Plan
On December 1, 1999, the Company established an Incentive Stock
Option Plan (the Plan). The Plan covers both current and prospective
employees. The Company reserved 1,000,000 shares of common stock under the
plan. The Board of Directors has approved the granting of options under the
plan as follows:
Directors, officers, employees and certain consultants have been
granted options to acquire 706,606 shares of the Company's common stock. The
options were granted at exercise prices ranging from $1.062 - $3.44 per share.
A total of 555,606 options were granted at the market price of the Company's
common stock on the date of grant. A total of 151,000 options were granted at
prices that were approximately 16.3% below fair market value of the Company's
common stock on the date of grant. The options vest periodically through
December 2001. The options expire through September 2005.
Fair Market Value of Options Granted
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" (FAS
123). Therefore, the Company accounts for stock-based compensation under the
Accounting Principles Board Opinion No. 25, under which approximately $15,000
has been recognized for compensation earned related to options issued at
exercise prices that were less than the fair market value of the Company's
stock on the date of grant. Had compensation cost for the stock-based
compensation been determined based upon the fair value of options at the grant
date consistent with methodology set forth by FAS 123, the Company's net loss
and loss per share would have increased to the following proforma amounts:
Pro forma net earnings 2000 1999 1998
------------- -------------- -------------
As reported (5,259,691) (2,567,535) (150,465)
Pro forma (6,140,291) (2,572,861) (150,465)
Net loss per common share -
basic and fully diluted
As reported (.40) (.27) (.03)
Pro forma (.47) (.27) (.03)
The fair value of these options was estimated at the date of grant
using the Black-Scholes American option-pricing model with the following
weighted-average assumptions for 2000 and 1999: expected volatility of 201
percent and 168 percent, respectively; risk free interest rate of 6.5 percent
and 6.75 percent, respectively; and expected life of 3.5 years. The weighted
average fair value of options granted $1.75 and $2.38 in 2000 and 1999,
respectively. There were no options granted in 1998.
Option pricing models require the input of highly sensitive
assumptions, including expected stock volatility. Also, the Company's stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and that the resulting option values
are reasonable.
18
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 16 - Incentive Stock Option Plan (continued)
Information with respect to the Company's stock options at December
31, 2000 is as follows:
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
NOTE 17 - Goodwill
The Company recorded goodwill in connection with the acquisition of
World Commerce Network, Inc. (WCN) due to the negative equity position of WCN.
A total of $240,521 was recorded upon acquisition and is being amortized over
a 5 year period. The realization of this asset is contingent upon WCN's
ability to generate revenues from their marketing of Pacific Webworks web
tools and future hosting fees related to WCN customers. Amortization expense
related to this acquisition was $52,113 for the year ended December 31, 2000.
The Company also recorded goodwill in connection with the acquisition
of Intellipay, Inc. (IPAY) due to the negative equity position of IPAY. The
Company issued 2,400,000 shares of its common stock valued at $4,320,000. A
total of $4,532,734 was recorded upon acquisition and is being amortized over
a five year period. The realization of this asset is contingent upon IPAY's
ability to generate revenues from their financial transaction processing
process. Amortization expense related to this acquisition was $679,916 for
the year ended December 31, 2000.
NOTE 18 - Subsequent Events
In January 2001, the Company committed to an operating lease for its
data center. The lease requires the Company to pay monthly rent of $26,200
and expires in December 31, 2001.
In February 2001, the Company engaged in a share exchange with
Logio, Inc. (Formerly Wordcruncher Technologies, Inc.) a public Nevada
corporation. The Company issued 2,800,000 shares of its common stock for all
of the outstanding shares of Logio, Inc. The shares were valued at $2,273,600
and the transaction was recorded using the purchase method of accounting.
During the first three months of 2001, the Company secured $475,000
in debt financing.
During 2001, the Company approved a new Stock Incentive Plan. No
more than 2,500,000 shares will be granted under the plan.
20
Exhibit 3.3
FILED C3748-87
FEB 08 2001
IN THE OFFICE OF
/S/ Dean Heller
DEAN HELLER SECRETARY OF STATE
ARTICLES OF SHARE EXCHANGE FOR
PACIFIC WEBWORKS, INC., A NEVADA CORPORATION
Pursuant to the provisions of Section 92A.200 of the Nevada Revised
Statutes, Pacific WebWorks, Inc., a Nevada corporation (the "Corporation") and
Logio, Inc., a Nevada corporation ("Logio"), hereby adopts and files the
following Articles of Share Exchange:
FIRST: The name and place of incorporation of each corporation which is
a party to this share exchange is as follows:
NAME PLACE OF INCORPORATION
Pacific WebWorks, Inc. (the acquiring corporation) Nevada
Logio, Inc. (the acquired corporation) Nevada
SECOND: The Agreement and Plan of Reorganization (the "Plan") governing
the share exchange between the Corporation and Logio, has been adopted by the
Boards of Directors of the Corporation and Logio.
THIRD: Logio has 18,425,828 shares of common stock issued, outstanding
and entitled to vote on the share exchange. At a meeting of the shareholders
of Logio held January 31, 2001 the owners of 11,060,733 common shares voted in
favor of the Plan. The number of votes cast for the Plan was sufficient for
approval of the Plan.
FOURTH: Stockholder approval of the Plan by the stockholders of Pacific
is not required pursuant to NRS 92A.130 1(b).
FIFTH: The complete executed Plan is on file at the registered office
or other place of business of the Corporation.
SIXTH: A copy of the Plan will be furnished by the Corporation, on
request and without cost, to any shareholder of either corporation which is a
party to the share exchange.
SEVENTH: The share exchange is effective upon filing.
DATED this 2nd of February, 2001.
PACIFIC WEBWORKS, INC., a Nevada corporation
/s/ Christian Larsen
________________________________________
Christian Larsen, President
/s/ Tom Eldredge
________________________________________
Tom Eldredge, Secretary
LOGIO, INC., a Nevada corporation
/s/ Kenneth W. Bell
________________________________________
Kenneth W. Bell, President
/s/ Tom Eldredge
________________________________________
Tom Eldredge, Secretary
Exhibit 10.10
L E A S E A G R E E M E N T
OFFICE FORM
Net Lease
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of this
1st day of January, 2001 by and between Principal Property Management, LLC
(the "Landlord"), and Pacific Webworks, Inc. (the "Tenant").
For and in consideration of the rental to be paid by Tenant and of the
covenants and agreements herein set forth to be kept and performed by Tenant,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the
Leased Premises (as hereinafter defined) and certain other areas, rights and
privileges for the term, at the rental and subject to and upon all of the
terms, covenants and agreements hereinafter set forth.
I. PREMISES
1.1 Description of Premises. Landlord does hereby demise, lease and let
unto Tenant, and Tenant does hereby take and receive from Landlord the
following: 26,200 square feet of the building located at 1760 S. Fremont Dr,
Salt Lake City, Utah along with all grounds and parking areas.
1.2 Work Improvement. The obligations of Landlord and Tenant to perform
the work and supply the necessary materials and labor to prepare the Leased
Premises for occupancy are described in detail on Exhibit "C." Landlord and
Tenant shall expend all funds and do all acts required of them as described on
Exhibit "C" and shall perform or have the work performed promptly and
diligently in a first class and workmanlike manner.
1.3 Changes to Building. Landlord hereby reserves the right at any time
and from time to time to make changes, alterations or additions to the
Building or to the Property. Tenant shall not, in such event, claim or be
allowed any damages for injury or for inconvenience occasioned thereby and
shall not be entitled to terminate this Lease.
II. TERM
2.1 Length of Term. The term of this Lease shall be for a period of one
year with an automatic renew in one year increments up to a total of five
years. plus the partial calendar month, if any, occurring after the
Commencement Date (as hereinafter defined) if the Commencement Date occurs
other than on the first day of a calendar month. Each party may cancel the
lease within 30 days of expiration each year.
2.2 Commencement Date; Obligation to Pay Rent. The term of this Lease
and Tenant's obligation to pay rent hereunder shall commence on the last to
occur of the following dates (the
"Commencement Date"):
(a) January 1, 2001.
Except to the extent of any monies deposited with Landlord by
Tenant, Landlord shall not have any liability to Tenant arising out of the
failure of the Commencement Date to occur.
2.3 Acknowledgement of Commencement Date. In the event that the
Commencement Date occurs other than on the date set forth in Section 2.2(a)
above, Landlord and Tenant shall execute a written acknowledgement of the
Commencement Date in the form attached hereto as Exhibit "D."
III. BASIC RENTAL PAYMENT
3.1 Basic Annual Rent. Tenant agrees to pay to Landlord as basic annual
rent (the "Basic Annual Rent") at such place as Landlord may designate without
prior demand therefore and without any deduction or set off whatsoever, the
sum of Three Hundred Fourteen Thousand Four Hundred Dollars ($ 314,400.00).
Said Basic Annual Rent shall be due and payable in twelve (12) equal monthly
installments to be paid in advance on the first day of each calendar month
during the term of the Lease. Simultaneously with the execution hereof, Tenant
has paid to Landlord the first month's rent, receipt whereof is hereby
acknowledged, subject to collection, however, if made by check.
(a) For the purpose of this Lease, the parties agree that the net usable
rental space is 26,200 square feet and that the initial base rental is
computed at $12.00 per square foot per annum. If any payment is not made by
the tenth day following the due date of the payment, then there shall be added
to the payment an amount equal to five (5%) percent of the payment as an
agreed penalty and late charge, this agreed penalty and late charge shall be
added on the tenth day of each and every month in which a payment is
delinquent.
3.2 Additional Monetary Obligations. Tenant shall also pay as base
rental (in addition to the Basic Annual Rent) all other sums of money as shall
become due and payable by Tenant to Landlord under this Lease. Landlord shall
have the same remedies in the case of a default in the payment of said other
sums of money as are available to Landlord in the case of a default in the
payment of Basic Monthly Rent.
IV. PAYMENT OF TAXES AND OTHER ASSESMENTS
4.1 Tenant shall pay when they are due all property taxes, license fees
and assessments
2
levied or imposed against the tenants assessable pro-rata share of the
premises or measured by the rent payable hereunder during the term of this
Lease or any extension thereof, by Federal, state, municipal or other
governmental authority; provided, however, that no law or practice postponing
the payment of such taxes, assessments or charges until after the termination
of this Lease shall relieve Tenant of the obligation to make such payments.
Payment of such taxes shall be made by Tenant to Landlord not later than
thirty (30) days following the date on which Landlord provides Tenant with
written evidence of such taxes in the form of a copy of the tax return or
notice. If Tenant fails to pay any of such taxes, charges or other
impositions when due, Landlord may pay the same under the provisions of
paragraph 5.2, hereinafter set forth. Anything herein to the contrary
notwithstanding, if Tenant deems excessive or illegal any such tax or
assessment, Tenant may defer payment thereof so long as the validity or the
amount thereof is contested by Tenant in good faith, in which case Tenant
shall furnish to Landlord a bond, in form reasonably satisfactory to Landlord,
in an amount equal to the amount of taxes or assessments so contested, which
bond shall guarantee the payment thereof with interest and penalties thereon.
V. SECURITY DEPOSIT
5.1 Deposit. Tenant has deposited in escrow the sum of 100,000 shares of
restricted common stock as security for the performance by Tenant of all of
the terms, covenants, and conditions required to be performed by it hereunder.
Such sum shall be returned to Tenant after the expiration of the term of this
Lease and delivery of possession of the Leased Premises to Landlord if, at
such time, Tenant has performed all such terms, covenants and conditions of
this Lease. Prior to the time when Tenant is entitled to any return of the
security deposit, Landlord may intermingle such deposit with its own funds and
use such sum for such purposes as Landlord may determine. Tenant shall not be
entitled to any interest on the security deposit.
5.2 Default. In the event of default by Tenant in respect to any of its
obligations under this Lease, including, but not limited to, the payment of
rent or additional rent, Landlord may use, apply, or retain all or any part of
the security deposit for the payment of any unpaid Basic Monthly Rent or
Additional Rent, or for any other amount which Landlord may be required to
expend by reason of the default of Tenant, including any damages or deficiency
in the reletting of the Leased Premises, regardless of whether the accrual of
such damages or deficiency occurs before or after an eviction or a portion of
the security deposit is so used or applied. Tenant shall, upon five (5) days
written demand, deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount.
VI. USE
6.1 Use of Leased Premises. The Leased Premises shall be used and
occupied by Tenant for general office purposes only and for no other purpose
whatsoever without the prior written consent of Landlord.
Tenant agrees not to keep, use or permit to be kept or used on the
Leased Premises any flammable fluids, explosives or any "hazardous substance,"
"solid waste," or "hazardous waste" as
3
said terms are defined in 42 U.S.C. 9601 (14), and 40 C.F.R. 261.1 et seq.
without the prior written permission of Landlord.
6.2 Prohibition of Certain Activities or Uses. The Tenant shall not do
or permit anything to be done in or about, or bring or keep anything in the
Leased Premises, which is prohibited by this Lease or will, in any way:
(a) Adversely affect any fire, liability or other insurance policy
carried with respect to the Building, the improvements or any of the contents
of the Building (except with Landlord's express written permission, which will
not be unreasonably withheld, but which may be contingent upon Tenant's
agreement to bear any additional costs, expenses or liability for risks that
may be involved).
(b) Obstruct or interfere with any right of any other tenant or occupant
of the Building or injure or annoy such persons.
(c) Conflict with or violate any law, statute, ordinance, rule,
regulation or requirement of any governmental unit, agency or authority
(whether existing or enacted as promulgated in the future, known or unknown,
foreseen or unforeseen).
(d) Adversely overload the floors or otherwise damage the structural
soundness of the Leased Premises, or Building, or any part thereof, (except
with Landlord's express written permission, which will not be unreasonably
withheld, but which may be contingent upon Tenant's agreement to bear any
additional costs, expenses or liability for risk that may be involved).
6.3 Affirmation Obligations With Respect to Use. Tenant will, at its
sole cost and expense, comply with all governmental laws, ordinances,
regulations, and requirements, now in force or which hereafter may be in
force, of any lawful governmental body or authority having jurisdiction over
the Leased Premises, will keep the Premises and every part thereof in a clean,
neat and orderly condition, free of objectionable noise, odors, or nuisance,
and which in all respects and at all times fully comply with all health and
policy regulations, and shall not suffer, permit, or commit any waste.
6.4 Suitability. Tenant acknowledges that except as expressly set forth
in this Lease, neither Landlord nor any other person has made any
representation or warranty with respect to the Leased Premises or any other
portion of the Building or improvements. Specifically, but not in limitation
of the foregoing, no representation has been made or relied on with respect to
the suitability of the Leased Premises or any other portion of the Building or
improvements for the conduct of Tenant's business. The Leased Premises,
Building and improvements (and each and every part thereof) shall be deemed to
be in satisfactory condition unless, within fifteen (l5) days after the
Commencement Date, Tenant shall give Landlord written notice specifying in
reasonable detail, the respects in which the Leased Premises, Building or
improvements are not in satisfactory condition.
6.5 Taxes. Tenant shall pay all taxes, assessments, charges, and fees
which during the
4
term hereof may be imposed, assessed or levied by any governmental or public
authority against or upon Tenant's use of the Leased Premises or any personal
property or fixture kept or installed therein by Tenant and on he value of
leasehold improvements to the extent that the same exceed Building allowances.
VII. UTILITIES AND SERVICE
7.1 Obligation of Landlord. During the term of this Lease, Landlord
agrees to cause to be furnished to the Leased Premises during customary
business hours and during generally recognized business days the following
utilities and services:
(a) Telephone connection, but not including telephone stations and
equipment (it being expressly understood and agreed that Tenant shall be
responsible for the ordering and installation of telephone lines and equipment
which pertain to the Leased Premises).
(b) Snow removal service.
(c) Landscaping and grounds keeping service.
7.2 Tenant's Obligations. Tenant shall pay all charges, including but
not limited to charges for water, heat, gas, electricity and other public
utilities used on the leased premises, including all replacements of light
bulbs, tubes, ballasts and starters within a reasonable time after they burn
out. Tenant shall arrange for and shall pay the entire cost and expense of
all telephone stations, equipment and use charges, electric light bulbs (but
not fluorescent bulbs used in fixtures originally installed in the Leased
Premises) and all other materials and services not expressly required to be
provided and paid for pursuant to the provisions of Section 7.1 above.
7.3 Tenant to Insure Leased Premises.
(a) Tenant shall insure and keep insured the tenants leased portion of
the premises against the perils of fire, lightning, the "Extended Coverages,"
vandalism and malicious mischief, and Tenant shall carry insurance against the
risk of business interruption and loss of rents and income resulting from fire
or other hazards. The later described policy must provide coverage for six
months estimated income from the leased premises. Such insurance shall be in
an amount equal to one hundred (100%) percent of the replacement value of the
premises, including all improvements on the leased premises and shall be made
payable to Landlord and Mortgagee (if any) as their interests may appear.
Tenant shall be responsible for any damage to premises as a result of forced
entry into his space or burglary thereof. Such insurance provided for
hereunder shall be in a company or companies acceptable to Landlord and shall
be procured and paid for by Tenant, and said policy or policies will be
delivered to Landlord. Such insurance may, at Tenant's election, be carried
under any General Blanket Insurance Policy of Tenant; provided, however, that
a satisfactory Certificate of Insurance, together with proof of payment of the
premium, shall be deposited with Landlord.
5
7.4 Limitation of Landlord's Liability. Landlord shall not be liable for
and Tenant shall not be entitled to terminate this Lease or to effectuate any
abatement or reduction of rent by reason of Landlord's failure to provide or
furnish any of the foregoing utilities or services if such failure was
reasonably beyond the control of Landlord. In no event shall Landlord be
liable for loss or injury to persons or property, however, arising, occurring
in connection with or attributable to any failure to furnish such utilities or
services even if within the control of Landlord.
VIII. MAINTENANCE AND REPAIRS; ALTERATIONS, ACCESS
8.1 Maintenance and Repairs by Landlord. Landlord shall maintain in good
order, condition and repair the Building and improvements except the Leased
Premises and those other portions of the Building leased, rented or otherwise
occupied by persons not affiliated with the Landlord. Landlord agrees for
the term of this Lease, to maintain in good condition and repair any latent
defects in the exterior wall, floor joists, and foundations, and to repair any
latent defects in the plumbing, electrical, heating and air conditioning
systems for one year after date of occupancy as well as any damage that might
result from acts of Landlord or Landlords representatives. Landlord shall not,
however, be obligated to repair any such damage until written notice of the
need of repair shall have been given to Landlord by Tenant and, after such
notice is so given, Landlord shall have a reasonable time in which to make
such repairs.
8.2 Maintenance and Repairs by Tenant. Tenant, at Tenant's sole cost and
expense and without prior demand being made, shall maintain the Leased
Premises in good order, condition and repair, reasonable wear and tear
excepted, and agrees to pay for all labor, materials and other repairs to the
electrical wiring, plumbing, air conditioning, and heating systems (including
spring and summer servicing, and replacement of filters as recommended by the
manufacturers). Tenant expressly and irrevocably waives the benefit or
applicability of any statute now or hereafter in effect which would otherwise
afford Tenant the right to make repairs at Landlord's expense or to terminate
this Lease because of Landlord's failure to keep the Leased Premises in good
order, condition and repair.
8.3 Alterations. Except as set forth on Exhibit "C" attached hereto,
Tenant shall not make or cause to be made any alterations, additions or
improvements or install or cause to be installed any fixtures, signs, floor
coverings, interior or exterior lighting, plumbing fixtures, or shades or
awnings, or make any other changes to the Leased Premises without first
obtaining Landlord's written approval. Tenant shall present to the Landlord
plans and specifications for such work at the time approval is sought. In the
event Landlord consents to the making of any alterations, additions, or
improvements to the Leased Premises by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense. All such work with respect to any
alterations, additions, and changes shall be done in a good and workmanlike
manner and diligently prosecuted to completion such that, except as absolutely
necessary during the course of such work, the Leased Premises shall at all
times be a complete operating unit. Any such alterations, additions, or
changes shall be performed and done strictly in accordance with all laws and
ordinances relating thereto. In performing the work or any such
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alterations, additions, or changes, Tenant shall have the same performed in
such a manner as not to obstruct access to any portion of the Building. Any
alterations, additions, or improvements to or of the Leased Premises,
including, but not limited to, wall covering, paneling, and built-in cabinet
work, but excepting movable furniture and equipment, shall at once become a
part of the realty and shall be surrendered with the Premises unless Landlord
otherwise elects at the end of the term hereof.
8.4 Landlord's Access to Leased Premises. Landlord shall have the right
to place, maintain, and repair all utility equipment of any kind in, upon, and
under the Leased Premises as may be necessary for the servicing of the Leased
Premises and other portion of the Building. Landlord shall also have the
right to enter the Leased Premises at all times to inspect or to exhibit the
same to prospective purchasers, mortgagees, tenants, and lessees, and to make
such repairs, additions, alterations, or improvements as Landlord may deem
desirable. Landlord shall be allowed to take all material upon said Leased
premises that may be required therefor without the same constituting an actual
or constructive eviction of Tenant in whole or in part and the rents reserved
herein shall in no way abate while said work is in progress by reason of loss
or interruption of Tenant's business or otherwise, and Tenant shall have no
claim for damages. During the three (3) months prior to expiration of this
Lease or of any renewal term, Landlord may place upon the Leased Premises "To
Let" or "For Sale" signs which Tenant shall permit to remain thereon.
IX. ASSIGNMENT
9.1 Assignment Prohibited. Tenant shall not transfer, assign, mortgage
or hypothecate this Lease, in whole or in part, or permit the use of the
Leased Premises by any person or persons other than Tenant, or sublet the
Leased Premises, or any part thereof, without the prior written consent of
Landlord in each instance. Such prohibition against assigning or subletting
shall include any assignment or subletting by operation of law. Any transfer
of this Lease from the Tenant by merger, consolidation, transfer of assets, or
liquidation shall constitute an assignment for purposes of this Lease. In the
event that Tenant hereunder is a corporation, an unincorporated association,
or a partnership, the transfer assignment, or hypothecation of any stock or
interest in such corporation, association or partnership in the aggregate in
excess of forty-nine (49%) percent shall be deemed an assignment within the
meaning of this Section.
9.2 Consent Required. Any assignment or subletting without Landlord's
consent shall be void, and shall constitute a default hereunder which, at the
option of Landlord, shall result in the termination of this Lease or exercise
of Landlord's other remedies hereunder. Consent to any assignment or
subletting shall not operate as a waiver of the necessity for consent to any
subsequent assignment or subletting, and the terms of such consent shall be
binding upon any person holding by, under, or through Tenant.
9.3 Landlord's Right in Event of Assignment. If this Lease is assigned
or if the Leased Premises or any portion thereof are sublet or occupied by any
person other than the Tenant, Landlord may collect rent and other charges from
such assignee or other party, and apply the amount collected to the rent and
other charges reserved hereunder, but such collection shall not constitute
consent or waiver of the necessity of consent to such assignment, subleasing,
or other transfer, not shall such
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collection constitute the recognition of such assignee, sublessee, or other
party as the Tenant hereunder or a released of Tenant from the further
performances of all the covenants and obligations of Tenant herein contained.
In the event that Landlord shall consent to a sublease or assignment
hereunder, Tenant shall pay to Landlord reasonable fees, not to exceed $l00.00
incurred in connection with processing of documents necessary to the giving of
such consent.
X. INDEMNITY
10.l Indemnification By Tenant. Tenant shall indemnify Landlord and save
it harmless from and against any and all suits, actions, damages, claims,
liability and expense in connection with loss of life, bodily or personal
injury, or property damage arising from or out of any occurrence in, upon, at
or from the Leased Premises, or the occupancy or use by Tenant of Leased
premises or any part thereof, or occasioned wholly or in part by any act or
omission of Tenant, its agents, contractors, employees, servants, invitees,
licensees, or concessionaires.
10.2 Release of Landlord. Landlord shall not be responsible or liable at
any time for any loss or damage to Tenant's personal property or to Tenant's
business, including any loss or damage to either the person or property of
Tenant that may be occasioned by or through the acts or omissions of persons
occupying space in the Building. Tenant shall store its property in and shall
use and enjoy the Leased Premises and all other portions of the Building and
improvements at its own risk, and hereby releases Landlord, to the full extent
permitted by law, from all claims of every kind resulting in loss of life,
personal or bodily injury, or property damage.
10.3 Notice. Tenant shall give prompt notice to Landlord in case of fire
or accidents in the Leased Premises or in the Building of which the Leased
Premises are a part or of defects therein or in any fixtures or equipment.
10.4 Litigation. In case Landlord, without fault on its part, shall be
made a party to any litigation commenced by or against Tenant, then Tenant
shall protect and hold Landlord harmless and shall pay all costs, expenses,
and reasonable attorney's fees incurred by Landlord.
XI. INSURANCE
Tenant will maintain insurance as follows:
a) Liability insurance naming Landlord as co-insured, as its interests
may appear, with limits of not less than $l million per person or accident.
b) Tenant shall maintain its own insurance protecting it from
interruption from business by reason of casualty, fire, legal, sprinkler
damage, or other interruption of business. All items required to be covered
by Tenant's insurance shall relieve Landlord of all direct or indirect
responsibility for the items so covered; the release of liability being one of
the conditions of this Lease.
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XII. CONDEMNATION - DESTRUCTION BY FIRE OR CASUALTY
If the Leased Premises are taken by condemnation or destroyed or
partially destroyed by fire, then, at the beginning of the month following the
date that the Leased Premises are not habitable, rent shall abate and the
lease period be extended until such time as the Leased Premises are rendered
reasonably habitable. The opinion of any MAI appraiser hired by either party
shall be binding upon the parties in effecting the determination as to whether
the premises are reasonably habitable. During such period as the Leased
Premises cannot be fully occupied, the term shall abate, and the period in
which the building is not habitable shall not be charged against the term of
the Tenant; such period being added as an extension of term without payment of
rentals. If building is taken by condemnation, then Owner's responsibility to
Tenant is terminated, but this in no way shall affect the Tenant's damages in
condemnation against the condemn or for the loss of the use of the Leased
Premises during the remainder of the Lease.
If the whole of the Leased premises or any major portion thereof, as
would affect the Tenant's occupation and use of the Leased Premises, shall be
destroyed or partially destroyed by fire or other casualty, or rendered
untenable for any other reason other than the fault of the Tenant, this Lease
shall terminate at the election of the Landlord or the Tenant upon written
notice given within thirty days of the occurrence advising of the termination
and the grounds therefore. If Tenant does not terminate, then rental shall,
within three months of he date of the occurrence, advise Tenant that it will
not repair or refurbish the premises or that it will repair or refurbish the
premises. If Landlord repairs the Leased Premises to a habitable condition,
then rental and term shall recommence on the first of the calendar month
following the date the Leased Premises are placed in a habitable condition.
Tenant waives any claim arising out of destruction of any portion of the
Leased Premises, regardless of the reason that gives rise to the repair.
XIII. LANDLORD'S RIGHTS TO CURE
13.1 General Right. In the event of breach, default, or noncompliance
hereunder by Landlord, Tenant shall, before exercising any right or remedy
available to it, give Landlord written notice of the claimed breach, default,
or noncompliance. If prior to its giving notice Tenant has been notified in
writing (by way of Notice of Assignment of Rents and Leases, or otherwise) of
the address of a lender which has furnished any of the financing referred to
in Part XV hereof, concurrently with giving the aforesaid notice to Landlord,
Tenant shall, by registered mail, transmit a copy thereof to such lender. For
the thirty (30) days following the giving of the notice(s) required by the
foregoing portion of this Section (or such longer period of time as may be
reasonably required to cure a matter which, due to its nature, cannot
reasonably be rectified within thirty (30) days), Landlord shall have the
right to cure the breach, default, or noncompliance involved. If Landlord has
failed to cure a default within said period, any such lender shall have an
additional thirty (30) days within which to cure the same or, if such default
cannot be cured within that period, such additional time as may be necessary
if within such thirty (30) day period said lender has commenced and is
diligently pursuing the actions or remedies necessary to cure the breach,
default, or noncompliance involved (including, but not limited to,
commencement and prosecution of proceedings to foreclose or otherwise exercise
its rights under its mortgage or other security instrument, if necessary to
effect such cure), in which event this Lease
9
shall not be terminated by Tenant so long as such actions or remedies are
being diligently pursued by said lender.
13.2 Mechanic's Lien. Should any mechanic's or other lien be filed
against the Leased Premises or any part thereof by reason of Tenant's acts or
omissions or because of a claim against Tenant, Tenant shall cause the same to
be canceled and discharged of record by bond or otherwise within ten (l0) days
after notice by Landlord.
XIV. DEFAULT
14.1 If Tenant shall default in the payment of rental; then, if said
default is not corrected within five (5) days of the date of notice of
default, Landlord, at its election, may reenter the Leased Premises, terminate
the Lease, and anything to the contrary herein notwithstanding, and Tenant
thereupon waives service of any notice in writing of intention to reenter and
expressly waives all right of restoration of possession of the Leased
Premises, and Tenant will indemnify Landlord against all damages suffered by
Landlord by reason of such default, including attorney's fees and expenses
incurred in enforcing any of the terms of this Lease.
14.2 If Tenant fails to correct any other default in the performance of
the terms or conditions of this Lease other than the payment of rental and
shall not correct such default within twenty (20) days after written notice of
the default, then, Landlord, at its election, may terminate this Lease,
reenter the Leased Premises, anything to the contrary herein notwithstanding,
and terminate Tenant's right to the possession of the Leased Premises.
14.3 Tenant's obligation to correct the default and to continue making the
remainder of the lease payments due on the Leased Premises shall not terminate
on termination of possession, but shall be ameliorated to the extent that
Landlord is able, by the use of reasonable diligence, to obtain the correction
of the default and lease the Leased Premises to a new tenant.
XV. PROVISIONS APPLICABLE AT TERMINATION OF LEASE
15.1 Surrender of Premises. At the expiration of this Lease, Tenant shall
surrender the Leased Premises in the same condition as they were in upon
delivery of possession thereto under this Lease and shall deliver all keys to
Landlord. Before surrendering the Leased Premises, Tenant shall remove all of
its personal property and trade fixtures and such property or the removal
thereof shall in no way damage the Leased Premises, and Tenant shall be
responsible for all costs, expenses and damages incurred in the removal
thereof. If Tenant fails to remove its personal property and fixtures upon the
expiration of this Lease, the same shall be deemed abandoned and shall become
the property of Landlord.
15.2 Holding Over. Any holding over after the expiration of the term
hereof or of any renewal term shall be construed to be a tenancy from month to
month at the rents herein specified (pro rated on a monthly basis) and shall
otherwise be on the terms herein specified so far as possible.
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XVI. ATTORNEYS' FEES
In the event that at any time during the term of this Lease either
Landlord or the Tenant institutes any action or proceeding against the other
relating to the provisions of this Lease or any default hereunder, then the
unsuccessful party in such action or proceeding agrees to reimburse the
successful party for the reasonable expenses of such action including
reasonably attorneys' fees, incurred therein by the successful party, such
fees not to exceed $2,500.00.
Mediation and Arbitration. If any dispute or claim in law or equity
arises out of this Lease, Tenant and Landlord agree in good faith to attempt
to settle such dispute or claim by mediation under the Commercial Mediation
rules of the American Arbitration Association. If such mediation is not
successful in resolving such dispute or claim, then such dispute or claim
shall be decided by neutral binding arbitration before a single arbitrator in
accordance with the Commercial Arbitration rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
XVII. ESTOPPEL CERTIFICATE
17.1 Landlord's Right to Estoppel Certificate. Tenant shall, within
fifteen (l5) days after Landlord's request, execute and deliver to Landlord a
written declaration in recordable form: (1) ratifying this Lease; (2)
expressing the Commencement Date and termination date hereof; (3) certifying
that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended (except by such writing as shall be stated);
(4) that all conditions under this Lease to be performed by Landlord have been
satisfied; (5) that there are no defenses or offsets against the enforcement
of this Lease by the Landlord, or stating those claimed by Tenant; (6) the
amount of advance rental, if any, (or none if such is the case) paid by
Tenant; (7) the date to which rental has been paid; (8) the amount of any
security deposit paid to Landlord; and (9) such other information as Landlord
may reasonably request. Landlord's mortgage lenders and/or purchasers shall be
entitled to rely upon such declaration.
17.2 Effect of Failure to Provide Estoppel Certificate. If Tenant fails to
furnish any Estoppel Certificate within fifteen (l5) days after request
therefor shall be deemed a default hereunder and, moreover, it shall be
conclusively presumed that: (a) this Lease is in full force and effect
without modification in accordance with the terms set forth in the request;
(b) that there are no breaches or defaults on the part of the Landlord; and
(c) no more than one (l) month's rent has been paid in advance.
XVIII. SIGNS, AWNINGS, AND CANOPIES
Tenant shall not place or suffer to be placed or maintained on any
exterior door, wall, or window of the Leased Premises, or elsewhere in the
Building, any sign, awning, marquee, decoration, lettering, attachment, or
canopy, or advertising matter or other thing of any kind, and will not place
or maintain any decoration, lettering, or advertising matter on the glass or
any window or door of the Leased Premises without first obtaining Landlord's
written approval.
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Tenant further agrees to maintain such sign, awning, canopy,
decoration, lettering, advertising matter, or other things as may be approved
in good condition and repair at all times. Landlord may at Tenant's cost, and
without liability to Tenant, enter the Lease Premises and remove any item
erected in violation of this Section. Landlord may establish rules and
regulations governing the size, type, and design of all signs, decorations,
etc., and Tenant agrees to abide thereby.
XIX. MISCELLANEOUS PROVISIONS
19.1 No Partnership. Landlord does not by this Lease, in any way or for
any purpose, become a partner or joint venturer of Tenant in the conduct of
its business or otherwise.
19.2 Force Majeure. Landlord shall be excused for the period of any delay
in the performance of any obligations hereunder when prevented from so doing
by cause or causes beyond Landlord's control, including labor disputes, civil
commotion, war, governmental regulations or controls, fire or other casualty,
inability to obtain any material or service, or acts of God.
19.3 No Waiver. Failure of Landlord to insist upon the strict performance
of any provision or to exercise any option hereunder shall not be deemed a
waiver of such breach. No provision of this Lease shall be deemed to have
been waived unless such waiver be in writing signed by Landlord.
19.4 Notices. Any notice, demand, request, or other instrument which may
be or is required to be given under this Lease shall be delivered in person or
sent by United States certified or registered mail, postage prepaid and shall
be addressed (a) if to Landlord, at the place specified for payment of rent,
and (b) if to Tenant, either at the Leased Premises or at any other current
address for Tenant which is known to Landlord. Notice shall be deemed given
when received or after two days of mailing, whichever is earlier. Either
party may address for giving notice by written notice to the other.
Landlord: Principal Property Management, LLC
525 S. 300 E.
Salt Lake City, UT 84111
Tenant: Pacific Webworks, Inc.
1760 S. Fremont Dr.
Salt Lake City, UT 84104
19.5 Captions, Attachments, Defined Terms.
(a) The captions to the sections of this Lease are for convenience of
reference only and shall not be deemed relevant in resolving questions of
construction or interpretation under this Lease.
(b) Exhibits referred to in this Lease, and any addendums and schedules
attached to this Lease and initialed by the parties shall be deemed to be
incorporated in this Lease as though part thereof.
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19.6 Recording. Tenant shall not record this Lease or a memorandum
thereof without the written consent of Landlord. Landlord, at its option and
at any time, may file this Lease for record with the Recorder of the County in
which the Building is located.
19.7 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be
invalid, the remainder of this Lease or the application of such provision
shall not be affected thereby and each provision of this Lease shall be valid
and enforced to the fullest extent permitted by law.
19.8 Tenant Defined; Use of Pronouns. The word "Tenant" shall be deemed
and taken to mean each and every person or party executing this document as a
Tenant herein. If there is more than one person or organization set forth on
the signature line as the Tenant, their liability hereunder shall be joint and
several. If there is more than one Tenant, any notice required or permitted
by the terms of this Lease may be given by or to any one thereof, and shall
have the same force and effect as if given by or to all thereof. The use of
the neuter singular pronoun to refer to Landlord or Tenant shall be deemed a
proper reference even though Landlord or Tenant may be an individual, a
partnership, a corporation, or a group of two or more individuals or
corporation. The necessary grammatical changes required to make the
provisions of this Lease apply in the plural sense where there is more than
one Landlord or Tenant and to corporations, associations, partnerships, or
individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
19.9 Provisions Binding, Etc. Except as otherwise provided, all
provisions herein shall be binding upon and shall inure to the benefit of the
parties, their legal representative, heirs, successors, and assigns. Each
provision to be performed by Tenant shall be construed to be both a covenant
and a condition, and if there shall be more than one Tenant, they shall all be
bound, jointly and severally, by such provisions. In the event of any sale or
assignment (except for purposes of security or collateral) by Landlord of the
Building, the Leased Premises, or this Lease, Landlord shall, from and after
the Commencement Date (irrespective of when such sale or assignment occurs),
be entirely relieved of all of its obligations hereunder and such obligations
shall, as of the time of such sale or assignment or on the Commencement Date,
whichever is later, automatically pass to Landlord's successor in interest.
19.10 Entire Agreement, Etc. This Lease and the Exhibits, Riders, and/or
Addenda, if any, attached hereto, constitute the entire agreement between the
parties. All Exhibits, Rider, or Addenda mentioned in this Lease are
incorporated herein by reference. Any guaranty attached hereto is an integral
part of this Lease and constitutes consideration given to Landlord to enter
into this Lease. Any prior conversations or writing are merged herein and
extinguished. No subsequent amendment to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed. Submission of this
Lease for examination does not constitute an option for the Leased Premises
and becomes effective as a lease only upon execution and delivery thereof by
Landlord to Tenant. If any provisions contained in a Rider or Addenda is
inconsistent with a provision in the body of this Lease, the provision
contained in said Rider or Addenda shall control. It is hereby agreed that his
Lease
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contains no restrictive covenants or exclusives in favor of Tenant. The
captions and Section numbers appearing herein are inserted only as a matter of
convenience and are not intended to define, limit, construe, or describe the
scope or intent of any Section or Paragraph.
19.11 Choice of Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease on the
day first set forth above.
LANDLORD TENANT:
BY: /s/ signature illegible BY: /s/ Kenneth Bell
----------------------- ---------------------
ITS: Managing Member ITS: Chief Executive Officer
BY:________________________
ITS: President
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