-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rp79CnEefTLIiPOYN49btoWDtuNz4VJbnBMOutavE1dUpCFhxbTWkRcrCnt8SwJw NYJYqXAKKOVJ+EVbmRQTbg== 0001038838-00-000103.txt : 20000216 0001038838-00-000103.hdr.sgml : 20000216 ACCESSION NUMBER: 0001038838-00-000103 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20000215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSI COMMUNICATIONS INC CENTRAL INDEX KEY: 0001084475 STANDARD INDUSTRIAL CLASSIFICATION: 6770 IRS NUMBER: 870627349 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-30538 FILM NUMBER: 544692 BUSINESS ADDRESS: STREET 1: 112 WEST BUSINESS PARK DR CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 8015722555 MAIL ADDRESS: STREET 1: 112 WEST BUSINESS PARK DR CITY: DRAPER STATE: UT ZIP: 84020 10-12B 1 FORM 10-12B As filed with the Securities and Exchange Commission on February 14, 2000 Registration No. ____ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 SB GENERAL FORM FOR REGISTRATION OF SECURITIES Pursuant to Section 12(g) of The Securities Exchange Act of 1934 LSI COMMUNICATIONS, INC. ------------------------ (Exact name of registrant as specified in its charter) Nevada 87-0627349 ------ ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 112 West Business Park Drive Draper, Utah 84020 (801) 572-2555 ------------------------------------------------------------------ (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Copies to: David Hunt Wangsgard & Associates, LLC 5252 N. Edgewood, Dr. Ste 210A Provo, UT 84604 (801) 852-8452 Securities to be registered pursuant to Section 12(g) of the Act: - - -------------------------------------------------------------------------------- Title of each class Name of each exchange on which to be registered: each class is to be registered: Common Stock Nasdaq Bulletin Board OTC - - -------------------------------------------------------------------------------- Securities to be registered pursuant to Section 12(g) of the Act: None 1 FORWARD-LOOKING STATEMENTS This Registration Statement contains forward-looking statements, including statements regarding, among other items, the availability of supplies, our ability to retain our competitive position, expected realization of our business strategy and costs associated therewith, governmental regulation, the sufficiency of cash flow and other sources of liquidity to fund our debt service requirements, working capital needs and other significant expenditures and anticipated trends in our business, including with respect to industry capacity, product demand and pricing. Forward-looking statements typically are identified by the words "believe," "expect," "anticipate," "intend," "seek," "estimate," "project" and similar expressions. These forward-looking statements involve risks and uncertainties that are beyond our control. These risks and uncertainties include unanticipated trends in the software and personal coaching businesses, and economic, competitive, legal, governmental, and technological factors. These factors could include global economic conditions, currency fluctuations, product demand and industry capacity, competitive products and pricing, manufacturing efficiencies, availability and cost of critical materials, new product development and commercialization, manufacturing capacity, facility expansion costs, the effect of regulatory and legal developments, capital resource and cash flow activities and interest costs. Actual results could differ from those contemplated by these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in this Registration Statement will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. BUSINESS General LSI Communications, Inc. (OTC: LSIM) is a technology development, sales and training company based in Draper, Utah, just outside of Salt Lake City. We were incorporated as TPI, Inc., under the laws of the State of Utah on April 26, 1983. In 1985, the Corporation changed its situs from Utah to Nevada and changed its name to Connections Marketing Corp. In July, 1992, our shareholders voted to change our name to LSI Communications, Inc. (LSI). We held mineral properties in Beaver County, Utah; however, no extraction operations ever commenced and the properties were distributed to the shareholders through a subsidiary spinoff. On November 20, 1998, we entered a Plan of Reorganization and Acquisition agreement with Warever, Inc., a Utah Corporation, wherein we issued 3,000,000 shares of common stock for 85% of Warever's outstanding common stock. The agreement provides for us to acquire the remaining 15% of Warever for 2,500,000 shares of LSI through option agreements which are exercisable for a period of 60 days following January 1, 2000 for no consideration. The acquisition is recorded as a reverse acquisition, with Warever being the accounting survivor, therefore all historical financial information prior to November 20, 1998 in these statements are those of Warever. 2 Warever is in the business of developing, programming, selling, and marketing computer software packages. Its primary product, Action Plus, is a management assistance software tool. Warever was organized in the State of Utah on May 13, 1992 under the name of Action Plus Software, Inc. On January 17, 1995 the name Action Plus Software was changed to Warever, Inc. We operate two distinct, but complementary subsidiaries, Warever Corporation and Coaching Institute, Inc. Warever Corporation currently is focused primarily on the development of sales automation, personal productivity and Internet-based software products. It is involved in the contact management industry and has been involved since the industry's formative years in the late 1980s and early 1990s. The majority of Warever Corporation's applications are focused in development of sales force automation and personal productivity arenas. Coaching Institute Inc. offers a fully integrated "coaching" program designed specifically for sales trainers, seminar leaders, motivational speakers and network marketers who are interested in extending their programs to seminar attendees through one-on-one training. By implementing an after-market program such as one-on-one coaching, companies are able to create a strong platform for personal development for each client, build an additional profit center, create client loyalty, and enhance long-term revenue possibilities. We lost money in each of the last fiscal years and our net losses have been significant. Our continued operations have depended, to some extent, on loans from a family member of one of our directors. Despite the fact that revenues from coaching are increasing and we are about to release a new software program, there is no assurance that we will ever make a profit. This Registration Statement is being filed on a voluntary basis to re-establish our real-time quotations on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. (the "NASD"). NASD OTC Bulletin Board Quotations Our common stock has been quoted on the OTC Bulletin Board of the NASD under the symbol "LSIM." For information concerning these stock quotations during the past two years, see the caption "Market Price of and Dividends on the Company's Common Equity and Other Stockholder Matters," Part II Item I. The quotations presented do not represent actual transactions or broker/dealer markups, markdowns or commissions. Effective January 4, 1999, the NASD adopted rules and regulations requiring that prior to any issuer having its securities quoted on the OTC Bulletin Board of the NASD that such issuer must be a "reporting issuer" which is required to file reports under Section 13 or 15(d) of the Securities and Exchange Act of the 1934, as amended (the "1934 Act"). The Company is not currently a "reporting issuer," but this Registration Statement will bring the Company into compliance with these listing provision of the OTC Bulletin Board. The NASD has "delisted" quotations of our common stock. Under the "phase-in" schedule of the NASD, we had until 3 January 19, 2000, within which to become a "reporting issuer." Our stock will again be quoted on the OTC Bulletin Board once we satisfy all comments of the Securities and Exchange Commission with respect to this Registration Statement. Merger and Business Combinations Effective November 20, 1998, we entered into an agreement and Plan of Reorganization with Warever, Inc., a private company. The agreement provided for our merger into Warever to be treated as a reverse merger, with Warever as the surviving business. Pursuant to the agreement we issued 3,000,000 shares of common stock to the shareholders of Warever for 85% of the shares of Warever. We have the option to acquire the remaining 15% of Warever for 2,500,000 shares of our Common Stock. The option is exercisable for a period of sixty days following January 1, 2000. Our management resigned and the management and board of Warever filled the vacancy. LSI Communications, Inc. had no assets or liabilities at the time of the merger, but was only a public shell. During November and December of 1998, we sold 1,000,000 shares of Common Stock at $.05 per share to "accredited investors" pursuant to Rule 504. On June 21, 1999, we acquired 85% of Coaching Institute, Inc., (hereafter, "Coaching Institute") a Utah corporation. Common stock in the Company was issued and delivered to the shareholders of Coaching Institute as set forth below, such certificates to bear a restrictive legend in compliance with Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933 as amended: o Craig R. Hendricks, 1,062,500 shares o Steven E. Carlson, 1,062,500 shares o Lona J. Hendricks, 175,000 shares o Richard A. McAllister, 150,000 shares o Roger G. Williams, 50,000 shares Operations We are a technology development, sales, and training company comprised of two distinct, but complementary subsidiaries, Warever Corporation and Coaching Institute, Inc. These two subsidiaries provide complementary products, services and contacts to each other. Our products assist personal and business betterment, through organization and training. Warever Corporation ("Warever"), since its founding in 1987, has primarily developed sales force automation and personal productivity software. Sales force automation software is designed to improve the efficiency of the sales process by tracking customer information, such as names and addresses, correspondence, and scheduling. Warever intends to expand more heavily into developing software that interacts more fully with the Internet. 4 Coaching Institute, Inc. ("Coaching Institute") was founded in June, 1998. Personal Coaching is an emerging industry where clients are assisted in reaching goals, implementing real, long-term change. Our coaches work with individuals one-on-one to: o facilitate change o motivate the individual o promote creativity o demand accountability o channel energy and desire o Implement skills and habits Industry Background Warever is in the software development industry. People and businesses increasingly rely on the Internet to access and share information. Businesses utilize the Internet to market and sell their products and streamline business operations. The Internet's growth creates market opportunities for companies that connect people and businesses to the Internet, provide applications for these users or distribute content over the Internet. The market for internet-based software is increasing as businesses and consumers increasingly rely on the Internet as a communications and transactional medium. Further, as small business and home based industries continue to grow, the need for multiple tasking software packages and applications becomes increasingly important to the success of those companies. Coaching Institute provides personal development coaching services. Personal development coaching is a new and evolving training methodology that is growing in popularity and is commonly referred to as "coaching. "Coaching is primarily an after seminar service where an individual is assisted in implementing information learned at the seminar. Normally the coach telephones the customer at designated times, such as once a week. During the phone conference the coach will answer questions, help the customer set goals, assess the customer's progress in implementing the principles taught at the seminar. The coaching relationship will commonly continue for 8 to 12 weeks. Coaching may also be used by purchasers of products, such as durable office equipment and software to assist the purchaser in effectively implementing the equipment and software in their business operations. Coaching supports a variety of topics. Such as: o Sales; o sales management; o personal development; o professional speaking; o network marketing; o anxiety and stress management; o business growth and development; o real estate sales; o real estate investment; and o areas where personal change would be a benefit 5 o areas where use of new products is to be implemented Coaching is used as a format of employee training for major businesses including Fortune 500 Companies such as Ameritech, Merrill Lynch, Amoco, Northwestern Mutual Life and Arthur Anderson. We do not currently provide coaching services to any of these companies. Many members of the National Speakers Association, as well as such notables as Zig Ziglar, Ron LeGrand, A.D. Kessler, Roger Butcher, Denis Waitley, Tom Hopkins, Brian Tracy, Peter Lowe, Stephen R. Covey, Les Brown, and Omar Periu have personal coaching programs. Many more National Speakers Association members are coaches themselves as well as professional speakers. We do not have a relationship with the National Speakers Association, but we do have relationships with many of its members. A list of vendors with whom we have relationships is listed in the section entitled "customers." Competition in the Market Competition in the software market has increased dramatically in recent years. Software products are sold through mail, seminars, over the Internet, through telemarketing and retail. Software is also given away as a promotion to sell other software programs. Warever faces competition from software manufacturers that are positioned to capture the small and home based business markets in a variety of industries ranging from real estate and insurance sales to multilevel marketing. Hundreds of companies including Act, Goldmine and Top Producer develop software products. Our software is tailored to a fairly narrow market. We have attempted to direct product sales and product development toward businesses in specific industries, such as real estate. Our market position is turning toward the Powerbase series which, like our software Action Plus, will consist of functions that can assist in the primary components of a company's day to day operations such as data-base maintenance, marketing using the database, time management, word processing, and accounting. However, Powerbase has not yet been fully tested or released and there can be no assurances as to its success. Coaching Institute faces competition from other business offering coaching services such as Franklin Covey Coaching, and dozens of new companies which are being formed around the country. Coaching is a form of self-help, which has traditionally been provided in books, tapes, seminars, and speakers. Competition in the coaching industry is difficult to assess because of the infancy of the industry. The apparent trend is for self-help providers, such as public speakers, motivators and organizers to expand or modify their services into the area of coaching. A common method of competition is for self-help providers to use their existing sales and customer contacts to sell coaching services. Well known self-help providers have an advantage due to their familiarity to customers and potential outside vendors. The competition from self-help providers is intense. We are attempting to gain notoriety and to establish relationships with outside vendors. We do not have a large market share. We currently have relationships with about a dozen_outside vendors. However, there is no assurance that we will be able to gain notoriety or continue to establish or maintain relationships with outside vendors. 6 General Operations Warever must adjust to the changing nature of the software industry. There is a shift to more industry specific software applications. Warever is attempting to tailor software programs to cover all of a small business' needs for certain particular industries. For example, Powerhouse, a software program currently under development for real estate agents and brokers, has contact management, calendaring, property management, presentations, and internet marketing. Currently, we are not aware of other software programs that have all of these functions. A real estate agent would need to purchase three different software packages to achieve the same function provided by Powerhouse. Further, Warever Corporation will continue to add functions to Powerhouse and its sister program, Powerbase, such as, full accounting, financial analysis, IRS reports, and networking. We intend to distribute our products through relationships with SDI LeGrand, RE Marketing, and others. Currently, we have oral agreements with SDI Marketing and RE Marketing to sell Powerbase and its sister software programs, however we have no formal written agreements. We anticipate that they will be paid 30% from the proceeds of sales that they refer to us. They will likely be paid approximately 50% for sales of our software that they completely facilitate. We anticipate written agreements with SDI and RE Marketing this year. We anticipate relationships with other entities that can sell or facilitate sales of our software. We do not anticipate contracts that will require minimum sales by our outside vendors. The companies provide us with attendance rosters from their seminars. In return, when we sell products to the rostered attendees, we give them a percentage of the revenues. In some cases these companies will sell our software directly and be paid a percentage of the revenues. These companies are not bound to provide us with names or sell our products and there is no assurance that these companies will produce for us. Coaching Institute must have a flow of clients because each coaching arrangement usually lasts only 8-12 weeks. We are actively seeking referral relationships with professional speakers and seminar companies. Coaching Institute attends the National Speakers Association convention on an annual basis for the purpose of acquiring new speakers, and increase the visibility of Coaching Institute in the speaking and seminar community. We have also begun to expand into coaching purchasers of complex products, such as office equipment. We have formed a relationship with Automation Quest for us to assist their customers with implementing newly purchased products. We have no contracts binding anyone to provide us with coaching leads or to sell our services. Our agreements focus on outside vendors' compensation for referrals and sales, but do not create binding assurances that such vendors will perform on our behalf. Coaching Institute is actively recruiting and training coaches and sales professionals. Our management believes that quality coaching personnel are key to the competitiveness of a coaching services provider, because Coaching consumers will be unwilling to recommend or purchase coaching services from coaches with substandard interpersonal and coaching skills. Sales and Marketing Warever has a three tiered sales strategy. o Direct sales to end users and corporate clients through an internal sales force. 7 o Arrangements with outside vendors to sell our software o Sales through regional distributors. Warever utilizes outside vendors as our main marketing strategy. For example, American Greetings has licensed a customized version of our software called "Pocket-it" Software. Pocket-it Software is a product designed to be the electronic companion to a paper-based planner called Pocket-it for which American Greetings has acquired retail distribution rights. The software will print schedules, notes, and lists onto the patented Pocket-it paper for insertion into the planner. We delivered the software source codes to American Greetings which is solely responsible for replication of the software, including all associated costs. In return for developing the software, Warever will receive a $5.00 royalty per unit sold by American Greetings. We have not received any royalties from the sales of "Pocket-it", nor are we aware of any sales of the software. Warever currently has two regional distributors, both of whom work on straight commission. Their sales are a minor portion of our software sales. Coaching Institute's sales are conducted in two ways. Similar to Warever's software, Coaching Institute's sales are primarily made through follow-up telephone calls to individuals who have attended a seminar held by an organization with which we have sales agreements. Our agreements with outside vendors both for the sale of our software and coaching services do not require outside vendors to sell our products and services. The arrangements set out a percentage of the revenue for the sale of the product or service that will be given to the outside vendor as compensation for selling the product or service. Secondly, sales are made directly by our outside vendors in a seminar environment. The outside vendor can pitch our software during a presentation and have a table set up in the seminar room from which our software is sold. Coaching Institute's coaching services are marketed primarily through direct mail followed by an outbound telephone campaign to the direct mail recipients. Outside vendor seminars are the source of the names, numbers, and addresses in our direct mailing and outbound telephone campaigns. We intend for marketing and sales responsibilities to be increasingly performed by outside vendors. One of our outside vendors, Automation Quest, for example, sells technology packages to real estate agents. The packages include office technology items useful to real estate agents, such as a laptop computer, digital camera, web site, and software. Our coaching services are also sold by Automation Quest as part of these technology packages. Automation Quest is compensated for selling our coaching services by payment of approximately half of the sale price. The total price of Automation Quest's technology package is about $6,500. Automation Quest sales account for several hundred coaching programs annually. In addition to outside vendors, Coaching Institute plans to utilize print media and radio and other traditional forms of marketing and advertising in the future. Customers Warever's relationship with outside vendors allows mutual profit from the sale of our products and services to -the outside vendor's clients. This relationship is beneficial because of the outside vendor's distribution channels and their ability to set up a table and sell products at seminars. Warever has similar sales relationships with network marketing companies such as: 8 SDI / LeGrand RE Marketing American Greetings Over the past several years, Warever Corporation has sold to approximately 30,000 individuals and businesses, ranging from home-based businesses to Fortune 1000 companies. Our customers have included: Radisson Hotels International Franklin Quest Corporation Bank of New York Blue Cross/Blue Shield United Technologies (Carrier) Bank One Nu Skin International Canadian Government Fruit of the Loom American Home Business Assoc. Zions Bank Paragon Trade Brands California Steel SKF Library of Congress Imall Coaching Institute has sales arrangements with well known people or organizations that have distribution channels or that speak in front of large audiences, such as, motivational speakers, sales trainers, seminar companies, and network marketing organizations. These people and organizations that act as outside vendors are not bound to sell our products or services. Pursuant to written agreement filed as Exhibits 10.4, 10.5 and 10.6, these people and organizations are paid a pre-designated percentage of sales that they generate. However, there is no assurance that they will continue to sell our products. Currently we have sales arrangements with: Omar Periu A.D. Kessler RE Marketing Automation Quest Complete Cyber Solutions SDI Ron LeGrand Publishing Rory Aplanalp Skin Secrets Xtax - Jim Burton Automation Quest is the source of 67% of our coaching customers. SDI/LeGrand is responsible for 23%, and RE Marketing is the source of 7% or our coaching customers. The remaining outside vendors supply only 3% of our coaching customers. A reduction in sales generated by Automation Quest would have a detrimental impact on our coaching sales. Products and Services Warever has several products currently available. o Action Plus ($395.00) - The flagship product of Warever Corporation, is a database program for businesses that includes a time manager, word processor and sales module that creates sales invoices, tracks inventory and performs certain accounting functions. Action Plus has received recognition from PC Computing Magazine and Portable Computing Magazine. 9 o Legion ($29.00)- An internet product specifically designed to increase the speed of your internet connection (up to a factor of 10). It essentially bypasses all intermediary connections, taking you directly to the URL of the site you specify. o Powerbase Financial Advisor ($99.00)- This program tracks personal financial information, including assets, liabilities, and net worth. It also tracks cash flow and debt, giving different methods of debt reduction. Financial calculators are included. o Idea Bank ($99.00)- This multimedia product is ideal for motivation speakers and other professional speakers, trainers or anyone who needs to reference large amounts of text data. Idea Bank stores, sorts and facilitates the retrieval of information such as quotes and anecdotes. Users can listen to audio or watch video presentations of the speaker. We have sold approximately 30,000 units of Action Plus. Our other software programs have been used as incentives, promotions and give aways, and direct revenues from these programs have been minute as we have sold less than 100 total units. Sales of Action Plus have decreased in recent years leaving Warever with dramatically reduced revenues. We hope to revive our software sales with the release of Powerbase and its sister programs. Warever has several products currently in production: o Powerbase - In January 2000, we plan to release Powerbase, a brand-new 32-bit, internet-enabled business automation product. Powerbase allows those that market products on the internet to download customer inquiries directly into their marketing database for follow-up. Powerbase includes the following: o powerful, customizable database o enterprise-wide time management and scheduling system o full-featured word processor with high-end graphics capabilities o Excel(R) compatible spreadsheet for financial analysis o Customizable label/envelope and forms generator for marketing activities o Integrated e-mail client with "e-merge" capabilities for internet marketing After Powerbase is released, we intend to commence development of upgrades of Powerbase, for release in the future that will include some of the following features: o networking capability o full accounting (see Powerbase Accounting below) o sales action plans and forecasting o Powerhouse (under development) - Is a software program for real estate agents and Brokers that has contact management, calendaring, property management, presentations and internet marketing functions. Powerhouse is a sister program to Powerbase. 10 o Action Accounting (under development) - Powerbase Accounting, coupled with the Powerbase base modules, is for small to medium-sized businesses. Action Accounting includes such standardized accounting modules as general ledger, accounts payable, accounts receivable, inventory, and sales. It will also directly integrate with the internet for order placement, fulfillment, and customer interaction. o Powerbase Dashboard (under development) - This product gives company CEOs, presidents and department heads an immediate and real-time view into the operations of their business through graphs and charts, alerting them to areas of concern within each department at a moment's notice, whether it be in sales, accounting, fulfillment, customer service, or web integration. Coaching Institute provides the following services: o Personal Coaching - Personal Coaching is conducted over the telephone, offering the client the greatest opportunity to utilize their own environment to make needed changes. Sessions last one half hour each over a period of 8-12 weeks with up to a year of follow up. o Telesales - Coaching Institute is equipped with advanced phone systems and provides telesales services to our outside vendors. o Data Base Management - Utilizing some of Warever Corporation's core technologies, Coaching Institute is able to manage outside vendor databases. We use our software and knowledge to operate and organize Omar Periu and RE Marketing's customer databases. We benefit because they provide us with names in the database to whom we market our coaching services. Database management is not currently a source of direct revenues for Warever. o Seminar Management - Seminars allow Coaching Institute to control lead flow from start to finish as well as provide needed structure to beginning speakers and fledgling organizations such as Xtax run by our outside vendor Jim Burton. Intellectual Property and Proprietary Rights We rely on a combination of copyright, trade secret, and trademark law to protect our technology, although we believe that other factors such as the technological and creative skills of our personnel, new product developments, frequent product and feature enhancements, and reliable product support and maintenance are more essential to maintaining a technology leadership position. We currently do not have any patents issued or pending. We generally enter into confidentiality and nondisclosure agreements with our employees, consultants, prospective customers, licensees, and corporate partners. In addition, we control access to and distribution of our software, coaching programs, documentation, and other proprietary information. Despite our efforts to protect our intellectual property and proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Effectively policing the unauthorized use of their products is time-consuming and 11 costly, and there can be no assurance that the steps we take will prevent misappropriation of our technology. We attempt to avoid infringing known proprietary rights of third parties in our product development efforts. However, we do not regularly conduct comprehensive patent searches to determine whether the technology used in our products infringes on patents held by third parties. There are many issued patents as well as patent applications in the electronic messaging field. Because patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to our software products. If we were to discover that our products violated or potentially violated third party proprietary rights, we might not be able to obtain licenses to continue offering those products without substantial reengineering. Any reengineering effort may not be successful, nor can we be certain that any licenses would be available on commercially reasonable terms. Substantial litigation regarding intellectual property rights exists in the software industry, and it is expected that software products may be increasingly subject to third-party infringement claims as the number of competitors in the industry segments grows and the functionality of software products in different industry segments overlaps. Any third-party infringement claims could be time-consuming to defend, result in costly litigation, divert management's attention and resources, cause product and service delays or require us to enter into royalty or licensing agreements. Any royalty or licensing arrangements, if required, may not be available on acceptable terms, if at all. A successful claim of infringement against us and our failure or inability to license the infringed or similar technology could have a material adverse effect on our business, financial condition, and results of operations. We may find defects in our sales automation and internet-based software that may require us to incur substantial product liability costs and significant redesign costs. Warever Corporation's product types often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Defects or errors in Warever Corporation's products could result in a loss of customers, reduced revenues and higher sales automation and internet-based software development costs, which would seriously harm our business. Acquisitions We may seek to expand through acquisitions which are not currently identified and which therefore may entail risks which cannot be evaluated at this time. We may seek to expand our operations by acquiring companies in businesses that we believe will complement or enhance our business, particularly in the seminar or internet-related industries. We cannot be assured that we will be able to ultimately effect any acquisition, successfully integrate any acquired business in our operations or otherwise successfully expand our operations. We have not established any minimum criteria for any acquisition and our management may have complete discretion in determining the terms of any acquisition. Supplies 12 The principal materials and components used in our software products include computer media, including disks and CD-ROMs, and user manuals. For each product, we prepare a master software disk or CD-ROM, user manuals, which may be in printed form or distributed on a CD-ROM, and packaging. Substantially all of our disk and CD-ROM duplication is performed by third-party vendors, using disks and blank CD-ROMs acquired from various sources. Outside sources print Warever Corporation's packaging and related materials to its specifications. Portions of the completed packages are assembled by third-party vendors. To date, Warever Corporation has not experienced any material difficulties or delays in the manufacture and assembly of its products, or material returns due to product defects. We do not have any contracts with our suppliers. We believe that we could replace our current suppliers without great expense, although such a replacement may slow down our operation and negatively impact our profits. Software is not a raw materials intensive product. The floppy disks, computer disks, and paper for manuals that we produce could be purchased from a number of suppliers. R&D We spent $39,433 in 1998 on salaries for our software development personnel. In 1999, we spent $76, 348 on salaries for personnel and independent contractors involved in the development of our software. These costs are not directly borne by our customers. Employees We currently have a total of twenty-six full time employees, ten of whom are in our sales department, six are coaches, four are programmers and six are in administration. We do not have employment contracts that guarantee a term or salary or grant stock options. We estimate our number of employees to increase to about sixty-five by the end of 2000. We cannot be certain of the number of employees that we will have by this years end, but the increase may resemble the following: Warever 1Q Warever 2Q Warever 3Q Warever 4Q ----------------------------------------------------------------------- Admin: 2 Admin: 3 Admin: 3 Admin: 3 Programming: 3 Program: 4 Program: 5 Program: 6 Sales: 2 Sales: 4 Sales: 6 Sales: 7 Support: 2 Support: 3 Support: 3 Support: 4 Total: 9 14 17 20 Coaching 1Q Coaching 2Q Coaching 3Q Coaching 4Q ----------------------------------------------------------------------- Officers: 3 Officers: 3 Officers: 3 Officers: 3 Admin Mgmt: 4 Admin Mgmt: 5 Admin Mgmt: 5 Admin Mgmt: 5 Coaches: 8 Coaches: 10 Coaches: 12 Coaches: 15 Sales: 12 Sales: 15 Sales: 18 Sales: 20 Support: 1 Support: 2 Support: 2 Support: 2 Total: 28 35 40 45 ----------------------------------------------------------------------- LSI Total: 37 49 57 65 13 Offices We operate from an office building in a business park where we have leased and occupy approximately 3,100 square feet of usable office space and 1,100 square feet of warehouse space. We own thirty computers, fax, phones and copiers, printers, typewriters, desks, a conference table, cabinets and other general office equipment. The monthly rental/lease rate is approximately $4,000 per month. We believe that as we expand the business, and cultivate additional relationships with outside vendors, we will need to relocate our executive offices to a nearby location or expand into our connected warehouse space which is currently part of our lease. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following discussion and analysis should be read in conjunction with LSI Communications' Financial Statements and the Notes thereto included elsewhere in this Registration Form. The results of operations prior to July 1, 1999 are solely based on the operations of Warever. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. For purposes of the following discussion, our results for the nine months ended September 30, 1998, as reflected in our unaudited financial statements for the period then ended, have been compared with our unaudited, interim results for the nine months ended September 30, 1999. Liquidity LSI's liquidity and capital resources as of December 31, 1998 were $24,418, and as of September 30, 1999 were $12,320. LSI's current assets exceed current liabilities. Neither Warever nor Coaching Institute has significant payables balances outstanding. Coaching Institute's debt payments and liabilities due in next 12 months arise from three outstanding promissory notes issued to Lona Hendricks involving principal loans totaling $190,000, with a total balance of 163,000. Interest and principal due on these notes in the next twelve months is $145,400. Warever's debt payments and liabilities due in next 12 months arise from one outstanding promissory note issued to Utah Technology Finance Corporation involving principal loans totaling $102,000, with a balance as of September 30, 1999 of 37000 and interest and principal due on these notes in the next twelve months of $21,418. Sale of Karl Malone project in October 1999 netted $378,000 in cash, $226,800 of which is still due to Coaching Institute as of February 2000. If necessary, this source of cash will be utilized to pay off the current portion of our debts. We had negative cash flow from operations in 1999, due in large part to investment in Karl Malone Fitness video, which has now been sold, and the expansion of Coaching Institute. 14 We had no material investments in 1999 with the exception of upgrading telephone system in October 1999 which cost $18,000. We do not have any financing transactions pending. We plan to explore financing alternatives during the first quarter of 2000 to fund additional growth, but do not believe that additional outside funding to be necessary in the next year for the continuation of our business. Coaching Institute is self-funding through profits generated. Warever's potential cash demands may be available from Coaching Institute's surpluses. There is a seasonal impact on our sales. Generally, the slower months are during the Summer and during the Christmas Holiday season. We issued stock on February 1, 2000 in order to purchase the 15% of Warever not yet owned by LSI. We also intend to purchase the remaining 15% of Coaching Institute by issuance of stock in the first quarter of 2001. Results of Operations - Nine month Periods Ended September 30, 1998 and 1999 The results of operations for the nine month period ended September 30, 1999 contain financial information for Coaching Institute from the time of its acquisition on June 21, 1999. Sales Revenues Sale revenues for the nine months ended September 30, 1999 were $200,826, a decrease of $194,675, or 49.2% from $395,501 for the nine months ended September 30, 1998. This is due to the fact that our limited resources were spent on developing new software programs rather than marketing and sales efforts that may have increased sales. Sales of our existing software is decreasing as the products enter the declining phase of their product life cycle. Action plus was our only source of meaningful income from software sales. The majority of consumers that are within reach of our current marketing strategy have either purchased the software or never will. This downward sales trend caused us to focus on development of new software. Management anticipates that future sales will be dependent upon our introduction of new software products with long life cycles and our ability to sell software through our outside vendors. The nature of the sales revenues discussed herein will change due to the acquisition of Coaching Institute. We intend for coaching services performed by Coaching Institute to expand and stabilize our revenue base. Cost of Sales Cost of sales increased by $2,720, or 279.8%, to $3,692 in the 1999 nine-month period from $972 in the 1998 nine-month period. Cost of sales is not a significant percentage of our software sales as the bulk of the sale price is derived from its intellectual property value. The addition of Coaching Institute caused the increase in our cost of sales and will likely continue to increase our cost of sales because our overall revenues should increase and the proportional cost of delivering Coaching Institute services is greater than software costs. Cost of goods sold as a percentage of revenues increased to 1.8% in the 1999 period from 0.25% in the 1998 period. Selling, General and Administrative Expenses 15 Selling, general and administrative expenses increased by $228,478, or 37.9%, to $602,470 in the 1999 nine-month period from $373,992 in the 1998 nine-month period. This increase is primarily due to three factors. The primary reason is the acquisition of Coaching Institute in 1999. We now have Selling, General and Administrative expenses for two subsidiaries where we only had one in 1998. Increased expenses resulting from the acquisition of Coaching Institute will continue indefinitely. Another ongoing cause of increased Selling, General and Administrative Expenses is amortization of our goodwill, which was $40,926 in the 1999 nine-month period. The final cause of increased Selling, General and Administrative Expenses for the 1999 nine-month period was approximately $135,000 related to the consulting agreements with Noble House of Boston, Inc. and National Capital. Noble House agreed to act as a liaison between potential investors and underwriters. Our management believes that Noble House no longer provides any services and that we are not bound to pay additional consideration under our contract. Our agreement with National Capital was related to registration of our common stock. Our obligations to National Capital have been satisfied. Depreciation Depreciation increased by $32,757, or 1,401.0%, to $40,926 in the 1999 nine-month period from $8,169 in the 1998 nine-month period. This increase is primarily due to the amortization of goodwill. Interest Expense Interest expense decreased by $4,481, or 54.6%, to $3,723 in the 1999 nine-month period from $8,204 in the 1998 nine-month period. The decrease was primarily due to a decrease in our debt with the Utah Technology Finance Corporation. Net Loss Our net income for the 1999 nine-month period decreased by $424,179, or 254%, to a net loss of ($407,483) in the 1999 nine-month period from net income of $16,696 in the 1998 period. This decrease is primarily due to decreased gross revenues due to the declining state of our software programs' product life-cycle and the increase in general and administrative expenses as discussed above. Results of Operations - Twelve Month Periods Ending December 1997 and 1998 Sales Revenues Sales revenues for 1998 were $414,009 a decrease of $150,436, or 26.6%, from revenues of $564,445 for 1997. This decrease is attributable to the declining stage of our software programs in their product life cycle. We responded to our decreasing revenues by developing new software in 1999. During 1999 we had two full-time in house programmers and one outside developer writing and developing Powerbase and Powerhouse, our next generation software programs. Our 1999 fourth quarter sales revenues should reflect a continuation of this 16 downward trend. We anticipate our software sales to increase due to the release and sale of Powerbase in early 2000. We are not aware of any reviews of Powerbase by any publication. We believe demand exists for Powerbase, however. we have not conducted any market studies and are relying on the judgement of our management. We also have no assurances that the public will have an interest in Powerbase or that any units will be sold. We do not have any commitments for the purchase of Powerbase. Cost of Sales Cost of sales decreased by $36,485, or 2,690%, to $1,356 in 1998 from $37,841 in 1997. In addition, cost of sales as a percentage of revenues decreased to .032% in 1998 from 6.7% in 1997. The cost of sales decrease was due to a decrease in overall sales during this period. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by $56,542, or 23.2%, to $243,257 in 1998 from $299,799 in 1997. This decrease is primarily due to lack of cash flow resulting from low sales volume. Much of the decreased expenses were due to a reduction in salary expenses due to the termination of some employees and Steve Carlson and Craig Hendricks receiving reduced salaries. Depreciation Depreciation decreased in 1998, by $4,437, or 43.4%, to $10,209 in 1998 from $14,646 in 1997. Net Loss The net loss for 1998 was ($17,999) which represented a decrease of $23,904 or 57%, as compared to the net loss of ($41,903) for 1997. We have operated at a loss over the last two years as a result of corporate restructuring, declining stage software producers and allocation of our resources toward new software development. We anticipate profitability in 2000, but profits will turn on market acceptance of our new software, the timely release of our new software, and continued demand for our coaching services. The year 1999 was a development period for our software operations. There is a trend of product price decreases in the software industry. There is also a trend toward business internet usage. We seek to develop and market software, such as Powerbase, that has applications related to business on the internet. Powerbase will be released in the first quarter of 2000 and we believe that it will increase our revenues. DESCRIPTION OF PROPERTY Our corporate headquarters are located in Draper, Utah where we have a lease for approximately 3,100 square feet of office space and 1,100 square feet of warehouse space in a typical business park. We believe that as we expand the business, we will need to lease additional space or add to the currently leased square footage. We believe that suitable additional or substitute space will be available on commercially reasonable terms. 17 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of the date of this registration statement, the aggregate number of shares of common stock owned of record or beneficially by each person who owned of record, or is known by us to own beneficially, more than 5% of our common stock, and the name and holdings of each officer and director and all officers and directors as a group:
- - -------------------- ------------------------------------------- -------------------------------- --------------------- Title of Class Name and Amount and Percent of Class Address of Beneficial Owner Nature Beneficial Owner - - -------------------- ------------------------------------------- -------------------------------- --------------------- Officers and Directors: Common Stock Craig R. Hendricks 2,894,604 26.1% 112 W. Business Park Drive Draper, Utah 84020 Common Stock Steven E. Carlson 2,894,604 26.1% 112 W. Business Park Drive Draper, Utah 84020 5% Shareholders: Common Stock Lona Hendricks 1,186,340 10.7% 4103 205th Ave. S.E. Issaquah, WA 98029 - - -------------------- ------------------------------------------- -------------------------------- ---------------------
The following table sets forth, as of the date of this registration statement, the aggregate number of shares of common stock warrants held by each person who owned of record, or is known by us to own beneficially, more than 5% of our common stock, and the name and holdings of each officer and director.
- - ----------------------------- ---------------------------------- ---------------------------- -------------------------- Name of Warrant Holder Title and Amount of Securities Exercise Price Date of Exercise Called for by Warrants - - ----------------------------- ---------------------------------- ---------------------------- -------------------------- Craig R. Hendricks 869,318 shares of common stock. .0073 shares of Coaching For a period of 60 days 112 W. Business Park Drive Institute, Inc stock per after January 1, 2001. Draper, Utah 84020 share. 18 Steven E. Carlson 869,318 shares of common stock. .0073 shares of Coaching For a period of 60 days 112 W. Business Park Drive Institute, Inc stock per after January 1, 2001. Draper, Utah 84020 share. Lona Hendricks 143,182 shares of common stock. .0073 shares of Coaching For a period of 60 days 4103 205th Ave. S.E. Institute, Inc stock per after January 1, 2001. Issaquah, WA 98029 share. - - ----------------------------- ---------------------------------- ---------------------------- --------------------------
DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS Officers and Directors The following table sets forth the names, age, and position of each of our directors and executive officers. Name Age Position and Office Held ---- --- ------------------------ Craig R. Hendricks 33 President, Chief Executive Officer Chief Accounting Officer, Chief Financial Officer, Director Steven E. Carlson 30 Vice President, Director Each of the above individuals became an officer and director in connection with our re-organization on December 8, 1998. The term of office of each officer and director is until his successor is elected and qualified. Biographical Information Set forth below is biographical information for each officer and director. No person other than officers and directors will currently perform any of our management functions. 19 Craig R. Hendricks Mr. Craig R. Hendricks has been with Warever Corporation since 1992. In 1993, he orchestrated and led the buyout of Warever Corporation from its founding owners. Prior to joining Warever Corporation in 1992, Mr. Hendricks began his career at WordPerfect Corporation. He served on the Board of CMS Casuals, Inc., a manufacturing company based in Bellevue, Washington with approximately 40 employees, which was sold to a group of Microsoft employees in 1990. He received a Bachelor of Science in accounting and a Master of Business Administration Degree, graduating with distinction from Brigham Young University in 1992. Steven E. Carlson Mr. Steven E. Carlson helped create Warever Corporation as one of the original founders while attending the University of Utah. Mr. Carlson has been a member of the board of directors since Warever's inception and the vice president of sales and marketing since 1995. Mr. Carlson has been involved in the productivity and sales automation industries since the late 1980's. For the past five years, Mr. Carlson has focused on day to day operations related to Warever's software sales and on-site implementation of Warever's automation system software. EXECUTIVE COMPENSATION We have no written employment agreements with any officer or director. The President and Vice President do not have set compensation and defer their compensation from time to time. Commencing January 1, 2000, the President and Vice President will be paid annual salaries of $100,000 each.
- - ------------------------------------------------------------------------------------------------------------------------------- SUMMARY COMPENSATION TABLE - - ------------------------------------------------------------------------------------------------------------------------------- Name and Principal Position (a) Year (b) Long-Term Compensation - - ----------------------- -------- ------------------------------------------ ------------------------------------- ------------- Annual Compensation Awards Payouts ------------------------------------------ ------------ ------------------------ ------------- Salary (c) Bonus (d) Other Restricted Securities LTIP All Annual Stock Under- Payouts Other Compen- Award (f) Lying (h) Compen- sation (e) Options/ sation (i) SARs (g) - - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- ------------- Craig Hendricks 1998 $ 50,250 $0.0 $0.0 $0.0 0 $0.0 $0.0 Chairman, CEO, President - - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- ------------- Steven Carlson 1998 $ 50,250 $0.0 $0.0 $0.0 0 $0.0 $0.0 Vice President - - ----------------------- -------- ------------- --------------- ------------ ------------ ------------ ----------- -------------
There are no other agreements or arrangements, express or implied, between us and any other officer or director, regarding any other form of compensation, including stock options, warrants, employment incentives, or the like. No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to our management during the year ended December 31, 1998, or the period ended September 30, 1999. 20 Compensation of Directors. There are no standard arrangements pursuant to which our directors are compensated for any services provided as a director. No additional amounts are payable to our directors for committee participation or special assignments. Employment Contracts and Termination of Employment and Change in Control Arrangements. There are no employment contracts, compensatory plans or arrangements, including payments to be received from us, with respect to any of our directors or executive officers which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of employment with us, any change in control of our organization, or a change in the person's responsibilities following a change in control of our organization. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Loan From 5% Stockholder The only transactions between members of management, nominees to become a director or executive officer, 5% stockholders or promoters are with Lona Hendricks, owner of 10.7% of our outstanding common stock. Lona Hendricks is an immediate family member of our President, Craig Hendricks, and has loaned us a total of $190,000 in a series of three similar transactions. The loans and terms are as follows:
-------------------- -------------------- -------------- -------------- ---------------------------------------------- Date of Loan Principal Amount Interest Rate Term Payment Terms -------------------- -------------------- -------------- -------------- ---------------------------------------------- April 1, 1999 $40,000 9.75% 3 years Monthly payments of principal and interest amortized over 36 months -------------------- -------------------- -------------- -------------- ---------------------------------------------- July 1, 1999 $50,000 9.75% 1 year Monthly payments of interest only with balloon payment due on or before month 12. -------------------- -------------------- -------------- -------------- ---------------------------------------------- August 1, 1999 $100,000 9.75% 1 year Monthly payments of interest only with balloon payment due on or before month 12. -------------------- -------------------- -------------- -------------- ----------------------------------------------
DESCRIPTION OF SECURITIES General LSI Communications is authorized to issue 50,000,000 shares of common stock, par value $0.01 per share, of which 11,096,054 shares are issued and outstanding. We have no preferred stock. Common Stock 21 Holders of common stock are entitled to one vote per share on each matter submitted to a vote at any meeting of stockholders. Shares of common stock do not carry cumulative voting rights and, therefore, holders of a majority of the outstanding shares of common stock will be able to elect the entire board of directors, and, if they do so, minority stockholders would not be able to elect any members to the board of directors. Our board of directors has authority, without action by the stockholders, to issue all or any portion of the authorized but unissued shares of common stock, which would reduce the percentage ownership of the stockholders and which may dilute the book value of the common stock. Shareholders have no pre-emptive rights to acquire additional shares of common stock. The common stock is not subject to redemption and carries no subscription or conversion rights. In the event of liquidation, the shares of common stock are entitled to share equally in corporate assets after satisfaction of all liabilities. Holders of common stock are entitled to receive dividends as the board of directors may from time to time declare out of funds legally available for the payment of dividends. We have not paid dividends on common stock and do not anticipate that we will pay dividends in the foreseeable future. PART II MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. Our common stock is quoted on the OTC Bulletin Board of the NASD. No assurance can be given that any established market for our common stock will develop or be maintained. For any market that develops for our common stock, the sale of "restricted securities" (common stock) pursuant to Rule 144 of the Securities and Exchange Commission by members of management or any other person to whom any such securities may be issued in the future may have a substantial adverse impact on any such public market. Information about the date when current holders' holding period of "restricted securities" commenced can be found under the caption "Recent Sales of Unregistered Securities." A minimum holding period of one year is required for resales under Rule 144, along with other pertinent provisions, including publicly available information concerning our operations. Limitations on the volume of "restricted securities" which can be sold in any 90 day period; the requirement of unsolicited broker's transactions; and the filing of a Notice of Sale on Form 144 will be satisfied by the filing and effectiveness of this Registration Statement. We have 11,096,054 shares of common stock outstanding of which all but 4,768,700 are freely traded or can be currently sold under Rule 144, subject to its limitations. There are currently outstanding options to purchase 2,420,205 shares of our common stock. The majority of these options are held by our two directors and will require issuance of new stock which will dilute the ownership interest of our shareholders. 22 Our common stock can be defined as a "penny stock" pursuant to Rule 3a51-1 under the Securities and Exchange Act of 1934 because our shares are traded at a price less than $5 per share, we do not yet meet certain financial size and volume levels, and our shares are not registered on a national securities exchange or quoted on the NASDAQ system. A "penny stock" is subject to rules 15g-1 through 15g-10 of the Securities and Exchange Commission. Those rules require securities broker-dealers, before effecting transactions in any "penny stock," to (a) deliver to the customer and obtain a written receipt for a disclosure document set forth in Rule 15g-10 (Rule 15g-2), (b) disclose certain price information about the stock (Rule 15g-3), (c) disclose the amount of compensation received by the broker-dealer (Rule 15g-4) or any "associated person" of the broker-dealer (Rule 15g-5), and (d) send monthly statements to customers with market and price information about the "penny stock" (Rule 15g-6). Our common stock could also become subject to Rule 15g-9, which requires the broker-dealer, in some circumstances, to approve the "penny stock" purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules. (Rule 15g-9) These requirements discourage broker-dealers form effecting transactions in "penny stocks" and may limit the ability of our shareholders to sell their shares into any secondary market for our common stock. The following quotations were provided by Dreyfus Brokerage Services, Inc. and represent historical pricing of our common stock by quarter over the past two years on the over the counter bulletin board, but do not represent actual transactions; these quotations do not reflect dealer markups, markdowns or commissions. Stock Quotations CLOSING BID no trades December 31, 1998 4 3/4 25/32 March 31, 1999 4 3/4 1 /78 June 30, 1999 3 5/16 1 3/8 September 30, 1999 1 7/8 7/8 December 31, 1999 1 3/4 7/16 Holders. The number of record holders of our securities as of the date of this Registration Statement is approximately 125. Dividends. 23 We have not declared any cash dividends with respect to our common and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty, and if and until we become profitable, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities. LEGAL PROCEEDINGS We are not a party to any pending legal proceedings, or governmental agency proceedings, and no such action by or, to the best of our knowledge, against us has been threatened. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS None. RECENT SALES OF UNREGISTERED SECURITIES Common Stock
--------------------------------------- ------------- ------------------ --------------------------------------------- Name Date Number of Shares Aggregate Consideration Acquired --------------------------------------- ------------- ------------------ --------------------------------------------- Bismark Mining 6/11/98 96,000 80,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Steven E. Carlson 12/8/98 999,330 85,000 shares of Warever, Inc. stock.(2) Steven E. Carlson 6/28/99 1,062,500 36,125 shares of Coaching Institute Steven E. Carlson 2/1/00 832,775 stock.(3) 15,000 shares of Warever, Inc. stock.(9) --------------------------------------- ------------- ------------------ --------------------------------------------- Chartlight Corp. 12/2/98 10,000 $500 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- DFT Consultants, LTD 12/2/98 243,600 $121,800 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- Eastern Forest Resources, Inc. 12/2/98 20,000 $11,000 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- Helena Silver Mines, Inc. 6/11/98 132,000 110,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Craig R. Hendricks 12/8/96 999,330 85,000 shares of Warever, Inc. stock.(2) --------------------------------------- ------------- ------------------ --------------------------------------------- Lona Hendricks 12/8/98 551,640 46,921 shares of Warever, Inc. stock. (2) Lona Hendricks 6/28/99 175,000 5,950 shares of Coaching Institute (3) Lona Hendricks 2/1/00 459,700 8,280 shares of Warever, Inc. stock.(9) --------------------------------------- ------------- ------------------ --------------------------------------------- Hercules Extension, Inc. 6/11/98 108,000 90,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Karl A. Malone 10/7/99 137,931 Services(5) --------------------------------------- ------------- ------------------ --------------------------------------------- M.B. Resources, Inc. 6/11/98 120,000 100,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Richard A. McAllister 6/28/99 150,000 6,000 shares of Coaching Institute stock. (3) --------------------------------------- ------------- ------------------ --------------------------------------------- Mark McKown 8/30/99 5,519 Services(5) --------------------------------------- ------------- ------------------ --------------------------------------------- 24 Northpost Operating Co. 6/11/98 120,000 100,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Don Robinson 12/8/98 299,800 25,500 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Savoy Industries, Inc. 6/11/98 96,000 80,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Scejon Investments, Inc. 12/2/98 225,000 $11,250 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- Starboard Financial Corp. 12/2/98 310,000 $15,500 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- Washington Mining Corp. 6/29/98 120,000 100,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Roger G. Williams 6/28/99 50,000 2,000 shares of Coaching Institute stock. (3) --------------------------------------- ------------- ------------------ --------------------------------------------- Wide West, Inc. 6/11/98 144,000 120,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Windlass Investments, Inc. 12/2/98 191,400 $9,570 in 1998 private placement(4) --------------------------------------- ------------- ------------------ --------------------------------------------- Ross Wolfley 12/6/98 149,900 12,750 shares of Warever, Inc. stock. (2) --------------------------------------- ------------- ------------------ --------------------------------------------- Security Insurers, Inc. 6/11/98 144,000 120,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Silverton Mines, Inc. 6/11/98 120,000 100,000 shares of Ferber stock.(1) --------------------------------------- ------------- ------------------ --------------------------------------------- Noble House of Boston, Inc. 4/99 200,000 Services(6) --------------------------------------- ------------- ------------------ --------------------------------------------- National Capital 4/99 35,000 Services(7) --------------------------------------- ------------- ------------------ --------------------------------------------- National Capital 4/99 50,000 Exercise of Options(8) --------------------------------------- ------------- ------------------ ---------------------------------------------
(1) LSI Communications, Inc., acquired all of the shares of Ferber Corporation in June 1997 where the shareholders of Ferber exchanged 1,000,000 Ferber shares for 1,200,000 shares of LSI Communications, Inc. (2) Warever, Inc. merged into LSI Communications, Inc., which acquired 85% of the shares of Warever, Inc. by issuing 2,500,000 shares of its stock in exchange for 85%, or 255,171, shares of Warever, Inc. stock pursuant to a November 20, 1998 transaction. LSI Communications, Inc., acquired 85% of the shares of (3) Coaching Institute by issuing 2,500,000 shares of stock in exchange for 85%, or 85,000, of the shares of Coaching Institute stock pursuant to a June 21, 1999 transaction. (4) In November and December 1998 the company raised $50,000 in a private offering pursuant to a Regulation D, Rule 504 exemption. (5) Services related to the production of a fitness video project. (6) Payment in stock for services related to public relations and funding. (7) Payment in stock for services related to registration of securities. (8) Payment for services related to funding. (9) LSI Communications, Inc., acquired the remaining 15% of Coaching Institute by issuing 2,500,000 shares of stock in exchange for 15%, or 15,000, of the shares of Coaching Institute stock in a February 1, 2000 transaction. We believe that each of the foregoing persons or entities was either an "accredited investor," or "sophisticated investor" as defined in Rule 506 of Regulation D of the Securities and Exchange Commission. Each had access to all material information regarding LSI Communications prior to the offer, sale or issuance of these "restricted securities." We believe these shares were exempt from the registration requirements of the Securities Act of 1933, as amended (the "1933 Act"), pursuant to Section 4(2) and applicable exemptions thereunder. We have taken the following factors into account in determining the valuations of the above-referenced shares: o the fact that the shares are "restricted" o our history of limited revenues o the limited market for our common stock on the OTC Bulletin Board of the NASD 25 o the low book value per share Transfer and Warrant Agent Our transfer agent is Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Holladay, UT 84117. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 78.7502 of the Nevada Revised Statutes provides in relevant part as follows: 1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall 26 indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. Our articles of incorporation do not contain a specific indemnification provision for its officers, directors and employees. Insofar as indemnification by LSI Communications for liabilities arising under the Securities Act may be permitted to our officers and directors we are aware that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by LSI Communications of expenses incurred or paid by an officer or director in the successful defense of any action, suit, or proceeding) is asserted by such officer or director in connection with the securities being registered hereby, LSI Communications will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 27 LSI Communications, Inc. Consolidated Financial Statements September 30, 1999 (unaudited), December 31, 1998 and 1997 F-1 C O N T E N T S Accountants' Report .................................................... F-3 Consolidated Balance Sheets ............................................ F-4 Consolidated Statements of Operations .................................. F-6 Consolidated Statements of Stockholders' Equity......................... F-7 Consolidated Statements of Cash Flows .................................. F-8 Notes to the Consolidated Financial Statements ......................... F-9 F-2 [letterhead of Crouch Bierwolf &Chisholmm] INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of LSI Communications, Inc. We have audited the accompanying consolidated balance sheets of LSI Communications, Inc. as of December 31, 1998 and 1997 and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LSI Communications, Inc. as of December 31, 1998 and 1997 and the results of its consolidated operations and cash flows for the years then ended in conformity with generally accepted accounting principles. The September 30, 1999 financial statements have not been reviewed or audited by us. Accordingly, we do not express an opinion or any form of assurance on them. Salt Lake City, Utah January 18, 2000 F-3
LSI Communications, Inc. Consolidated Balance Sheets ASSETS September 30, December 31, 1999 1998 1997 ----------------- ------------------ --------------- CURRENT ASSETS (unaudited) Cash & Cash Equivalents (Note 1) $ 12,320 $ 24,418 $ 22,665 Inventory 8,088 5,286 7,728 Accounts Receivable (Net of allowance of $11,800, $8,500 and $12,900, respectively) 73,058 7,252 49,666 Contract (Note 3) 261,000 - - ----------------- -------------------- --------------- Total Current Assets 354,446 36,956 80,059 ----------------- ------------------ --------------- PROPERTY & EQUIPMENT (Note 2) 27,962 15,093 24,365 ----------------- ------------------ --------------- OTHER ASSETS Goodwill (Note 1) 1,311,698 - - Deposits & Prepaids 6,076 6,076 6,076 ----------------- ------------------ --------------- Total Other Assets 1,317,774 6,076 6,076 ----------------- ------------------ --------------- TOTAL ASSETS $ 1,700,202 $ 58,125 $ 110,500 ================= ==================== ===============
The accompanying notes are an integral part of these financial statements F-4
LSI Communications, Inc. Consolidated Balance Sheets continued LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31, 1999 1998 1997 ----------------- ------------------ --------------- CURRENT LIABILITIES (unaudited) Accounts payable $ 59,893 $ 13,891 $ 32,676 Accrued expenses 29,332 5,216 10,764 Current portion of long-term liabilities (Note 3) 193,169 23,392 59,317 Deferred Revenues (Note 1) 3,000 5,000 - ----------------- ------------------ --------------- Total Current Liabilities 285,394 47,499 102,757 ----------------- ------------------ --------------- LONG TERM LIABILITIES (Note 3) Notes payable 63,878 37,121 60,654 Notes payable-related party 187,278 3,593 31,000 Capital lease obligations - - 8,603 Less current portion (193,169) (23,392) (59,317) ----------------- ------------------ --------------- Total long term Liabilities 57,987 17,322 40,940 ----------------- ------------------ --------------- TOTAL LIABILITIES 343,381 64,821 143,697 ----------------- ------------------ --------------- MINORITY INTEREST - - - ----------------- ------------------ --------------- STOCKHOLDERS' EQUITY Common stock, authorized 60,000,000 shares of $.001 par value, issued and outstanding 8,915,632, 5,959,697 and 300,201 shares, respectively 8,916 5,960 300 Additional Paid-in capital 2,078,079 310,035 300,195 Treasury Stock - - (29,000) Retained earnings (730,174) (322,691) (304,692) ----------------- ------------------ --------------- Total Stockholders' Equity 1,356,821 (6,696) (33,197) ----------------- ------------------ --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,700,202 $ 58,125 $ 110,500 ================= ================= ===============
The accompanying notes are an integral part of these financial statements F-5
LSI Communications, Inc. Consolidated Statements of Operations For the Nine Months Ended For the Year Ended September 30, December 31, 1999 1998 1998 1997 ---------------- -------------- -------------- ------------- (unaudited) (unaudited) REVENUES Software Sales $ 96,792 $ 396,473 $ 414,000 $ 564,445 Training Revenues 104,034 - - - ---------------- -------------- -------------- ------------- TOTAL REVENUES 200,826 396,473 414,009 564,445 ---------------- -------------- -------------- ------------- COST OF SALES Software 874 972 1,356 37,841 Training 2,818 - - - ---------------- -------------- -------------- ------------- TOTAL COST OF SALES 3,692 972 1,356 37,841 ---------------- -------------- -------------- ------------- GROSS PROFIT 197,134 395,501 412,653 526,604 ---------------- -------------- -------------- ------------- SELLING EXPENSES 107,952 142,677 152,289 15,485 DEPRECIATION & AMORTIZATION 40,926 8,169 10,209 14,646 PRODUCTION FEES 70,000 - - - CONSULTING FEES 135,000 - - - PAYROLL 138,366 113,957 138,000 234,897 GENERAL & ADMINISTRATIVE EXPENSES 83,026 82,339 90,968 284,314 RESEARCH & DEVELOPMENT 27,200 26,850 35,800 12,300 ---------------- -------------- -------------- ------------- TOTAL OPERATING EXPENSES 602,470 373,992 427,266 561,642 ---------------- -------------- -------------- ------------- OPERATING LOSS (405,336) 21,509 (14,613) (35,038) ---------------- -------------- -------------- ------------- OTHER INCOME AND (EXPENSES) Minority interest 5,059 - - - Miscellaneous income (3,483) 3,391 3,392 14,832 Interest expense (3,723) (8,204) (6,778) (21,697) ---------------- -------------- -------------- ------------- Total Other Income and (Expenses) (2,147) (4,813) (3,386) (6,865) ---------------- -------------- -------------- ------------- LOSS BEFORE INCOME TAXES (407,483) 16,696 (17,999) (41,903) PROVISION FOR INCOME TAXES (Note 1) - - - - ---------------- -------------- -------------- ------------- NET INCOME/(LOSS) $ (407,483) $ 16,696 $ (17,999) $ (41,903) ================ ============== ============== ============= NET INCOME/(LOSS) PER SHARE $ (.06) $ .06 $ (.02) $ (.14) ================ ============== ============== ============= WEIGHTED AVERAGE OUTSTANDING SHARES 7,231,457 300,495 1,135,100 300,201 ================ ============== ============== =============
The accompanying notes are an integral part of these financial statements F-6
LSI Communications, Inc. Consolidated Statements of Stockholders' Equity From December 31, 1996 through September 30, 1999 (unaudited) Common Stock Additional Retained -------------------------- Paid-in Treasury Earnings Shares Amount Capital Stock (Deficit) ------------ ------------ ----------- ----------- ------------ Balance on December 31, 1996 300,201 $ 300 $ 300,195 $ (29,000) $ (262,789) Net loss for the year ended December 31, 1997 - - - - (41,903) ------------ ------------ ----------- ----------- ------------ Balance on December 31, 1997 300,201 300 300,195 (29,000) (304,692) October 12, 1998 - Purchase of Treasury Stock - - - (500) - November 98 - Reverse acquisition and reorganization adjustment (Note 1) 4,659,496 4,660 65,532 29,500 - November 98 - Stock issued for cash at $.05 per share 1,000,000 1,000 49,000 - - Offering Costs - - (5,000) - - Net Loss for the year ended December 31, 1998 - - - - (17,999) ------------ ------------ ----------- ----------- ------------ Balance on December 31, 1998 5,959,697 5,960 310,035 - (322,691) March 3, 1999 - shares issued in Shareholder settlement at $.001 per share 27,485 27 (27) - - April 1, 1999 - shares issued for consulting agreement at $1.00 per share 85,000 85 84,915 - - June 28, 1999 - shares issued in acquisition of Coaching Institute, Inc. 2,500,000 2,500 1,372,500 - - July 1, 1999 - shares issued for consulting agreement at $.25 per share 200,000 200 49,800 - - August 30, 1999 - shares issued for royalty agreement at $1.825 per share 143,450 144 260,856 - - Net Loss for the nine months ended September 30, 1999 (unaudited) - - - - (407,483) ------------ ------------ ----------- ----------- ------------ Balance on September 30, 1999 (unaudited) 8,915,632 $ 8,916 $ 2,078,079 $ - $ (730,174) ============ ============ =========== =========== ============
The accompanying notes are an integral part of these financial statements F-7
LSI Communications, Inc. Consolidated Statements of Cash Flows For the Nine Months Ended For the Year Ended September 30, December 31, 1999 1998 1998 1997 ---------------- -------------- -------------- ------------- (unaudited) (unaudited) Cash Flows From Operating Activities: Net income (loss) $ (407,483) $ 16,696 $ (17,999) $ (41,903) Non-cash items: Consulting fee paid with stock issues 135,000 - - - Depreciation & amortization 40,926 8,169 10,209 14,646 Bad Debt 11,859 8,548 4,400 12,900 Minority Interest - - - - (Increase)/decrease in current assets: Accounts receivable (65,806) 36,600 46,814 40,006 Inventory (2,802) 1,268 2,442 23,018 Increase/(decrease) in current liabilities: Accounts payable 46,002 (21,966) (18,784) (12,693) Accrued expenses 24,116 (9,511) (5,548) 3,008 Deferred revenues (2,000) - 5,000 - ---------------- -------------- -------------- ------------- Net Cash Provided (Used) by Operating Activities (220,188) 39,804 26,534 38,982 ------------ ------------- ------------ ---------------- Cash Flows from Investing Activities Cash from acquisition of Coaching Institute, Inc. 14,448 - - - Cash paid for property, equipment and software technology (17,272) (1,769) (1,769) (4,945) Cash paid for Treasury Stock - - (500) - Cash paid for deposits - - - 249 ---------------- -------------- -------------- ------------- Net Cash Provided (Used) by Investing Activities (2,824) (1,769) (2,269) (4,696) ---------------- -------------- -------------- ------------- Cash Flows from Financing Activities: Proceeds from long term debt 215,000 - - - Cash received from stock issuance - - 45,000 - Principal payments on long-term debt (4,086) (45,749) (67,512) (17,413) ---------------- -------------- -------------- ------------- Net Cash Provided (Used) by Financing Activities 210,914 45,749 (22,512) (17,413) ---------------- -------------- -------------- ------------- Increase/(decrease) in Cash (12,098) (7,714) 1,753 16,873 Cash and Cash Equivalents at Beginning of Period 24,418 22,665 22,665 5,792 ---------------- -------------- -------------- ------------- Cash and Cash Equivalents at End of Period $ 12,320 $ 13,979 $ 24,418 $ 22,665 ================ ============== ============== ============= (continued) F-8 LSI Communications, Inc. Consolidated Statements of Cash Flows (continued) Supplemental Cash Flow Information: Cash paid for interest $ 3,723 $ 8,204 $ 6,778 $ 21,697 Cash paid for income taxes $ - $ - $ - $ - Non-Cash Investing Activities: In 1999, the Company issued 2,500,000 shares of common stock for 85,000 shares (85%) of common stock of Coaching Institute, Inc. In 1998, the Company issued 3,000,000 shares of common stock for 85% of the outstanding common stock of Warever. Non-Cash Financing Activities: In 1999, the Company issued 428,450 shares of common stock for services valued at $396,000.
The accompanying notes are an integral part of these financial statements F-9 LSI Communications, Inc. Notes to the Consolidated Financial Statements September 30, 1999 (unaudited), December 31, 1998 and 1997 NOTE 1 - Summary of Significant Accounting Policies a. Organization The Company was incorporated as TPI, Inc., under the laws of the State of Utah on April 26, 1983. In 1985, the Corporation changed its situs from Utah to Nevada and its name to Connections Marketing Corp. In July, 1992, the shareholders of the Corporation voted to change the name to LSI Communications, Inc. (LSI). The Company held mineral properties in Beaver County, Utah; however, no extraction operations ever commenced and the properties were distributed to the shareholders through a subsidiary spinoff. On November 20, 1998, the Company entered a Plan of Reorganization and Acquisition agreement with Warever, Inc. (Warever) a Utah Corporation, wherein the Company issued 3,000,000 shares of common stock for 85% of the outstanding common stock of Warever. The agreement provides for the Company to acquire the remaining 15% of Warever for 2,500,000 shares of LSI through option agreements which are exercisable for a period of 60 days following January 1, 2000 for no consideration. Warever was organized in the State of Utah on May 13, 1992 under the name of Action Plus Software, Inc. On January 17,1995 the company changed the name of the company to Warever, Inc. Warever is in the business of developing, programming, selling and marketing a computer software package named Action Plus, a management assistance software tool. The acquisition is recorded as a reverse acquisition, with Warever being the accounting survivor, therefore all historical financial information prior to November 20, 1998 in these statements are those of Warever. On June 21, 1999, the Company entered into a Plan of Acquisition with Coaching Institute, Inc., a Utah corporation, wherein the Company issued 2,500,000 shares of common stock for 85,000 shares, 85%, of the outstanding common stock of Coaching Institute, Inc. The agreement provides for the Company to receive options to acquire the remaining 15% of the issued and outstanding common stock of Coaching Institute, Inc. in exchange for 2,045,455 shares of the Company's common stock. After the acquisition, both companies are surviving with Coaching Institute, Inc. being a majority-owned subsidiary of LSI Communications, Inc. Coaching Institute, Inc. has certain intellectual property and contracts in place that generate revenue, including a contract to produce a video series utilizing the name, image, and knowledge of Karl Malone. F-10 NOTE 1 - Summary of Significant Accounting Policies (continued) a. Organization (continued) The acquisition of Coaching Institute, Inc. has been recorded using the purchase method of a business combination. Operating activities have been included from Coaching Institute in the consolidated financials since June 21, 1999. The Company valued the acquisition of Coaching Institute at $1,375,000 which was the market value of the common stock less a 60% discount for the restriction on the stock. b. Recognition of Revenue/Deferred Revenue The Company recognizes income and expense on the accrual basis of accounting. The Company receives revenues from services provided for custom program conversions and training. Pursuant to SOP 97-2, revenue is recorded when the services are completed. The Company also generates revenues from the sale of their Action Plus software technology. This product is sold separately without future performance such as upgrades or maintenance, and is not sold with PCS services, therefore according to SOP 97-2 revenue is recorded upon the sale and delivery of the product once an agreement exists, the price is fixed and collectability is probable. The Company sells post contract support services separately for one year. The Company defers the revenue and recognizes it over the contract term as required by SOP 97-2. The deferred revenue at September 30, 1999 (unaudited), December 31, 1998 on contracts sold during 1999 and 1998 total $3,000 and $5,000, respectively. c. Earnings (Loss) Per Share The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements. d. Provision for Income Taxes In 1997, Warever, Inc. elected to file federal and state income taxes under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay corporate income taxes on its taxable income during that period of time. Instead, the stockholders are liable for individual income taxes on their respective shares of the Company's net operating income in their individual income tax returns. Effective December 1, 1998, the Company will file a consolidated return with it's parent and will lose it's S-Corp status. No provision for income taxes has been recorded due to net operating loss carry forwards totaling approximately $425,000 that will be offset against future taxable income. These NOL carry forwards begin to expire in 2013. No tax benefit has been reported in the financial statements because the Company has not yet proven it can generate taxable income. F-11 NOTE 1 - Summary of Significant Accounting Policies (Continued) d. Provision for Income Taxes (continued) Deferred tax assets and the valuation account is as follows at September 30, 1999 (unaudited), December 31, 1998 and 1997:
September 30, December 31, 1999 1998 1997 --------------- ------------- ----------- Deferred tax asset: NOL carry forward $ 144,500 $ 6,800 $ - Valuation allowance (144,500) (6,800) - --------------- ------------- ----------- Total $ - $ - $ - =============== ============= ===========
e. Cash and Cash Equivalents The company considers all highly liquid investments with maturities of three months or less to be cash equivalents. f. Property and Equipment Expenditures for property and equipment and for renewals and betterments, which extend the originally estimated economic life of assets or convert the assets to a new use, are capitalized at cost. Expenditures for maintenance, repairs and other renewals of items are charged to expenses. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is included in the results of operations. The provision for depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Depreciation expense for the period ended September 30, 1999 (unaudited), December 31, 1998 and 1997 is $7,293, $10,209 and $14,646, respectively. g. Goodwill The Company recorded $1,345,331 in connection with the acquisition of Coaching Institute, Inc. Goodwill will be amortized over 10 years on the straight line method. h. Inventory Inventory consists primarily of software manuals and disks. i. Advertising Costs Advertising costs are charged to operations when incurred. The cost for direct response advertising is also expensed because the future benefit is only three days, therefore capitalization is ineffective. F-12 NOTE 1 - Summary of Significant Accounting Policies (Continued) j. Consolidation Policy These financial statements include the books of LSI Communications, Inc., a public shell company, Warever Corporation, a software sales and marketing company, and Coaching Institute, Inc. (September 30, 1999 only), a training and consulting firm. All intercompany accounts and transactions have been eliminated in the consolidation. NOTE 2 - Property & Equipment Property and equipment consists of the following at September 30, 1999 (unaudited), December 31, 1998 and 1997:
September 30, December 31, 1999 1998 1997 ---------------- ---------------- --------------- (unaudited) Computer equipment $ 40,653 $ 20,195 $ 62,495 Leased equipment 15,075 15,075 15,075 Furniture and fixtures 6,769 6,769 6,769 Software technology 2,847 2,847 6,815 ---------------- ---------------- --------------- 65,344 44,886 91,154 Less: Accumulated depreciation - equipment (24,066) (18,738) (58,749) Accumulated depreciation - leased equipment (13,316) (11,055) (8,040) ---------------- ---------------- --------------- Total Property & Equipment $ 27,962 $ 15,093 $ 24,365 ================ ================ ===============
NOTE 3 - Contract In 1999, the Company acquired a contract for a video production. The amount capitalized as the cost of the contract is the value of the participation in the video by Karl Malone and others. For their participation, 143,450 shares of common stock were issued at a valuation of $1.825 per share or $261,000. The stock was valued at the average market price at the time of issue. This cost is to be amortized over three years. The contract was sold October 26, 1999. See Note 10 for details. NOTE 4 - Long-Term Liabilities Long Term Liabilities are detailed in the following schedules as of September 30, 1999 (unaudited), December 31, 1998 and 1997: Note payable-related party is detailed as follows:
September 30, December 31, 1999 1998 1997 -------------- --------------- ------------ (unaudited) Note payable to a relative of an officer of the Company, bears interest at 12%, with principal due April 1999, unsecured note $ - $ 3,593 $ 31,000 Note payable to a relative of an officer of the Company, bears interest at 12%, with a principal due of $189,119 at September 30, 2000 189,119 - - -------------- --------------- ------------ Total notes payable - related party 189,119 3,593 31,000 -------------- --------------- ------------ Capital lease obligations are detailed in the following schedule as of September 30, 1999 (unaudited), December 31, 1998 and 1997: Capital lease obligation to a corporation for telephone equipment, lease payments due monthly of $397 through April 2000, bears interest at 20%, secured by telephone equipment. $ - $ - $ 8,603 -------------- --------------- ------------ Total Lease Obligations - - 8,603 -------------- --------------- ------------ Notes payable are detailed as follows: Note payable to a corporation for working capital, payments due monthly of $698 through June 2000, bears interest at 11%, uncolateralized. $ 11,208 $ 11,531 $ 18,307 Note payable to a corporation for working capital, payments due monthly of $830 through October 1998, bears interest at 12%, unsecured. 113 105 7,970 F-13 NOTE 4 - Long-Term Liabilities (Continued) September 30, December 31, 1999 1998 1997 -------------- --------------- ------------ (unaudited) Note payable to a corporation for working capital, payments due monthly of $1,087 through January 2000, bears interest at 11%, unsecured. 25,716 25,485 34,377 Note payable (credit agreement) with a production company, interest at 10%, payments of interest only for twelve month period, principal outstanding would be converted to a term loan of no more than 24 months. In October 1999, the debt was terminated and forgiven. 25,000 - - -------------- --------------- ------------ Total Note Payable 62,037 37,121 60,654 -------------- --------------- ------------ Total long term liabilities 251,156 40,714 100,257 -------------- --------------- ------------ Less current portion of: Notes payable - related party 189,119 3,593 31,000 Capital lease obligations - - 3,087 Notes payable 4,050 19,799 25,230 -------------- --------------- ------------ Total current portion 193,169 23,392 59,317 -------------- --------------- ------------ Net Long Term Liabilities $ 57,987 $ 17,322 $ 40,940 ============== =============== ============
Future minimum principal payments on notes payable are as follows: 1999 $ 53,588 2000 161,599 2001 27,918 - --------------- Total notes payable $ 243,105 =============== F-14 LSI Communications, Inc. Notes to the Consolidated Financial Statements September 30, 1999 (unaudited), December 31, 1998 and 1997 NOTE 5 - Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. In these financial statements, assets and liabilities involve reliance on management's estimates. Actual results could differ from those estimates. F-15 LSI Communications, Inc. Notes to the Consolidated Financial Statements September 30, 1999 (unaudited), December 31, 1998 and 1997 NOTE 6 - Commitments and Contingencies The Company is committed for their office facilities. Monthly lease payments are due of $3,300 for a 24 month period beginning May 1, 1999. Future minimum lease payments are as follows at September 30, 1999: 1999 $ 9,900 2000 39,600 2001 16,500 ------------ $ 66,000 NOTE 7 - Related Party Transactions During 1995, a shareholder relative of Craig Hendricks, an officer and director of the Company, advanced $39,000 for working capital. As of September 30, 1999 (unaudited) $3,593 in payments were made to this related party with a balance due at December 31, 1998 and 1997, of $3,593 and $31,000, respectively. NOTE 8 - Software Technology Pursuant to FASB 86, the Company expensed all costs associated with the development of its software product until technological feasibility is reached. At such time the Company capitalizes costs associated with producing the master files. The Company also capitalizes software purchased for internal use. During 1999, a shareholder relative of Craig Hendricks, an officer and director of the Company, advanced $190,000 for working capital. As of September 30, 1999 (unaudited) $7,730, including interest, was paid to this related party with a balance due at September 30, 1999 (unaudited) of $189,119. F-16 LSI Communications, Inc. Notes to the Consolidated Financial Statements September 30, 1999 (unaudited), December 31, 1998 and 1997 NOTE 9 - Reverse Merger Effective November 20, 1998, LSI Communications, Inc. (a public company) entered into an agreement and Plan of Reorganization with Warever, Inc., (a private company). The agreement provides for the merger of the Company into Warever to be treated as a reverse merger, thus making Warever the accounting survivor. Pursuant to the agreement the Company issued 3,000,000 shares of common stock to the shareholders of Warever for 85% of the shares of their Company. Because the historical financial information in these financial statements prior to the reverse merger (November 20, 1998) is that of the accounting acquirer (Warever), a reverse merger adjustment is used on the statement of stockholders' equity to bring the pre-merger equity of Warever up to the consolidated post-merger equity of LSI Communications. The actual shares issued by the Company to the Warever shareholders was 3,000,000 shares. The difference between the 3,000,000 shares issued to the Warever shareholders and the 4,659,496 reverse merger adjustment represents the 1,659,496 shares held by the original pre-merger shareholder of the public company (LSI). The management of the Company resigned and the management and board of Warever filled the vacancy. LSI Communications, Inc. had no assets or liabilities at the time of the merger, but was only a public shell. NOTE 10 - Subsequent Event On October 26, 1999, the contract for the video series featuring Karl Malone was sold. On the date of the sale, the buyer executed a $100,000 promissory note to the production company in order to terminate the agreement with Coaching Institute, Inc. In addition, the buyer executed an agreement with the production company to forgive the $25,000 principal balance due from Coaching Institute, Inc. Besides the above agreements, the buyer agrees to pay cash in the amount of $378,000 to Coaching Institute, Inc. according to the following schedule: At Closing $ 75,600 November 15, 1999 75,600 December 15, 1999 75,600 January 15, 2000 75,600 February 15, 2000 75,600 ------- $378,000 F-17 NOTE 11 - Segment Data For the nine months ended September 30, 1999, the Company had two reportable industry segments: (i) Software Sales and (ii) Training Services. Sales (Net of Accounts) Software $ 96,792 Training 104,034 ---------------- Consolidated $ 200,826 ================ Operating Income (Loss) Software $ (247,662) Training (157,674) ---------------- Consolidated (405,336) Other Income/(expense) (3,483) Interest expense 3,723 ---------------- Net (Loss) before Income Taxes $ (412,542) ================ Accounts Receivable Software $ 6,893 Training 66,165 ---------------- Consolidated $ 73,058 ================ Identifiable Assets Software $ 243,702 Training 144,802 ---------------- Consolidated 388,504 Goodwill 1,311,698 ---------------- Total $ 1,700,202 ================ NOTE 12 - Unaudited Information The information furnished herein was taken from the books and records of the Company without audit. However, such information reflects all adjustments which are, in the opinion of management, necessary to properly reflect the results of the nine months ended September 30, 1999. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year. F-18
LSI Communications, Inc. Pro Forma Consolidated Statement of Operations December 31, 1998 (unaudited) LSI Communications Warever Coaching Institute Pro forma For the For the For the Consolidated Year Ended Year Ended Year Ended Pro forma Balance December 31, December 31, December 31, Adjustments December 31, 1998 1998 1998 dr cr 1998 -------------- ------------- --------------- --------- ---------- ------------ Revenues - 414,009 260,137 - - 674,146 -------------- ------------- --------------- --------- -------- ------------ Cost of Good Sold - 1,356 7,079 - - 8,435 -------------- ------------- --------------- --------- -------- ------------ Gross Profit - 412,653 253,058 - - 665,711 -------------- ------------- --------------- --------- -------- ------------ Selling expenses - 152,289 75,325 - - 227,614 General & Administrative - 276,639 37,583 - - 314,222 -------------- ------------- --------------- --------- -------- ------------ Total Operating Expenses - 428,928 112,908 - - 541,836 -------------- ------------- --------------- --------- -------- ------------ Income/ (Loss) from Operations - (16,275) 140,150 - - 123,875 -------------- ------------- --------------- --------- -------- ------------ Other income/(expenses) - (3,386) (240) - - (3,626) -------------- ------------- --------------- --------- -------- ------------ Net (Loss) - (19,661) 139,910 - - 120,249 ============== ============= =============== ========= ======== ============
F-19 LSI Communications, Inc. Notes to Pro Forma Consolidated Statement of Operations December 31, 1998 NOTE 1 - Summary of Transaction On June 21, 1999, the Company entered into a Plan of Acquisition with Coaching Institute, Inc., a Utah Corporation, wherein the Company issued 2,500,000 shares of common stock for 85,000 shares (85%) of the outstanding common stock of Coaching Institute, Inc. After the acquisition, both companies are surviving with Coaching Institute, Inc. being a majority-owned subsidiary of LSI Communications, Inc. NOTE 2 - Management Assumptions The pro forma consolidated statement of operations assumes that the entities were together as of December 31, 1998 and no adjustments are necessary to reflect a full year of activity. F-20
LSI Communications, Inc. Pro Forma Consolidated Statement of Operations September 30, 1999 (unaudited) LSI Communications Warever Coaching Institute Pro forma For the For the For the Consolidated Year Ended Year Ended Year Ended Pro forma Balance September 30, September 30, September 30, Adjustments September 30 1999 1999 1999 dr 1999 1999 Revenues 96,792 281,899 - - - 378,691 -------------- ------------- --------------- --------- ------- ------------ Cost of Good Sold - 874 28,045 - - 28,919 -------------- ------------- --------------- --------- ------- ------------ Gross Profit - 95,918 253,854 - - 349,772 -------------- ------------- --------------- --------- ------- ------------ Selling expenses - 11,218 288,103 - - 299,321 General & Administrative - 388,092 225,989 - - 614,081 -------------- ------------- --------------- --------- ------- ------------ Total Operating Expenses - 399,310 514,092 - - 913,402 -------------- ------------- --------------- --------- ------- ------------ Income/ (Loss) from Operations - (303,392) (260,238) - - (563,630) -------------- ------------- --------------- --------- ------- ------------ Other income/(expenses) - (2,900) (6,023) - - (8,923) -------------- ------------- --------------- --------- ------- ------------ Net (Loss) - (306,292) (266,261) - - (572,553) ============== ============== =============== ========= ======= =============
F-21 LSI Communications, Inc. Notes to Pro Forma Consolidated Statement of Operations September 30, 1998 NOTE 1 - Summary of Transaction On June 21, 1999, the Company entered into a Plan of Acquisition with Coaching Institute, Inc., a Utah Corporation, wherein the Company issued 2,500,000 shares of common stock for 85,000 shares (85%) of the outstanding common stock of Coaching Institute, Inc. After the acquisition, both companies are surviving with Coaching Institute, Inc. being a majority-owned subsidiary of LSI Communications, Inc. NOTE 2 - Management Assumptions The pro forma consolidated statement of operations assumes that the entities were together as of September 30, 1999 and no adjustments are necessary to reflect a full year of activity. F-22 ITEM 1. INDEX TO EXHIBITS Copies of the following documents are included as exhibits to this Registration Statement pursuant to Item Part III of Form I-A and Item 6 of Part II. - - ----------- --------------------- ---------------------------------------------- Exhibit No. SEC Reference No. Title of Document - - ----------- --------------------- ---------------------------------------------- 2.1 Plan of Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc. - - ----------- --------------------- ---------------------------------------------- 2.2 Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. - - ----------- --------------------- ---------------------------------------------- 3.1 Articles of Incorporation of Connections Marketing Corp. - - ----------- --------------------- ---------------------------------------------- 3.2 Articles of Amendment to the Articles of Incorporation of Connections Marketing Corp. - - ----------- --------------------- ---------------------------------------------- 3.3 Bylaws of Connections Marketing Corp. - - ----------- --------------------- ---------------------------------------------- 10.1 Promissory Note to Lona J. Hendricks ($100,000) - - ----------- --------------------- ---------------------------------------------- 10.2 Promissory Note to Lona J. Hendricks ($40,000) - - ----------- --------------------- ---------------------------------------------- 10.3 Promissory Note to Lona J. Hendricks ($50,000) - - ----------- --------------------- ---------------------------------------------- 10.4 Coaching and Strategic Agreement-8/25/99 - - ----------- --------------------- ---------------------------------------------- 10.5 Coaching and Strategic Agreement-1/6/99 - - ----------- --------------------- ---------------------------------------------- 10.6 Coaching and Strategic Agreement-6/5/99 - - ----------- --------------------- ---------------------------------------------- 10.7 Standard Distribution Provisions--Columbia House Co., and Warever, Inc. - - ----------- --------------------- ---------------------------------------------- 10.8 License Agreement - - ----------- --------------------- ---------------------------------------------- 21.1 Subsidiaries of the Company - - ----------- --------------------- ---------------------------------------------- 27.1 Financial Data Schedule - - ----------- --------------------- ---------------------------------------------- 28 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. REGISTRANT: By: /s/ Craig Hendricks --------------------- Craig Hendricks Chief Executive Officer, President Date 2/10/00 29 EX-2.1 2 LSI COMMUNICATIONS ACQUIRES WAREVER, INC. PLAN OF REORGANIZATION AND ACQUISITION BY WHICH LSI Communications, Inc. (A NEVADA CORPORATION) SHALL ACQUIRE Warever, Inc. (A UTAH CORPORATION) This Plan of Reorganization and Acquisition is made and dated this 20th day of November 1998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Warever, Inc. ("Warever") is a private Utah Corporation. II. RECITALS A. The Capital of the Parties: 1. The Capital of LSI consists of 50,000,000 shares of common voting stock of $001 par value authorized, of which approximately 1,959,579 shall be issued or outstanding at closing. 2. The Capital of Warever consists of 1,000,000 shares of common voting stock of no par value authorized, of which 300,201 shares are issued and outstanding. B. The Background for the Reorganization: 1. Warever has certain software that generates significant annual revenue. Significant interest has been shown concerning the use of this software for distribution by numerous companies and other significant parties. 2. Warever has an interest to be acquired/merged with a public corporation, and 3. LSI wishes to acquire these assets and maintain Warever, Inc., a Utah Corporation, as a majority owned subsidiary to generate revenue for these companies and other significant parties. As required by law, the vote for approval of this definitive Agreement and Reorganization shall be approved by a vote of the holders of a majority of the issued and outstanding shares of LSI, and 4. The Parties contemplate and intend that the acquisition will be a stock for stock transaction; that 85% of the issued and outstanding capital stock of WAREVER shall be acquired by LSI in exchange solely for 3,000,000 shares of LSI voting stock (Exhibit A); that the remaining 15% of the issued and outstanding capital stock of WAREVER shall be available to be acquired by LSI in exchange solely for 2,500,000 shares of LSI voting stock through option agreements (Exhibits B-F); that this transaction qualify as a tax-free reorganization under Section 368(a)(l)(B) of the Internal Revenue Code of 1954, as amended, and related sections thereunder. III. PLAN OF REORGANIZATION A. Reorganization and Acquisition: (1) LSI shall acquire a majority of the Assets, Businesses and Capital Stock of WAREVER, and WAREVER shall become and be a majority-owned subsidiary of LSI, on the terms and conditions which follow and are provided in this Agreement; (2) LSI shall issue to the shareholders of WAREVER, as WAREVER shall direct, an aggregate of 3,000,000 (three million) shares of the common stock of LSI for 85% of the issued and outstanding capital stock of WAREVER (Exhibit A); (3) WAREVER shall issue to LSI options (Exhibits B-F) to acquire the remaining 15% of the issued and outstanding capital stock of WAREVER in exchange solely for 2,500,000 shares of LSI voting stock. B. Transfer of control: The Existing Directors of WAREVER shall remain as the Officers and Directors of the corporation. C. Surviving Corporations: Both Companies shall survive the Reorganization as indicated above, such that after Reorganization, WAREVER shall be a majority- owned subsidiary of LSI. D. Closing/Effective Date: This Plan of Reorganization shall become effective immediately upon approval and adoption by Corporate parties hereto, in the manner provided by the law of its place of incorporation and its constituent corporate documents. E. Further Assurance, Good Faith and Fair Dealing: The directors of each Company shall and will execute and deliver any and all necessary documents, acknowledgements and assurances and to do all things proper to confirm or acknowledge any and all rights, titles and interests created or confirmed herein; and both companies covenant hereby to deal fairly and in good faith with each other and each others shareholders. F. Construction: This Plan of Reorganization and the resulting legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Nevada. G. Representations & Undertakings by WAREVER: WAREVER represents and warrants as follows: (1) The assets held by WAREVER are with liabilities that are reflected in statements to be provided; any obligations are in the usual course of business; and no such contracts or obligations in the usual course of business are liens or other liabilities which, if disclosed, would alter substantially the financial condition of this proposed acquisition herein. (2) There have not been, and prior to the closing date there will not be, any material adverse changes in the financial position of these contracts, except changes arising in the ordinary course of business. (3) WAREVER is not involved in any pending or threatened litigation or governmental investigation or proceeding not reflected in such financial statement or otherwise disclosed in writing to LSI and, to the knowledge of WAREVER, or its holders, no litigation, is pending or threatened against WAREVER. II. REPRESENTATIONS AND UNDERTAKINGS BY LSI: LSI represents and warrants as follows: (1) As of the closing date, the LSI shares to be delivered to the Stockholders will constitute valid and legally issued shares of LSI, fully paid and nonassessable, and will be legally equivalent in all respects to the common stock of LSI issued and outstanding as of the date hereof. (2) The officers of LSI are duly authorized to execute this agreement pursuant to authorization of its Board of Directors. (3) The financial statements of LSI, are true and complete statements, as of that date, of its financial condition, and fairly present the results of its operations for such period; there are no substantial liabilities, either fixed or contingent, not reflected in such financial statements other than contracts or obligations in the usual course of business are liens or other liabilities, which if disclosed, would alter substantially the financial condition of LSI, as reflected in such financial statements. Within 12 months after the reorganization and acquisition takes place, if it is found that there are material liabilities if LSI which were not previously disclosed, which may cause the directors, officers, and/or shareholders to be liable or at risk for liability, or that could adversely affect the performance of the company, Warever will have the option to rescind the acquisition agreement. If recision take place, Warever shareholders will forfeit all shares of LSI stock, and LSI will forfeit all shares of Warever stock. (4) There have not been, and prior to the closing date there will not be, any material adverse changes in the financial position of LSI, except changes arising in the ordinary course of business and this proposed reorganization. (5) To the best knowledge of LSI, its Officers, Directors or Principal Shareholder, LSI is not involved in any pending or threatened litigation or governmental investigation or proceeding not reflected in such financial statements or otherwise disclosed in writing to WAREVER. (6) As of the closing date, LSI will be in good standing as a Nevada corporation with total authorized capital consisting of Fifty Million shares of $0.001 par value common shares. I. Confidentiality: The Parties hereto agree that the information which each intends to impart to the other subsequent to the execution thereof shall not be disclosed to any other third party and each person shall take reasonable precautions to prevent disclosure of any information and know-how to any entity for any use, including but not limited to, commercial use. The parties hereto further agree to keep confidential all proprietary information. The parties furthermore agree to keep confidential any and all names, telephone or telex numbers, and any other matters considered confidential arising from this Agreement. J. Counterpart: This Agreement may be signed by facsimile. Counterpart originals will also be signed by both parties. This Reorganization Agreement is executed on behalf of each company by its duly authorized representatives, and attested to, pursuant to the laws of its respective places of incorporation and in accordance with its constituent documents. LSI Communications, Inc. Warever, Inc. /s/ W.L. Campbell /s/ Craig R. Hendricks ----------------- ---------------------- W.L. Campbell Craig R. Hendricks President and Director President and Director /s/ Fred C. Rahn ----------------- Fred C. Rahn Secretary and Director
Warever, Inc. 3,000,000 2,500,000 5,500,000 Shares Options Shares Allocation of Stock Total 85% of Stock 15% of Stock of Stock & Options Stock Sold From LSI Optioned From LSI From LSI - - ----------------------------------------------------------------------------------------------- Ross Wolfley 15,000 12,750 149,900 2,250 124,916 274,816 Don Robinson 30,000 25,500 299,800 4,500 249,834 549,634 Steve Carlson 100,000 85,000 999,330 15,000 832,775 1,832,105 Craig Hendricks 100,000 85,000 999,330 15,000 832,775 1,832,105 Lona Hendricks 55,201 46,921 551,640 8,280 459,700 1,011,340 - - ----------------------------------------------------------------------------------------------- Total 300,201 255,171 3,000,000 45,030 2,500,000 5,500,000 ======= ======= ========= ====== ========= =========
OPTION AGREEMENT This AGREEMENT IS made and entered into on this 20th day of November 1998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Craig R. Hendricks ("Stockholder") is an individual. C. Warever, Inc. ("Warever") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Warever, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Warever. Stockholder has made no representations or warranties concerning the future value of Warever stock, future earnings of Warever stock, or any other representations concerning Warever, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 100,000 shares of common stock of Warever. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquistion by which LSI Communications, Inc. shall acquire Warever, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2000, Stockholder grants LSI an exclusive right to acquire the remaining 15,000 shares of common stock of Warever, representing all of those shares identified in paragraph II.C. not being part of the 85% exchanged in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc., above. The acquisition price of the 15,000 shares shall be for 832,775 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advice of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Warever; (b) any representatives, agents, officers, employees, or directors of LSI or Warever; or (c ) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines Road, Suite A, Spokane, WA 99206. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph 11.6., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon the delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This Agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ W.L. Campbell /s/ Craig R. Hendricks ----------------- ---------------------- W L Campbell Craig R. Hendricks President and Director OPTION AGREEMENT This AGREEMENT IS made and entered into on this 20th day of November 1998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Steve Carlson ("Stockholder") is an individual. C. Warever, Inc. ("Warever") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Warever, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Warever. Stockholder has made no representations or warranties concerning the future value of Warever stock, future earnings of Warever stock, or any other representations concerning Warever, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 100,000 shares of common stock of Warever. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquistion by which LSI Communications, Inc. shall acquire Warever, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2000, Stockholder grants LSI an exclusive right to acquire the remaining 15,000 shares of common stock of Warever, representing all of those shares identified in paragraph 11.C. not being part of the 85% exchanged in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc., above. The acquisition price of the 15,000 shares shall be for 832,775 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof; this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advice of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Warever; (b) any representatives, agents, officers, employees, or directors of LSI or Warever; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines Road, Suite A, Spokane, WA 99206. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph 11.6., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon the delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This Agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ W.L. Campbell /s/ Steve Carlson ----------------- ----------------- W. L. Campbell Steve Carlson President and Director OPTION AGREEMENT This AGREEMENT IS made and entered into on this 20th day of November 1998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Lona Hendricks ("Stockholder") is an individual. C. Warever, Inc. ("Warever") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Warever, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Warever. Stockholder has made no representations or warranties concerning the future value of Warever stock, future earnings of Warever stock, or any other representations concerning Warever, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 55,201 shares of common stock of Warever. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2000, Stockholder grants LSI an exclusive right to acquire the remaining 8,280 shares of common stock of Warever, representing all of those shares identified in paragraph II.C. not being part of the 85% exchanged in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc., above. The acquisition price of the 8,280 shares shall be for 459,700 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof; this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advice of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Warever; (b) any representatives, agents, officers, employees, or directors of LSI or Warever or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines Road, Suite A, Spokane, WA 99206. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph 11.6., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon the delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This Agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ W. L. Campbell /s/ Lona Hendricks ------------------ ------------------ W. L. Campbell Lona Hendricks President and Director OPTION AGREEMENT This AGREEMENT IS made and entered into on this 20th day of November l998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Don Robinson ("Stockholder") is an individual. C. Warever, Inc. ("Warever") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Warever, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Warever. Stockholder has made no representations or warranties concerning the future value of Warever stock, future earnings of Warever stock, or any other representations concerning Warever, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 30,000 shares of common stock of Warever. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquistion by which LSI Communications, Inc. shall acquire Warever, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2000, Stockholder grants LSI an exclusive right to acquire the remaining 4,500 shares of common stock of Warever, representing all of those shares identified in paragraph 11.C. not being part of the 85% exchanged in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc., above. The acquisition price of the 4,500 shares shall be for 249,834 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof; this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advice of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Warever; (',)any representatives, agents, officers, employees, or directors of LSI or Warever; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to 2815 S. Highland Drive, Salt Lake City, UT 84106. Notices to LSI shall be delivered to W.L. Campbell, 905 North Pines Road, Suite A, Spokane, WA 99206. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph 11.6., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon the delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars (S 100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This Agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ W.L. Campbell /s/ Don Robinson ----------------- ---------------- W.L. Campbell Don Robinson President and Director OPTION AGREEMENT This AGREEMENT IS made and entered into on this 20th day of November 1998, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("L SI") is a public Nevada Corporation. B. Ross Wolfley ("Stockholder") is an individual. C. Warever, Inc. ("Warever") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Warever, Inc. Warever, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Warever, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Warever. Stockholder has made no representations or warranties concerning the future value of Warever stock, future earnings of Warever stock, or any other representations concerning Warever, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 15,000 shares of common stock of Warever. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquistion by which LSI Communications, Inc. shall acquire Warever, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2000, Stockholder grants LSI an exclusive right to acquire the remaining 2,250 shares of common stock of Warever, representing all of those shares identified in paragraph 11.C. not being part of the 35% exchanged in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Warever, Inc., above. The acquisition price of the 2,250 shares shall be for 124,916 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advice of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Warever; (0) any representatives, agents, officers, employees, or directors of LSI or Warever; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: W. L. Campbell, 905 North Pines Road, Suite A, Spokane, WA 99206. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph 11.6., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon the delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This Agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS THEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ W.L. Campbell /s/ Ross Wolfley ----------------- ---------------- W.L. Campbell Ross Wolfley President and Director EX-2.2 3 LSI ACQUIRES COACHING INSTITUTE PLAN OF ACQUISITION BY WHICH LSI Communications, Inc. (A NEVADA CORPORATION) SHALL ACQUIRE Coaching Institute, Inc. (A UTAH CORPORATION) This Plan of Acquisition is made and dated this 21st day of June 1999, by and between the Parties, as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation II. RECITALS A. The Capital of the Parties: 1. The Capital of LSI consists of 50,000,000 shares of common voting stock of $.001 par value authorized, of which approximately 6,072,182 shall be issued or outstanding at closing. 2. The Capital of Coaching Institute consists of 1,000,000 shares of common voting stock of no par value authorized, of which 100,000 shares are issued and outstanding. B. The Background for the Acquisition: 1. Coaching Institute has certain intellectual property and contracts in place that generate significant annual revenue, including a contract to produce a fitness video series with the MVP of the NBA, Karl Malone. Significant interest has been shown concerning the use of Coaching's services by numerous companies and other significant parties. 2. Coaching Institute has an interest to be acquired/merged with a public corporation, and 3. LSI wishes to acquire these assets and maintain Coaching Institute, Inc., a Utah Corporation, as a majority owned subsidiary to generate revenue for these companies and other significant parties. As required by law, the vote for the approval of this definitive Agreement and Reorganization shall be approved by a vote of the holders of a majority of the issued and outstanding share of LSI and 4. The Parties contemplate and intend that the acquisition will be a stock for stock transaction; that 85% of the issued and outstanding capital stock of COACHING INSITUTE shall be acquired by LSI in exchange solely for 2,500,000 shares of LSI voting stock (Exhibit A); that the remaining 15% of the issued and outstanding capital stock of COACHING INSTITUTE shall be available to be acquired by LSI in exchange solely for 2,045,455 shares of LSI voting stock through option agreements (Exhibits B-F); that this transaction qualify as a tax-free reorganization under Section 368(a)(1)(13) of the Internal Revenue Code of 1954, as amended, and related sections thereunder. III. PLAN OF REORGANIZATION A. Reorganization and Acquisition: (1) LSI shall acquire the Assets, Businesses and Capital Stock of COACHING INSTITUTE, and COACHING INSTITUTE shall become and be a majority-owned subsidiary of LSI, on the terms and conditions which follow and are provided in this Agreement; (2) LSI shall issue to the shareholders of COACHING INSTITUTE, as COACHING INSTITUTE shall direct, an aggregate of 2,500,000 (two million five hundred thousand) shares of the common stock of LSI for 85% of the issued and outstanding capital stock of COACHING INSTITUTE (Exhibit A); (3) COACHING INSTITUTE shall issue to LSI options (Exhibits B-F) to acquire the remaining 15% of the issued and outstanding capital stock of COACHING INSTITUTE in exchange solely for 2,045,455 shares of LSI voting stock; B. Transfer of control: The Existing Directors of COACHING INSTITUTE shall remain as the Officers and Directors of the corporation. C. Surviving Corporations: Both Companies shall survive the acquisition as indicated above, such that after acquisition, COACHING INSTITUTE shall be a majority owned subsidiary of LSI. D. Closing/Effective Date: This Plan of Reorganization shall become effective immediately upon approval and adoption by Corporate parties hereto, in the manner provided by the law of its place of incorporation and its constituent corporate documents. E. Further Assurance, Good Faith and Fair Dealing: The directors of each Company shall and will execute and deliver any and all necessary documents, acknowledgements and assurances and to do all things proper to confirm or acknowledge any and all rights, titles and interests created or confirmed herein; and both companies covenant to hereby to deal fairly and in good faith with each other and each others shareholders. F. Construction: This Plan of Reorganization and the resulting legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Nevada. G. Representations & Undertakings by COACHING INSTITUTE: COACHING INSTITUTE represents and warrants as follows: (1) The assets held by COACHING INSTITUTE are with liabilities that are reflected in statements to be provided; any obligations are in the usual course of business; and no such contracts or obligations in the usual course of business are liens or other liabilities which, if disclosed, would alter substantially the financial condition of this proposed acquisition herein. (2) There have not been, and prior to the closing date there will not be, any material adverse changes in the financial position of these contracts, except changes arising in the ordinary course of business. (3) COACHING INSTITUTE is not involved in any pending or threatened litigation or governmental investigation or proceeding not reflected in such financial statement or otherwise disclosed in writing to LSI and, to the knowledge of COACHING INSTITUTE, or its holders, no litigation, is pending or threatened against COACHING INSTITUTE. H. REPRESENTIONS AND UNDERTAKINGS BY LSI: LSI represents and warrants as follows. (1) As of the closing date, the LSI shares to be delivered to the Stockholders will constitute valid and legally issued shares of LSI, fully paid and nonassessable, and will be legally equivalent in all respects to the common stock of LSI issued and outstanding as of the date hereof. (2) The officers of LSI are duly authorized to execute this agreement pursuant to authorization of its Board of Directors. (3) The financial statements of LSI, are true and complete statements, as of that date, of its financial condition, and fairly present the results of its operations for such period; there are no substantial liabilities, either fixed or contingent, not reflected in such financial statements other than contracts or obligations in the usual course of business are liens or other liabilities, which if disclosed, would alter substantially the financial condition of LSI, as reflected in such financial statements. Within 12 months after the reorganization and acquisition takes place, if it is found that there are material liabilities of LSI which were not previously disclosed, which may cause the directors, officers, and/or shareholders to be liable or at risk for liability, or that could adversely affect the performance of the company, Coaching Institute will have the option to rescind the acquisition agreement if recision takes place, Coaching Institute shareholders will forfeit all shares of LSI stock, and LSI will forfeit all shares of Coaching Institute stock. (4) There have not been, and prior to the closing date there will not be, any material adverse changes in the financial position of LSI, except changes arising in the ordinary course of business and this proposed reorganization. (5) To the best knowledge of LSI, its Officers, Directors or Principal Shareholder, LSI is not involved in any pending or threatened litigation or governmental investigation or proceeding not reflected in such financial statements or otherwise disclosed in writing to COACHING INSTITUTE. I. Confidentiality: The Parties hereto agree that the information which each intends to impart to the other subsequent to the execution thereof shall not be disclosed to any other third party and each person shall take reasonable precautions to prevent disclosure of any information and know-how to any entity for any use, including but not limited to, commercial use. The parties hereto further agree to keep confidential all proprietary information. The parties furthermore agree to keep confidential any and all names, telephone or telex numbers, and any other matters considered confidential arising from this Agreement. J. Counterpart: This Agreement may be signed by facsimile. Counterpart originals will also be signed by both parties. This Reorganization Agreement is executed on behalf of each company by its duly authorized representatives, and attested to, pursuant to the laws of its respective places of incorporation and in accordance with its constituent documents. LSI Communications, Inc. Coaching Institute, Inc. /s/ Craig R. Hendricks /s/ Steven E. Carlson - - ---------------------- --------------------- Craig R. Hendricks Steven E. Carlson President and Director Vice-President and Director
EXHIBIT A 85% PURCHASE 15% PURCHASE 15-Jun-99 1-Jan-01 LSI Shares LSI Shares Tot. Min Name Total Shares Percentage Issued Issued LSI Shares - - --------------------------------------------------------------------------------------------------------------- Craig R. Hendricks 42,500 42.50% 1.062,500 869,318 1,931,818 Steven E. Carlson 42,500 42.50% 1.062,500 869,318 1,931,818 Lona J. Hendricks 7,000 7.00% 175,000 143,182 318,182 Rick McAllister 6,000 6.00% 150,000 122,727 272,727 Roger Williams 2,000 2.00% 50,000 40,909 90,909 100,000 2,500,000 2,045,455 4,545,455
EXHIBIT B OPTION AGREEMENT This AGREEMENT IS made and entered into on this l5th day of June 1999, by and between the Parties as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. Craig R. Hendricks ("Stockholder") is an individual. C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Coaching Institute, Inc. Coaching Institute, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Coaching Institute, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Coaching Institute. Stockholder has made no representations or warranties concerning the future value of Coaching Institute stock, future earnings of Coaching Institute stock, or any other representations concerning Coaching Institute, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 42,500 shares of common stock of Coaching Institute. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2001. Stockholder grants LSI an exclusive right to acquire the remaining 6,375 shares of common stock of Coaching Institute, representing all of those shares identified in paragraph II.C. not being part of the 85% exchanged in the Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc., above. The acquisition price of the 6,375 shares shall be for 869,318 shares of the common stock of LSI. F. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principle place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advise of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Coaching Institute; (b) any representatives, agents, officers, employees, or directors of LSI or Coaching Institute; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: 112 West Business Park Drive, Draper, UT 84020. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in Paragraph II. G. above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement L. Complete Agreement. This agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of, and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ Craig R. Hendricks /s/ Craig R. Hendricks ---------------------- ---------------------- Craig R. Hendricks Craig R. Hendricks President and Director EXHIBIT C OPTION AGREEMENT This AGREEMENT IS made and entered into on this 15th day of June 1999, by and between the Parties as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI') is a public Nevada Corporation. B. STEVEN E. CARLSON ("Stockholder") is an individual. C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Coaching Institute, Inc. Coaching Institute, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Coaching Institute, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Coaching Institute. Stockholder has made no representations or warranties concerning the future value of Coaching Institute stock, future earnings of Coaching Institute stock, or any other representations concerning Coaching Institute, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 42,500 shares of common stock of Coaching Institute. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as dictated in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2001. Stockholder grants LSI an exclusive right to acquire the remaining 6,375 shares of common stock of Coaching Institute, representing all of those shares identified in paragraph ll.C. not being part of the 85% exchanged in the Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc., above. The acquisition price of the 6,375 shares shall be for 869,318 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statues of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advise of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Coaching Institute; (1,) any representatives, agents, officers, employees, or directors of LSI or Coaching Institute; or (c) any person other thin his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: 112 West Business Park Drive, Draper, UT 84020. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph II. G., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement L. Complete Agreement. This agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of, and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ Craig R. Hendricks /s/ Steven E. Carlson ---------------------- --------------------- Craig R. Hendricks Steven E. Carlson President and Director EXHIBIT D OPTION AGREEMENT This AGREEMENT IS made and entered into on this 15th day of June 1999, by and between the Parties as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("ISP") is a public Nevada Corporation. B. LONA J. HENDRICKS ("Stockholder") is an individual. C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Coaching Institute, Inc. Coaching Institute, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Coaching Institute, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Coaching Institute. Stockholder has made no representations or warranties concerning the future value of Coaching Institute stock, future earnings of Coaching Institute stock, or any other representations concerning Coaching Institute, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 7,000 shares of common stock of Coaching Institute. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2001. Stockholder grants LSI an exclusive right to acquire the remaining 1,050 shares of common stock of Coaching Institute, representing all of those shares identified in paragraph ILC. not being part of the 85% exchanged in the Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc., above. The acquisition price of the 1,050 shares shall be for 143,182 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statutes of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advise of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Coaching Institute; (b) any representatives, agents, officers, employees, or directors of LSI or Coaching Institute; or (c) any person other than his retained legal attorney. Notices. Notices to Stockholder shall be delivered to _________________ _______________________________________________________________________ Notices to LSI shall be delivered to: 112 West Business Park Drive, Draper, UT 84020. All notices shall he delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph II.G., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon delivery of any or all shares from stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ Craig R. Hendricks /s/ Lona J. Hendricks ---------------------- --------------------- Craig R. Hendricks Lona J. Hendricks President and Director EXHIBIT E OPTION AGREEMENT This AGREEMENT IS made and entered into on this 15~ day of June 1999, by and between the Parties as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. RICRARD McALLISTER ("Stockholder") is an individual. C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Coaching Institute, Inc. Coaching Institute, Inc. is a Utah Corporation, having its principal place of business in Draper, Utah. The only class of stock of Coaching Institute, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Coaching Institute. Stockholder has made no representations or warranties concerning the future value of Coaching Institute stock, future earnings of Coaching Institute stock, or any other representations concerning Coaching Institute, except as are identified herein. C. Stock Ownership. Stockholder is the owner of 6,000 shares of common stock of Coaching Institute. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. D. Option Grant to LSI. For a period of sixty days after January 1, 2001. Stockholder grants LSI an exclusive right to acquire the remaining 900 shares of common stock of Coaching Institute, representing all of those shares identified in paragraph ILC. not being part of the 83% exchanged in the Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc., above. The acquisition price of the 900 shares shall be for 122,727 shares of the common stock of LSL E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statues of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advise of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Coaching Institute; (b) any representatives, agents, officers, employees, or directors of LSI or Coaching Institute; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: 112 West Business Park Drive, Draper, UT 84020. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier; or by facsimile. All notices shall be complete upon delivery H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement. Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement. I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph IIG., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall be due upon delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement. L. Complete Agreement. This agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ Craig R. Hendricks /s/ Richard McAllister ---------------------- ---------------------- Craig R. Hendricks Richard McAllister President and Director EXHIBIT F OPTION AGREEMENT This AGREEMENT IS made and entered into on this l5th day of June 1999, by and between the Parties as identified hereinafter, respectively. I. THE PARTIES A. LSI Communications, Inc. ("LSI") is a public Nevada Corporation. B. ROGER G. WILLIAMS ("Stockholder") is an individual. C. Coaching Institute, Inc. ("Coaching Institute") is a private Utah Corporation. II. IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: A. Identification of Coaching Institute, Inc. Coaching Institute, Inc. is a Utah Corporation, haying its principal place of business in Draper; Utah The only class of stock of Coaching Institute, Inc. is common stock. B. Representations. Stockholder has made no representations to LSI concerning the financial condition of Coaching Institute. Stockholder has made no representations or warranties concerning the future value of Coaching Institute stock, future earnings of Coaching Institute stock, or any other representations concerning Coaching Institute except as are identified herein. C. Stock Ownership. Stockholder is the owner of 2,000 shares of common stock of Coaching Institute. Stockholder will not transfer or assign any of such stock until expiration of this option agreement, except as directed in the Plan of Reorganization and Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute, Inc. D. Option Grant to LSI. For a period of sixty days alter January 1, 2001. Stockholder grants LSI an exclusive right to acquire the remaining 300 shares of common stock of Coaching Institute, representing all of those shares identified in paragraph II.C. not being part of the 8% exchanged in the Plan of Acquisition by which LSI Communications, Inc. shall acquire Coaching Institute Inc., above. The acquisition price of the 300 shares shall be for 40,909 shares of the common stock of LSI. E. Construction. This agreement shall be liberally construed in favor of granting an exclusive option upon the terms specified herein. In furtherance thereof, this Agreement shall be construed in accordance with the laws and statues of the State of Nevada, being the principal place of business of LSI. F. Advise to Seek Legal Counsel. Stockholder has sought and obtained the advise of counsel prior to entering this Agreement or has been strongly advised to obtain legal counsel concerning the advisability of entering this Agreement. In entering this Agreement, Stockholder is not relying upon any statements, representations, or opinions of: (a) any attorneys or counsel for or of LSI or Coaching Institute; (b) any representatives, agents, officers, employees, or directors of LSI or Coaching Institute; or (c) any person other than his retained legal attorney. G. Notices. Notices to Stockholder shall be delivered to ______________ _______________________________________________________________________ Notices to LSI shall be delivered to: 112 West Business Park Drive, Draper, UT 84020. All notices shall be delivered by certified mail with a return receipt requested, by overnight courier, or by facsimile. All notices shall be complete upon delivery. H. Cooperation. Stockholder agrees to fully cooperate with LSI in the event that LSI elects to exercise any rights under this Agreement Stockholder shall take no action which would obstruct the ability of LSI to exercise its rights under this Agreement I. Procedure for Exercising Option. LSI may exercise its rights under this Agreement by giving written notice to the Shareholder in the manner specified in paragraph II.G., above. Such written notice shall be in any reasonable form sufficient to notify Stockholder of the exercising of the option. Full payment shall he due upon delivery of any or all shares from Stockholder to LSI. Upon exercising of any options, Stockholder shall arrange for delivery of existing shares, if any, to LSI within five business days. J. Severability. In the event that any section or paragraph contained herein shall be invalid, unlawful, or unenforceable, the remainder shall be severable, valid, and effective as if such invalid, unlawful, or unenforceable section or paragraph was not contained herein. K. Consideration. In consideration of the Agreements contained herein, LSI is providing the sum of One Hundred Dollars ($100.00) to Stockholder. Stockholder accepts such amount as full and complete consideration for this Agreement L. Complete Agreement. This agreement is the full and complete agreement between the parties. There are no agreements or understandings between the parties which are not contained herein. M. Binding Effect. This Option Agreement shall inure to the benefit of; and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Stockholder may not assign its rights or obligations hereunder without the prior express written consent of LSI in each instance. IN WITNESS WHEREOF, the parties have executed this Agreement upon the day and year first above written. LSI Communications, Inc. Stockholder /s/ Craig R. Hendricks /s/ Richard McAllister ---------------------- ---------------------- Craig R. Hendricks Richard McAllister President and Director EX-3.(I) 4 INCORPORATION OF CONNECTIONS MARKETING CORP. ARTICLES OF INCORPORATION OF CONNECTIONS MARKETING CORP. WHEREAS, the undersigned natural persons acting as incorporators of the corporation under the Nevada Business Corporations Act adopt the following Articles of Incorporation for such corporation. ARTICLE I Name. The name of the corporation (hereinafter called "Corporation") is CONNECTIONS MARKETING CORP. ARTICLE II Period of Duration. The period of duration of the Corporation is perpetual. ARTICLE III Purposes and Powers. The purpose for which this Corporation is organized is to engage in the business of investing in, participating in, and joint venturing in, and acquiring of all forms of investment and businesses and to engage in any and all other lawful business. ARTICLE IV Capitalization. The Corporation shall have the authority to issue 50,000,000 shares of stock having a par value of one mil ($.001). All stock of the Corporation shall be of the same class and shall have the same rights and preferences. Fully paid stock of this Corporation shall not be liable for further call or assessment. The authorized trading shares shall be issued at the discretion of the Directors. ARTICLE V Commencement of Business. The Corporation shall not commence business until at least One Thousand Dollars ($1,000) has been received by the Corporation as consideration for the issuance of its shares. ARTICLE VI Initial Registered Office and Initial Registered Agent. The address of the initial registered office of the Corporation is 2050 Ellis Way, Elko, Nevada 89801, and the initial registered agent of the Corporation at such address is Gateway Enterprises, Inc. ARTICLE VII Directors. The Corporation shall be governed by a Board of Directors consisting of no less than three (3) and no more than nine (9) directors. Directors need not be stockholders in the Corporation but shall be elected by the stockholders of the Corporation. The number of Directors constituting the initial Board of Directors is three (3) and the name and post office address of the person who shall serve as Directors until their successors are elected and qualified are: R. Kenneth Jarrell 4091 Westlake Avenue West Valley City, Utah 84120 Kurtis D. Hughes 2325 Arbor Lane Salt Lake City, Utah 84117 Sharon Lundskog 1168 Sunnyside Avenue Salt Lake City, Utah 84102 ARTICLE VIII Incorporators. The name and post office address of each incorporator is: Kurtis D. Hughes 2325 Arbor Lane Salt Lake City, Utah 84117 ARTICLE IX Preemptive Rights. There shall be no preeemptive right to acquire unissued and/or treasury shares of the stock of the Corporation. ARTICLE X Voting of Shares. Each outstanding share of common stock of the Corporation shall be entitled to one vote on each matter submitted to a vote at the meeting of the stockholders. Each stockholder shall be entitled to vote his or its shares in person or by proxy, executed in writing by such stockholder, or by his duly authorized attorney-in-fact. At each election of Directors, every stockholder entitled to vote in such election shall have the right to vote in person or by proxy the number of shares owned by him or it for as many persons as there are directors to be elected and for whose election he or it has the right to vote, but the shareholder shall have no right to accumulate his or its votes with regard to such election. /s/ Kurtis D. Hughes -------------------- Kurtis D. Hughes STATE OF UTAH ) ) ss COUNTY OF SALT LAKE ) On the 8th day of November, 1984, personally appeared before me Kurtis D. Hughes and duly acknowledged to me that he is the person who signed the foregoing instrument as incorporator and that he has read the foregoing instrument and know the contents thereof and the same is true of his own knowledge except as to those matters upon which he operates on information and belief and as to those matters believes them to be true. /s/ Debbie Hunis ---------------- NOTARY PUBLIC Residing in Salt Lake City, Utah My Commission Expires: July 26, 1987 EX-3.(II) 5 AMENDMENT TO INCORPORATION CONNECTIONS MARKETING ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CONNECTIONS MARKETING CORP. Pursuant to the applicable provisions of the Nevada Business Corporations Act, Connections Marketing Corp. (the "Corporation") adopts the following Articles of Amendment to its Articles of Incorporation by stating the following: FIRST: The present name of the Corporation is Connections Marketing Corp. SECOND: The following amendments to its Articles of Incorporation were adopted by majority vote of shareholders of the corporation on June 17, 1992 in the manner prescribed by Nevada law. 1. Article I is amended to read as follows: Name. The name of the corporation shall be: LSI Communications, Inc. 2. Article IV is hereby amended to read as follows: Capitalization. (a) Common Stock. The corporation shall have the authority to issue 50,000,000 shares of common stock having a par value of $.001. All common stock of the corporation shall be of the same class and shall have the same rights and preferences. Fully paid common stock of this corporation shall not be liable for further call or assessment. The authorized common shares shall be issued at the discretion of the Directors. (b) Preferred Stock. The corporation shall have the authority to issue 5,000,000 shares of preferred stock each having a par value of $.001, with such rights, preferences and designations as to be issued in such series as determined by the Board of Directors of the Corporation. 3. Articles VI is hereby amended to read as follows: Directors. The Corporation shall be governed by a board of directors consisting of no less than one person. Directors need not be stockholders in the corporation but shall be elected by the stockholders of the Corporation unless appointed by other directors to fill a vacancy on the Board. 4. Article XI is hereby added as follows: ARTICLE XI Liability of Directors and Officers. No director or officer shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing sentence, a director or officer shall be liable to the extent provided by applicable law, (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of NRS 78.300. The provisions hereof shall not apply to or have any effect on the liability or alleged liability of any officer or director of the Corporation for or with respect to any acts or omissions of such person occurring prior to such amendment. 5. The Corporation has effectuated a 1 for 9 reverse stock split of its shares of common stock outstanding as of May 15, 1992 decreasing said shares from 10,250,000 shares to 1,138,839 shares. Said reverse split to be effective with the commencement of business on August 3, 1992. THIRD: The number of shares of the Corporation outstanding and entitled to vote at the time of the adoption of said amendment was 10,250,000. FOURTH: The number of shares voted for such amendments was 9,449,200 (93%) and the number voted against such amendment was -0-. DATED this 30th day of July, 1992. CONNECTIONS MARKETING CORP. By: /s/ Michael Lee ------------------- Michael Lee, President/Secretary VERIFICATION STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The undersigned being first duly sworn, deposes and states: that the undersigned is the Secretary of Connections Marketing Corp. That the undersigned has read the Articles of Amendment and knows the contents thereof and that the same contains a truthful statement of the Amendment duly adopted by the sole director and stockholders of the Corporation. /s/ Michael Lee -------------------- Michael Lee, Secretary STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) Before me the undersigned Notary Public in and for the said County and State, personally appeared the President and Secretary of Connections Marketing Corp., a Nevada corporation, and signed the foregoing Articles of Amendment as their own free and voluntary acts and deeds pursuant to a corporate resolution for the uses and purposes set forth. IN WITNESS WHEREOF, I have set my hand and seal this 30th day of July, 1992. /s/ Thomas G. Kimble ------------------------------ NOTARY PUBLIC, residing at Salt Lake City, Utah My Commission Expires: November 1, 1993 - - ---------------------- EX-3.3 6 BYLAWS OF CONNECTIONS MARKETING CORP BY-LAWS OF CONNECTIONS MARKETING CORP. ARTICLE I. OFFICES The principal office of the corporation in the State of Nevada shall be located in the City of Elko, County of Elko. The corporation may have such other offices, either within or without the State Of Nevada as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE II. SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held on the 15th day in the month of May in each year, beginning with the year 1985, at the hour of 3:00 o'clock P.M., for the purpose of electing Directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State Of Nevada, such meeting shall be held on the next succeeding business day. If the election of Directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as conveniently may be. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at the request of the holders of not less than ten percent (l0%) of all the outstanding shares of the corporation entitled to vote at the meeting. SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State Of Nevada unless otherwise prescribed by statute, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place either within or without the State of Nevada, unless otherwise prescribed by statute, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation in the State of SECTION 4. Notice of Meeting. Written notice stating the place, day and hour of the meeting and, in case of special meeting, the purpose or purposes for which the meeting is called, shall unless otherwise prescribed by statute, be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the secretary, or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of share-holders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, ten (10) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceeding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty (50) days and, in case of a meeting of shareholders, not less then ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or a vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. SECTION 7. Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after twelve (12) months from the date of its execution, unless otherwise provided in the proxy. SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one (1) vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the By-Laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the corporation shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. SECTION 11. Informal Action by Shareholders. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting, if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III. BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the corporation shall be managed by its Board of Directors. SECTION 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be three (3). Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified. SECTION 3. Regular Meetings. The Board of Directors shall be held without other notice than this By-Law immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION 4. REGULAR MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place for holding any special meeting of the Board of Directors called by them. SECTION 5. Notice. Notice of any special meeting shall be given at least five (5) days previously thereto by written notice delivered personally or mailed to each director at his business address, or by telegram. If mailed1 such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. SECTION 6. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors but, if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. SECTION 7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 8. Action Without A Meeting. Any action that may be taken by the Board of Directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so to be taken, shall be signed before such action by all of the Directors. SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors, unless otherwise provided by law. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the Board of Directors for a term of office continuing only until the next election of Directors by the shareholders. SECTION 10. Compensation. By resolution of the Board of Directors, each Director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore. SECTION 11. Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action. ARTICLE IV. OFFICERS SECTION 1. Number. The officers of the corporation shall be a President, a Vice President, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election And Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent may be removed by the Board of Directors whenever, in its judgment, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. President. The President shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 6. Vice President. In the absence of the President or in event of his death, inability or refusal to act, the Vice President shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (3) sign with the President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time be assigned to him by the President or the Board of Directors. SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article V of these By-Laws; and (c) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. SECTION 9. Salaries. The salaries of the officers shall. be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money1 notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do, and sealed with the corporate seal. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefore upon such terms arid indemnity to the corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. ARTICLE VII. FISCAL YEAR The fiscal year of the corporation shall begin on the first day of May and end on the last day of April in each year. ARTICLE VIII. DIVIDENDS The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE IX. CORPORATE SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the word "Corporate Seal". ARTICLE X. WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of these By-Laws or under the Articles of Incorporation or under the provisions of the Utah Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XI. AMENDMENTS These By-Laws may be altered, amended or repealed and new By-Laws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors. CONNECTIONS MARKETING CORP. By: /s/ Kurtis D. Hughes ----------------------- President . EX-10.1 7 PROMISSORY NOTE - LOAN HENDRICKS ($100,000) PROMISSORY NOTE For consideration received, Coaching Institute, Inc., 112 West Business Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks (Lender) according to the following terms: Principal amount: $100,000 Annualized Interest Rate: 9.75% Term: 1 year Payment Terms: Interest only with balloon payment due on or before month 12. Date of Loan: August 1, 1999 This promissory note is secured by the general credit of Coaching Institute, Inc., and at the option of the Lender, a security interest may be filed securing the loan with the assets of the borrower. /s/ Craig J. Hendricks, Pres. /s/ Lona J. Hendricks ----------------------------- --------------------- Coaching Institute, Inc. Lender Borrower EX-10.2 8 PROMISSORY NOTE - LOAN HENDRICKS ($40,000) PROMISSORY NOTE For consideration received, Coaching Institute, Inc., 112 West Business Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks (Lender) according to the following terms: Principal amount: $40,000 Annualized Interest Rate: 9.75% Term: 3 years Payment Terms: Monthly payments of principal and interest amortized over 36 months. Date of Loan: April 1, 1999 This promissory note is secured by the general credit of Coaching Institute, Inc., and at the option of the Lender, a security interest may be filed securing the loan with the assets of the borrower. /s/ Craig J. Hendricks, Pres. /s/ Lona J. Hendricks ----------------------------- --------------------- Coaching Institute, Inc. Lender Borrower EX-10.3 9 PROMISSORY NOTE - LOAN HENDRICKS ($50,000) PROMISSORY NOTE For consideration received, Coaching Institute Inc, 112 West Business Park Drive, Draper, UT 84020 (Borrower) agrees to pay Lona J. Hendricks (Lender) according to the following terms: Principal amount: $50,000 Annualized Interest Rate: 9.75% Term: 1 year Payment Terms: Monthly payments of interest only with balloon payment due on or before month 12. Date of Loan: July 1,1999 This promissory note is secured by the general credit of Coaching Institute, Inc., and at the option of the Lender, a security interest may be filed securing the loan with the assets of the borrower. /s/Craig R. Hendricks /s/Lona J. Hendricks --------------------- -------------------- Coaching Institute, Inc. Lender Borrower EX-10.4 10 COACHING & STRATEGIC AGREEMENT (8/25/99 COACHING AND STRATEGIC AGREEMENT This agreement is entered into this 25th day of August, 1999 between Coaching Institute, Inc., a Utah company with its principal place of business located at 112 West Business Park Drive, Draper, UT 84020, and SDI LeGrand Publishing, Inc., a Florida company with its principal place of business located at 9799 Old St. Augustine Rd., Jacksonville, FL 32257 RECITALS 1. Coaching Institute is engaged in the business of providing coaching services. 2. [Company] requires the services from Coaching Institute that are set forth in this agreement ("Services"). 3. Coaching Institute desires to provide Services to [Company] and [Company] desires to receive Services from Coaching Institute. OPERATIVE PROVISIONS 1. ASSOCIATION. Coaching Institute and [Company] hereby agree to be associated with each other on and subject to the terms and conditions herein. It is the intention of Coaching Institute and [Company] to focus on their respective areas of business and technological expertise, and to enhance their own and each other's business opportunities by associating together to offer solutions to their customers whenever and wherever possible. 2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties that as to their relationship with each other they are independent contractors. Nothing in this Agreement shall be construed as creating any partnership, agency, joint venture, or other joint obligation, and both parties agree not to make any representations to the contrary. Any conduct in which a party engages in connection with or in the performance of this Agreement shall be solely in its capacity as an independent contractor, and nothing in this Agreement shall be construed to the contrary. The parties agree that, as independent contractors, they do not have authority to sign contracts, notes, or obligations, or to purchase, acquire, or dispose of any property for or on behalf of the other party or any of its customers, and shall only have authority to perform those services specifically described herein. Each party is solely responsible and liable for all labor and expenses in connection with its services performed hereunder, and for any and all damages which may be occasioned on account of the operation of this Agreement, whether the same be for personal injuries or damages of any other kind. 3. TAX LIABILITY. Each party assumes full responsibility for the payment of its respective taxes, assessments, or contributions, whether state or federal, as to compensation paid and/or the services performed under this Agreement. Each party also agrees to pay any and all gross receipts, compensation, transaction, sales, use, or other taxes or assessments of whatever nature or kind levied or assessed as a consequence of the compensation paid and/or services performed under this agreement. 4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains with the creator of the property. 5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties agree to the following: A. Coaching Institute responsibilities 1. Coaching Institute will develop the [Company] Coaching Program and associated curriculum. The curriculum will be focused on the sales and marketing of [Company] business opportunity, building communication skills, and personal and business development. Professional skills assessment will be included. 2. Coaching Institute will hire and train appropriately skilled coaches and mentors. 3. Coaching Institute will hire and train salespeople that will appropriately represent the [Company] organization. 4. Coaching Institute will provide inbound and outbound call center services to market the coaching program to the [Company] students/customers. 5. Coaching Institute is responsible for maintaining its phone system, phone lines, computer equipment, office supplies, office space, and other materials and assets necessary to perform its function to adequately support and market services to the [Company] customer base. 6. To maintain or assist in the maintenance of the [Company] database B. [Company] responsibilities: 1. To promote and sell the [Company] coaching program in all its seminars, workshops, and other venues. 2. To work in conjunction with Coaching Institute to assure that the expectations regarding the quality and content of the coaching program are met. 3. To provide Coaching Institute with customer names and lists of seminar attendees and other interested parties on a regular basis for the intent of marketing the coaching program to them. 4. To provide materials, including copies of software packages sold, training videos, and other relevant information for the coaching staff. 5. To process all [Company] coaching sales through its merchant account. 6. To compensate Coaching Institute according to the financial arrangements contained herein and to pay on a schedule according to, or similar to, the "general procedures guidelines" provided. C. Mutual Responsibilities 1. It is understood that an undertaking of this magnitude, with the possibility of thousands of individuals contacted, enrolled, and spoken with, there will inevitably be some individuals who will be displeased with some aspect of the service. Therefore, if there are any concerns regarding representations made, the quality of service provided, or the manner in which a customer is treated, both parties agree to notify the other immediately and use their combined best efforts to rectify the situation. Customer satisfaction is the ultimate goal. 6. PRODUCTS A. Personal Coaching - Coaching will be considered as contact between Coaching Institute and individuals enrolled in the process of coaching. Coaching will be sold in blocks of sessions of 8, 10, or 12 with coaching resources available for up to a year. The coaching may be sold by either Coaching Institute or the company and it may also be bundled into or with the company's regular products. B. Symposium - Symposiums will be considered as one day or more of workshop type training followed by at least 8 sessions of coaching. Pricing and content to be negotiated at later date. C. Technical Package - The Technical Package will include but is not limited to the following components, laptop computer, digital camera, web site, contact management software, SDI LeGrand materials package and Personal Coaching. 7. COMPENSATION. - The following are the retail values associated with the products described in paragraph 6. A. Personal Coaching - The personal coaching program is valued at $1,495.00 - $2,995, depending on the duration and content of the coaching program. [Company] agrees to compensate Coaching Institute as follows for each program sold: Coaching Institute SDI - LeGrand SDI LeGrand Sale: 50% 50% Coaching Institute Sale: 70% 30% B. Symposium pricing content and duration to be considered at later date. C. Technical Package pricing and content to be considered at later date. 8. MUTUAL EXCLUSIVITY AND NON-COMPETE - Throughout the duration of this agreement, [Company] grants Coaching Institute, Inc. status as its sole provider of coaching services. [Company] agrees not to develop any similar or competing program and also agrees not to utilize other third-party coaching providers through the duration of this agreement. 9. TERM OF AGREEMENT- This agreement and the association hereunder shall commence on the effective date hereof and shall continue for a period of 1 year. Upon the completion of the one-year term of the agreement, the agreement will automatically extend an additional 2 years unless notification is received according to the terms in paragraph 10. 10. TERMINATION - Either party may terminate this Agreement on the expiration date by giving written notice to the other party at least ninety (90) days prior to the expiration of the Agreement. The premise of this arrangement is that it will continue so long as it is mutually beneficial 11. RESTRICTIVE COVENANTS - Each party understands that the other party has disclosed and will disclose certain knowledge concerning the other party's trade secrets, proprietary information, business and marketing methods, procedures, products, and services, including, but not limited to, names of customers, clients, and suppliers, and other things which constitute the property of the other party and which enable the other party to compete successfully in its business. In consideration of the parties association with each other and these disclosures, each party agrees as follows: A. Confidential Information; Covenant of Non-Disclosure; Trade Secrets--Proprietary Information. Each party covenants that it shall treat all such matters relating to the other party's business as confidential and proprietary information entrusted to said party solely for accomplishing the purposes of this agreement, and shall not at any time, either during or after the term of this Agreement, either directly or indirectly, use, divulge, disclose, or communicate to any person, firm, or corporation any information concerning any matters affecting or relating to the business of the other party, including without limiting the generality of the foregoing, any of its customers, clients, suppliers, the prices it obtains or has obtained for the services it renders and/or the products it sells, or any other information, written or otherwise, concerning the business of the other party, the manner of operation, plans processes, products, employees, or other data without regard to whether all the foregoing will be deemed confidential, material, or important. All of the terms contained anywhere in this Agreement shall remain in full force and effect from the effective date hereof indefinitely and perpetually thereafter, notwithstanding the termination of the association between the parties and regardless of the reason for such termination. 12. INDEMNIFICATION. The party to whom a customer is referred shall indemnify the referring party against all liability or loss, and against all claims or actions based upon or arising out of the relationship between the referred customer and the party to whom the customer was referred pursuant to the terms of this Agreement, or based upon any violation of any statute, ordinance, code, or regulation, and the defense of any such claims or actions. Each party shall also indemnify the other against all liability and loss in connection with, and shall assume full responsibility for, payment of their respective federal, state, and local taxes, contributions, or assessments imposed or required as a result of this Agreement. 13. GENERAL PROVISIONS A. Remedies. The rights and remedies of any of the parties hereto shall not be exclusive. In general, the respective rights and obligation hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to or shall limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other party for a breach or threatened breach of any provision hereof, it being the intention of this Paragraph to make clear the agreement of the parties that the respective rights and obligations of the parties hereunder shall be enforceable in equity as well as at law or otherwise. B. Governing Law, Jurisdiction, and Venue. This Agreement is governed by the laws of the State of Utah in all respects, and the parties hereto consent to jurisdiction and venue in the United States Court, District of Utah and/or the Courts of Salt Lake County, State of Utah, as applicable. C. Entire Agreement. This instrument sets forth the entire agreement among the parties and supersedes all prior agreements, whether written or oral. All parts of Section titles or Paragraph captions of this Agreement are for convenience only, and shall not be deemed part of this Agreement, and in no way define, limit, augment, extend, or describe the scope, content, or intent of any part or parts of this Agreement. D. Binding Effect and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their representatives, successors, and assigns; provided, however, that this provision shall not be construed as permitting assignment, substitution, delegation, or other transfer of rights or obligations by either party except upon the prior written consent of both parties hereto. E. Waiver or Forbearance Unless otherwise indicated herein, failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall not constitute a waiver of any such breach or of any other covenant, agreement, term, or condition. Any party, by notice delivered in the manner provided in this Agreement, may, but shall be under no obligation to waive any rights or any conditions to its obligation hereunder, or any duty, obligation, or covenant of any other party. No waiver shall affect or alter the remainder of this Agreement, but each and every other covenant, agreement, term and condition hereof shall continue in full force and effect with respect to any other then existing or subsequently occurring breach. To be effective, any waiver must be signed by both parties hereto. F. Severability. In the event that any condition, covenant, or other provision herein contained is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect any other covenant or condition herein contained. If such condition, covenant, or other provision shall be deemed invalid due to is scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. The parties have executed this Coaching and Strategic Agreement effective the date and year set forth above. /s/ Craig R. Hendricks /s/ David A. Reecher ---------------------- -------------------- Craig R. Hendricks Name David A. Reecher President Title President and CEO Coaching Institute, Inc. SDI LeGrand Publishing, Inc. Additional Items (hand written) A. SDI to approve final coaching program prior to first training program. B. SDI to also approve "Coaching Institute's" SA Program prior to contact with SDI customers. EX-10.5 11 COACHING & STRATEGIC AGREEMENT (1/6/99) COACHING AND STRATEGIC AGREEMENT This agreement is entered into this 6th day of January, 1999 between Coaching Institute, Inc., a Utah company with its principal place of business located at 112 West Business Park Drive, Draper, UT 84020, and RE Marketing, a California company with its principal place of business located at 11330 Sunrise Park Drive, #C, Rancho Cordova, CA. RECITALS 1. Coaching Institute is engaged in the business of providing coaching services. 2. RE Marketing requires the services from Coaching Institute that are set forth in this agreement ("Services"). 3. Coaching Institute desires to provide Services to RE Marketing and RE Marketing desires to receive Services from Coaching Institute. NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows: OPERATIVE PROVISIONS 1. ASSOCIATION. Coaching Institute and RE Marketing hereby agree to be associated with each other on and subject to the terms and conditions herein. It is the intention of Coaching Institute and RE Marketing to focus on their respective areas of business and technological expertise, and to enhance their own and each other's business opportunities by associating together to offer solutions to their customers whenever and wherever possible. 2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties that as to their relationship with each other they are independent contractors. Nothing in this Agreement shall be construed as creating any partnership, agency, joint venture, or other joint obligation, and both parties agree not to make any representations to the contrary. Any conduct in which a party engages in connection with or in the performance of this Agreement shall be solely in its capacity as an independent contractor, and nothing in this Agreement shall be construed to the contrary. The parties agree that, as independent contractors, they do not have authority to sign contracts, notes, or obligations, or to purchase, acquire, or dispose of any property for or on behalf of the other party or any of its customers, and shall only have authority to perform those services specifically described herein. Each party is solely responsible and liable for all labor and expenses in connection with its services performed hereunder, and for any and all damages which may be occasioned on account of the operation of this Agreement, whether the same be for personal injuries or damages of any other kind. 3. TAX LIABILITY. Each party assumes full responsibility for the payment of its respective taxes, assessments, or contributions, whether state or federal, as to compensation paid and/or the services performed under this Agreement. Each party also agrees to pay any and all gross receipts, compensation, transaction, sales, use, or other taxes or assessments of whatever nature or kind levied or assessed as a consequence of the compensation paid and/or services performed under this agreement. 4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains with the creator of the property. 5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties agree to the following: A. Coaching Institute responsibilities 1. Coaching Institute will develop the RE Marketing Coaching Program and associated curriculum. The curriculum will be focused on the sales and marketing of real estate, building communication skills, and personal and business development. Professional skills assessment will be included. 2. Coaching Institute will hire and train appropriately skilled coaches and mentors. 3. Coaching Institute will hire and train salespeople that will appropriately represent the RE Marketing organization. 4. Coaching Institute will provide inbound and outbound call center services to market the coaching program to RE Marketing seminar attendees - non-buyers. 5. Coaching Institute is responsible for maintaining its phone system, phone lines, computer equipment, office supplies, office space, and other materials and assets necessary to perform its function to adequately support and market services to the RE Marketing customer base. 6. To maintain or assist in the maintenance of the RE Marketing database 7. To forward all coaching tuition moneys to RE Marketing. 8. To include a coaching evaluation and feedback form with every program. All completed copies of this form, as well as any testimonial letters, will be forwarded to RE Marketing. B. RE Marketing responsibilities: 1. To promote and sell the RE Marketing coaching program in all its seminars, workshops, and other venues. 2. To work in conjunction with Coaching Institute to assure that the expectations regarding the quality and content of the coaching program are met. 3. To provide Coaching Institute with customer names and lists of seminar attendees and other interested parties on a regular basis for the intent of marketing the coaching program to them. 4. To provide materials, including copies of software packages sold, training videos, and other relevant information for the coaching staff. 5. To process all RE Marketing coaching sales through its merchant account or through its financing or lease program. 6. To compensate Coaching Institute according to the financial arrangements contained herein and to pay on a schedule according to, or similar to, the "general procedures guidelines" provided. C. Mutual Responsibilities 1. It is understood that an undertaking of this magnitude, with the possibility of thousands of individuals contacted, enrolled, and spoken with, there will inevitably be some individuals who will be displeased with some aspect of the service. Therefore, if there are any concerns regarding representations made, the quality of service provided, or the manner in which a customer is treated, both parties agree to notify the other immediately and use their combined best efforts to rectify the situation. Customer satisfaction is the ultimate goal. 6. COMPENSATION. - The retail value associated with the coaching program is $1,495.00 - $1,995. RE Marketing agrees to compensate Coaching Institute as follows for each program or package sold. The percentage of payment to Coaching Institute will be made after the credit card processing fee is deducted. Bundled or Sold by R.E.M. Sold by Coaching Institute 55% 70% A. Coaching Packages - Initial package offerings to be sold are detailed in Exhibit A. Coaching packages may be changed from time to time with mutual approval from Coaching Institute and RE Marketing. B. Separate Product Sales - When RE Marketing products are sold separately by Coaching Institute, and not in conjunction with a coaching program, Coaching Institute will receive 40% of the gross sale amount. These individual product sales will be included on the weekly reconciliation report with regular coaching package sales. 7. MUTUAL EXCLUSIVITY AND NON-COMPETE - Throughout the duration of this agreement, REM grants Coaching Institute, Inc. status as its sole provider of coaching services. REM agrees not to develop any similar or competing program and also agrees not to utilize other third-party coaching providers through the duration of this agreement. 8. TERM OF AGREEMENT- This agreement will be subject to a 120-day trial period. Either party may terminate this Agreement within 30 days of the termination of the trial period. After the completion of the trial period, and subject to the provisions for termination contained herein, this Agreement and the association hereunder shall commence on the effective date hereof and shall continue for a period of 1 year. Upon the completion of the 1-year term of the agreement, the agreement will automatically extend an additional 2 years unless notification is received according to the terms in paragraph 9. 9. TERMINATION - Either party may terminate this Agreement on the expiration date by giving written notice to the other party at least ninety (90) days prior to the expiration of the Agreement. The premise of this arrangement is that it will continue so long as it is mutually beneficial 10. RESTRICTIVE COVENANTS - Each party understands that the other party has disclosed and will disclose certain knowledge concerning the other party's trade secrets, proprietary information, business and marketing methods, procedures, products, and services, including, but not limited to, names of customers, clients, and suppliers, and other things which constitute the property of the other party and which enable the other party to compete successfully in its business. In consideration of the parties association with each other and these disclosures, each party agrees as follows: A. Confidential Information; Covenant of Non-Disclosure; Trade Secrets--Proprietary Information. Each party covenants that it shall treat all such matters relating to the other party's business as confidential and proprietary information entrusted to said party solely for accomplishing the purposes of this agreement, and shall not at any time, either during or after the term of this Agreement, either directly or indirectly, use, divulge, disclose, or communicate to any person, firm, or corporation any information concerning any matters affecting or relating to the business of the other party, including without limiting the generality of the foregoing, any of its customers, clients, suppliers, the prices it obtains or has obtained for the services it renders and/or the products it sells, or any other information, written or otherwise, concerning the business of the other party, the manner of operation, plans processes, products, employees, or other data without regard to whether all the foregoing will be deemed confidential, material, or important. Upon termination of this agreement, or when this agreement becomes null and void, each party shall inform the other party as to what material and information is confidential. The named material and information shall not be used in any way by the other party and, if possible, shall be surrendered upon request. 11. INDEMNIFICATION. The party to whom a customer is referred shall indemnify the referring party against all liability or loss, and against all claims or actions based upon or arising out of the relationship between the referred customer and the party to whom the customer was referred pursuant to the terms of this Agreement, or based upon any violation of any statute, ordinance, code, or regulation, and the defense of any such claims or actions. Each party shall also indemnify the other against all liability and loss in connection with, and shall assume full responsibility for, payment of their respective federal, state, and local taxes, contributions, or assessments imposed or required as a result of this Agreement. 12. GENERAL PROVISIONS A. Remedies. The rights and remedies of any of the parties hereto shall not be exclusive. In general, the respective rights and obligation hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to or shall limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other party for a breach or threatened breach of any provision hereof, it being the intention of this Paragraph to make clear the agreement of the parties that the respective rights and obligations of the parties hereunder shall be enforceable in equity as well as at law or otherwise. B. Governing Law, Jurisdiction, and Venue. This Agreement is governed either by the laws of the State of Utah or the State of California. If action is brought by RE Marketing, this agreement will be governed by the State of Utah, with jurisdiction and venue in the United States Court, District of Utah and/or the Courts of Salt Lake County, State of Utah. If action is brought by Coaching Institute, this agreement shall be governed by the State of California, with jurisdiction and venue in the United States Court, the corresponding District and/or County Courts where RE Marketing is located. C. Entire Agreement. This instrument sets forth the entire agreement among the parties and supersedes all prior agreements, whether written or oral. All parts of Section titles or Paragraph captions of this Agreement are for convenience only, and shall not be deemed part of this Agreement, and in no way define, limit, augment, extend, or describe the scope, content, or intent of any part or parts of this Agreement. D. Binding Effect and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their representatives, successors, and assigns; provided, however, that this provision shall not be construed as permitting assignment, substitution, delegation, or other transfer of rights or obligations by either party except upon the prior written consent of both parties hereto. E. Waiver or Forbearance Unless otherwise indicated herein, failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall not constitute a waiver of any such breach or of any other covenant, agreement, term, or condition. Any party, by notice delivered in the manner provided in this Agreement, may, but shall be under no obligation to waive any rights or any conditions to its obligation hereunder, or any duty, obligation, or covenant of any other party. No waiver shall affect or alter the remainder of this Agreement, but each and every other covenant, agreement, term and condition hereof shall continue in full force and effect with respect to any other then existing or subsequently occurring breach. To be effective, any waiver must be signed by both parties hereto. F. Severability. In the event that any condition, covenant, or other provision herein contained is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect any other covenant or condition herein contained. If such condition, covenant, or other provision shall be deemed invalid due to is scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. The parties have executed this Coaching and Strategic Agreement effective the date and year set forth above. /s/ Craig R. Hendricks /s/ Roger Butcher ---------------------- ----------------- Craig R. Hendricks Roger Butcher President President Coaching Institute, Inc. RE Marketing Exhibit A Roger Butcher Coaching Programs Package #1 Intensive 8-Session personalized Roger Butcher Real Estate Coaching Program msrp $1,495.00 -Includes Professional Sales Assessment msrp $ 199.00 -Also includes Roger Butcher Real Estate Master Series Study Guide msrp $ 89.95 --------- Total Value $1,783.95 Special package price: $1,495.00 Package #2 Powerful 10-Session personalized Roger Butcher Real Estate Coaching Program msrp $1,695.00 -Includes Professional Sales Assessment $ 199.00 -Also includes Roger Butcher Real Estate Master Series Study Guide $ 89.95 --------- Super Bonus Pack Including the following: -Master series 16 cassette sales training course $ 259.95 -Personal Brochure Design Kit $ 49.95 -Postcard Marketing System $ 99.95 -Working with an Agent Video $ 49.95 -Pricing to Sell for Top Dollar Video $ 49.95 -Listing Visual Presentation Video $ 49.95 -Listing Visual Presentation (39 color pp) $ 60.00 -Counselor "Sold" Folder $ 24.95 -Power Letters Book & Computer Disc $ 125.00 -14 page personal Web Site Design $ 795.00 --------- Total Value $3,548.60 Special Package Price $1,795.00 Package #3 Expanded 12-Session personalized Roger Butcher Real Estate Coaching Program msrp $1,995.00 -Includes Professional Sales Assessment $ 199.00 -Also includes Roger Butcher Real Estate Master Series Study Guide $ 89.95 Super Bonus Pack $1,570.00 Delux Career Mega Pack Including the following: -Dialogue Memory Flashcards $ 45.95 -Absentee Owner Video $ 49.95 -Expired Listing Video $ 49.95 -Personal Brochure Design Video $ 49.95 -Prospect & List for Sale by Owners Video $ 49.95 -Variable Price Ranging Video $ 49.95 -Personal Assistant Program (6 cassettes) $ 89.95 --------- Total Value $4,239.60 Special Package Price $1,995.00 /s/ Craig R. Hendricks /s/ Roger Butcher - - ---------------------- ----------------- Craig R. Hendricks Roger Butcher President President Coaching Institute, Inc. Real Estate Marketing EX-10.6 12 COACHING & STRATEGIC AGREEMENT (6/5/99) COACHING AND STRATEGIC AGREEMENT This agreement is entered into this 5th day of June, 1999 between Coaching Institute, Inc., a Utah company with its principal place of business located at 112 West Business Park Drive, Draper, UT 84020, and Automation Quest, a Utah company with its principal place of business located at 7231 South 900 East, Suite 700, Salt Lake City, UT 84047. RECITALS 1. Coaching Institute is engaged in the business of providing coaching services. 2. Automation Quest requires the services from Coaching Institute that are set forth in this agreement ("Services"). 3. Coaching Institute desires to provide Services to Automation Quest and Automation Quest desires to receive Services from Coaching Institute. NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows: OPERATIVE PROVISIONS 1. ASSOCIATION. Coaching Institute and Automation Quest hereby agree to be associated with each other on and subject to the terms and conditions herein. It is the intention of Coaching Institute and Automation Quest to focus on their respective areas of business and technological expertise, and to enhance their own and each other's business opportunities by associating together to offer solutions to their customers whenever and wherever possible. 2. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties that as to their relationship with each other they are independent contractors. Nothing in this Agreement shall be construed as creating any partnership, agency, joint venture, or other joint obligation, and both parties agree not to make any representations to the contrary. Any conduct in which a party engages in connection with or in the performance of this Agreement shall be solely in its capacity as an independent contractor, and nothing in this Agreement shall be construed to the contrary. The parties agree that, as independent contractors, they do not have authority to sign contracts, notes, or obligations, or to purchase, acquire, or dispose of any property for or on behalf of the other party or any of its customers, and shall only have authority to perform those services specifically described herein. Each party is solely responsible and liable for all labor and expenses in connection with its services performed hereunder, and for any and all damages which may be occasioned on account of the operation of this Agreement, whether the same be for personal injuries or damages of any other kind. 3. TAX LIABILITY. Each party assumes full responsibility for the payment of its respective taxes, assessments, or contributions, whether state or federal, as to compensation paid and/or the services performed under this Agreement. Each party also agrees to pay any and all gross receipts, compensation, transaction, sales, use, or other taxes or assessments of whatever nature or kind levied or assessed as a consequence of the compensation paid and/or services performed under this agreement. 4. INTELLECTUAL PROPERTY. Ownership of all intellectual property remains with the creator of the property. 5. BUSINESS RELATIONSHIP. During the term of this agreement, the parties agree to the following: A. Coaching Institute responsibilities 1. The Coaching Institute will develop the Automation Quest Coaching Program and associated curriculum. The curriculum will be focused on utilizing technology in the sales and marketing of real estate, building communication skills, and personal and business development. Professional skills assessment will be included. 2. The Coaching Institute will hire and train appropriately skilled coaches and mentors. 3. The Coaching Institute will hire and train salespeople that will appropriately represent the Automation Quest organization. 4. The Coaching Institute will provide inbound and outbound call center services to market the coaching program to Automation Quest seminar attendees - non-buyers. 5. The Coaching Institute is responsible for maintaining its phone system, phone lines, computer equipment, office supplies, office space, and other materials and assets necessary to perform its function to adequately support and market services to the Automation Quest customer base. 6. To maintain or assist in the maintenance of the Automation Quest database B. Automation Quest responsibilities: 1. To include the Automation Quest coaching program in all its seminars, workshops, and other venues. 2. To work in conjunction with Coaching Institute to assure that the expectations regarding the quality and content of the coaching program are met. 3. To provide Coaching Institute with customer names and lists of seminar attendees and other interested parties on a regular basis for the intent of marketing the coaching program to them. 4. To provide materials, including copies of software packages sold, training videos, and other relevant information for the coaching staff. 5. To process all Automation Quest coaching sales through its merchant account or through its financing or lease program. 6. To compensate Coaching Institute according to the financial arrangements contained herein and to pay on a schedule according to, or similar to, the "general procedures guidelines" provided. C. Mutual Responsibilities 1. It is understood that an undertaking of this magnitude, with the possibility of thousands of individuals contacted, enrolled, and spoken with, there will inevitably be some individuals who will be displeased with some aspect of the service. Therefore, if there are any concerns regarding representations made, the quality of service provided, or the manner in which a customer is treated, both parties agree to notify the other immediately and use their combined best efforts to rectify the situation. Customer satisfaction is the ultimate goal. 6. COMPENSATION. - The retail value associated with the coaching program is $1,495.00. Automation Quest agrees to compensate The Coaching Institute as follows for each program sold: Bundled (Sold by A.Q.) Sold by The Coaching Institute ---------------------- ------------------------------ $672.75 (45%) $971.75 (65%) 7. MUTUAL EXCLUSIVITY AND NON-COMPETE - So long as Automation Quest includes the coaching program in each of their packages as described in paragraph 5.B.1, and that monthly coaching clients exceed an average of 60 per month, The Coaching Institute agrees that Automation Quest will have an exclusive arrangement with The Coaching Institute for providing coaching services to the real estate agent industry. The Coaching Institute will not actively pursue other marketing or real estate companies whose focus is to sell products and services to real estate agents during the term of this Agreement. It is understood that The Coaching Institute currently has customers in the real estate investment industry and that these types of companies do not fall into the restricted category. Pursuant to this arrangement, Automation Quest agrees to promote The Coaching Institute's coaching program to other current and potential real estate clients. In those situations in which Automation Quest introduces and promotes The Coaching Institute's coaching program to its clients, Automation Quest will receive an agreed-upon commission or royalty for each sale made through the new channel. Throughout the duration of this agreement, Automation Quest grants The Coaching Institute, Inc. status as its sole provider of coaching services. Automation Quest agrees not to develop any similar or competing program and also agrees not to utilize other third-party coaching providers. 8. TERM OF AGREEMENT- Subject to the provisions for termination contained herein, this Agreement and the association hereunder shall commence on the effective date hereof and shall continue for an indefinite period of time. 9. TERMINATION - Either party may terminate this Agreement at any time after an initial 120-day trial period for any reason by giving the other party a ninety (90) day written notice. The premise of this arrangement is that it will continue so long as it is mutually beneficial. 10. RESTRICTIVE COVENANTS - Each party understands that the other party has disclosed and will disclose certain knowledge concerning the other party's trade secrets, proprietary information, business and marketing methods, procedures, products, and services, including, but not limited to, names of customers, clients, and suppliers, and other things which constitute the property of the other party and which enable the other party to compete successfully in its business. In consideration of the parties association with each other and these disclosures, each party agrees as follows: A. Confidential Information; Covenant of Non-Disclosure; Trade Secrets--Proprietary Information. Each party covenants that it shall treat all such matters relating to the other party's business as confidential and proprietary information entrusted to said party solely for accomplishing the purposes of this agreement, and shall not at any time, either during or after the term of this Agreement, either directly or indirectly, use, divulge, disclose, or communicate to any person, firm, or corporation any information concerning any matters affecting or relating to the business of the other party, including without limiting the generality of the foregoing, any of its customers, clients, suppliers, the prices it obtains or has obtained for the services it renders and/or the products it sells, or any other information, written or otherwise, concerning the business of the other party, the manner of operation, plans processes, products, employees, or other data without regard to whether all the foregoing will be deemed confidential, material, or important. All of the terms contained anywhere in this Agreement shall remain in full force and effect from the effective date hereof indefinitely and perpetually thereafter, notwithstanding the termination of the association between the parties, and regardless of the reason for such termination. 11. INDEMNIFICATION. The party to whom a customer is referred shall indemnify the referring party against all liability or loss, and against all claims or actions based upon or arising out of the relationship between the referred customer and the party to whom the customer was referred pursuant to the terms of this Agreement, or based upon any violation of any statute, ordinance, code, or regulation, and the defense of any such claims or actions. Each party shall also indemnify the other against all liability and loss in connection with, and shall assume full responsibility for, payment of their respective federal, state, and local taxes, contributions, or assessments imposed or required as a result of this Agreement. 12. GENERAL PROVISIONS A. Remedies. The rights and remedies of any of the parties hereto shall not be exclusive. In general, the respective rights and obligation hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to or shall limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other party for a breach or threatened breach of any provision hereof, it being the intention of this Paragraph to make clear the agreement of the parties that the respective rights and obligations of the parties hereunder shall be enforceable in equity as well as at law or otherwise. B. Governing Law, Jurisdiction, and Venue. This Agreement is governed by the laws of the State of Utah in all respects, and the parties hereto consent to jurisdiction and venue in the United States Court, District of Utah and/or the Courts of Salt Lake County, State Utah, as applicable. C. Entire Agreement. This instrument sets forth the entire agreement among the parties and supersedes all prior agreements, whether written or oral. All parts of Section titles or Paragraph captions of this Agreement are for convenience only, and shall not be deemed part of this Agreement, and in no way define, limit, augment, extend, or describe the scope, content, or intent of any part or parts of this Agreement. D. Binding Effect and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their representatives, successors, and assigns; provided, however, that this provision shall not be construed as permitting assignment, substitution, delegation, or other transfer of rights or obligations by either party except upon the prior written consent of both parties hereto. E. Waiver or Forbearance Unless otherwise indicated herein, failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall not constitute a waiver of any such breach or of any other covenant, agreement, term, or condition. Any party, by notice delivered in the manner provided in this Agreement, may, but shall be under no obligation to waive any rights or any conditions to its obligation hereunder, or any duty, obligation, or covenant of any other party. No waiver shall affect or alter the remainder of this Agreement, but each and every other covenant, agreement, term and condition hereof shall continue in full force and effect with respect to any other then existing or subsequently occurring breach. To be effective, any waiver must be signed by both parties hereto. F. Severability. In the event that any condition, covenant, or other provision herein contained is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect any other covenant or condition herein contained. If such condition, covenant, or other provision shall be deemed invalid due to is scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. The parties have executed this Coaching and Strategic Agreement effective the date and year set forth above. /s/ Craig R. Hendricks /s/ Brent D. Gray, Pres. ---------------------- ------------------------ Craig R. Hendricks Brent D. Gray President President Coaching Institute, Inc. Automation Quest EX-10.7 13 STANDARD DISTRIBUTION PROVISIONS 1221 Avenue of the Americas New York NY 10020-1090 Telephone: (212) 596-2000 March 28, 1997 Warever Corp. 112 West Business Park Drive Draper, UT 84020 Ladies and Gentlemen: Thisletter and the attached Standard Distribution Provisions, when signed by you and by us, will constitute our agreement with you. (All words defined in the Standard Distribution Provisions have the same meanings in this letter.) 1. Rights. You authorize us to copy and duplicate the Programs in your CD-ROM catalogue in CD-ROM Devices, to copy and duplicate related Packaging Materials, and to distribute those Devices and Materials by Direct Response Distribution, as provided in this letter and the Standard Distribution Provisions. 2. Term. The Term of this agreement will be the period beginning on the date of this agreement and ending March 31, 2000. 3. Programs. This agreement will apply to all Programs that you make available for distribution in the form of CD-ROM Devices in the Territory at any time during the Term of this agreement. 4. Royalties. We will pay you royalties on our Net Paid Sales of CD-ROM Devices in accordance with the Standard Distribution Provisions. Very truly yours, THE COLUMBIA HOUSE COMPANY By: /s/ AJG ------------------------------------- AGREED: WAREVER CORP. By: /s/ Craig R. Hendricks, President ----------------------------------- STANDARD DISTRIBUTION PROVISIONS attached to the letter agreement dated March 28, 1997 (CH 97-31.1(1)) between Warever Corp. ("you") and The Columbia House Company ("we"). The "agreement", below, means the attached letter agreement and these Standard Distribution Provisions. 1. Definitions (Each definition prescribed in this agreement will apply to all uses of the term defined, whether or not the term is capitalized in the use concerned.) (a) "Actual Selling Price". The price we charge our customer for the CD-ROM Device concerned, excluding: (1) shipping and handling charges, (2) sales, excise, and value-added taxes and any other turnover taxes, (3) customs duties and other importation expenses, and (4) partial credits against our selling prices allowed to customers for any reason. (Units for which full credit is allowed are excluded from "Net Paid Sales" under subparagraph 1(b).) (b) "Net Paid Sales". Those CD-ROM Devices for which we derive actual revenues, including those distributed to members for enrolling free of charge or for a nominal price ("Introductory Units"). Net Paid Sales do not include actual returns, units whose full selling prices are credited to customers for any reason, or units for which we are not paid the amounts due us. (If we are paid part of the amount due us for a unit, the unpaid balance will be treated as a credit against the selling price under clause (4) of subparagraph 1(a).) (c) "Program". An information or entertainment program and any related materials, including computer software programs, that can be communicated by the use of CD-ROM Devices. (d) "CD-ROM Device". An optical disc storage device containing a Program and using the technology commonly known as compact disc read-only-memory ("CD-ROM") or any subset, format, enhancement or other version of it, whether now known or developed in the future (including but not limited to CD-ROM-XA, CD-I, 3D-O, and CDTV). (e) "Packaging Materials" Packaging, instruction manuals and other informational materials, and other packaging elements distributed with CD-ROM Devices. (f) "Direct Response Distribution" Distribution directly to consumers (not through wholesalers or intermediate distributors), and not by sale in retail stores. (g) "Territory". The United States, Canada and Mexico and their territories, possessions and military bases. 2. Grant of Rights. You grant and assign to us irrevocably the non-exclusive rights, under copyright and otherwise, to copy and duplicate in CD-ROM Devices the Programs which you make available for distribution in CD-ROM format, to copy and duplicate all Packaging Materials used by you in connection with those Programs, to advertise those Devices and to market, distribute, and sell those Devices and Materials by Direct Response Distribution, during the Term and in the Territory, and to authorize our subsidiaries and affiliates in the Territory to do so. 3. Royalties. (a) Basic royalty rates. Your royalty on each unit of Net Paid Sales will be the higher of the following amounts: (1) The applicable percentage of our Actual Selling Price specified in the "PERCENTAGE ROYALTY RATE" column below; or (2) The applicable amount specified in the "MINIMUM ROYALTY" column: YOUR SUGGESTED PERCENTAGE MINIMUM RETAIL LIST PRICE ROYALTY RATE ROYALTY ("SRLP") $70 and above 17.5% $4.50 $25 - $69.99 15% $3.00 ---------------- --- $15 - $24.99 12.5% $1.25 ---------------- ----- Under $15 10% $0.50 ----- If you do not publish a SRLP for the CD-ROM Device concerned, our regular list price will be substituted for it in the calculation under this subparagraph (a). Your royalties may be increased under subparagraph 3(b). (b) Excess Introductory Units If more than fifty percent (50%) of our Net Paid Sales of CD-ROM Devices in any SRLP category listed above are Introductory Units, the royalty payable on those excess Introductory Units (the excess over 50%) will be calculated by applying the applicable percentage royalty rate for that SRLP category to the average of our Actual Selling Prices for all CD-ROM Devices in that category, excluding Introductory Units, distributed under this agreement. (c) Cumulative Calculation. The calculation called for in subparagraph 3(b) will be made on a cumulative basis after the rendition of the last royalty accounting statement due under this agreement. (d) Foreign Sales. (1) Canada. In respect of Net Paid Sales in Canada, the list price and selling price amounts used in making the calculations under this paragraph 3 will be the same amounts in Canadian currency, without exchange rate adjustments. (For example, a unit sold in Canada will be treated as having a SRLP of $70.00 if your SRLP for it in Canada is $70.00 (Canadian)). The royalties on Net Paid Sales in Canada will be calculated in Canadian currency and paid in the equivalents in United States currency. (For example, if the SRLP of the unit concerned is $70.00 (Canadian), the Minimum Royalty applicable to it will be the U.S. currency equivalent of $4.50 (Canadian)). (2) Mexico. In respect of Net Paid Sales in Mexico, the list price and selling price amounts used in making the calculations under this paragraph 3 will be the equivalents in Mexican currency. The royalties on Net Paid Sales in Mexico will be calculated in Mexican currency and paid in the equivalents in United States currency. (3) Each currency conversion calculation under this subparagraph (d) will be based on the then current exchange rates at the close of the royalty accounting period concerned. 4. Royalty Accounting. (a) We will compute and pay royalties due you, accompanied by accounting statements, within sixty (60) days after each March 31, June 30, September 30 and December 31 during the Term for the preceding three (3) months, for each such three month period during which CD-ROM Devices are distributed or sold. (b) You may, at your expense, examine our books and records relating to your account and the sale of CD-ROM Devices under this agreement, during our regular business hours and at the place where we regularly keep them, for the sole purpose of verifying the accuracy of the statements sent to you under subparagraph 4(a). You may make such an examination with respect to a particular statement only once, and not later than one (1) year after the date of the statement covering the cumulative calculation required under subparagraph 3(c). (c) Each royalty statement and other accounting rendered by us will be conclusively binding upon you and not subject to any objection by you for any reason unless you give us specific notice of your objections to it and your reasons for them before the end of the one year period prescribed in the second sentence of subparagraph 4(b). You will not have the right to sue us in connection with any accounting or for royalties on sales of CD-ROM Devices during the period covered by an accounting, unless you commence the suit within that one year period. 5. Mechanical Royalties and Other Payments. You will make all payments to third parties, including but not limited to payments to holders of rights (including copyrights) in musical compositions, master recordings, literary material, audio and audiovisual elements, computer software programs, graphics, technology, artwork, photographs, names and likenesses, required by reason of the use of the Programs in the duplication, modification or marketing of the CD-ROM Devices. 6. Duplicating. (a) (1) This subparagraph 6(a) will apply in those instances in which we elect to procure duplication of CD-ROM Devices from you. Subparagraph 6(b) below will apply when we elect to duplicate them ourselves (or have them duplicated by others for our account). (2) You will supply us with the CD-ROM Devices we require for distribution, ready for delivery to our customers, in the same quality, packaging and format as the units you distribute in the highest quality retail channels through which you distribute CD-ROM Devices. (3) The CD-ROM Devices furnished under this subparagraph 6(a) will not contain any advertising or promotion material or any other matter that is not an integral part of the Program designated in our duplication order. You will not package those Devices with any inserts, stickers, or other materials that: (1) are not customarily packaged in your general release of the CD-ROM Devices concerned; (ii) advertise or promote any CD-ROM products or other interactive or multimedia products not available to us under this agreement; (iii) advertise or promote any Program on or in any platform, format or technology other than CDROM Devices, or (iv) advertise or promote any Direct Response Distribution or other direct marketing. (4) We shall pay you for the CD-ROM Devices you duplicate for us in accordance with prices listed on Schedule A plus the cost of shipping direct from your duplicator to our designated facility. You represent and warrant that the prices in Schedule A are your actual duplication costs, FOB your duplicator (i.e., that they do not include any creative or mastering costs, order processing or inventory control costs, or allocations of overhead or profit). You will review those duplicating costs not less frequently than semi-annually, will notify us of any reductions or increases in them, and will adjust those duplicating prices commensurately with those changes. (5) With respect to the duplication and delivery of CD-ROM Devices, we will be treated no less favorably than any other distributor of CD-ROM Devices for whom you duplicate or furnish duplicated product. You shall make reasonable efforts to deliver the CD-ROM Devices within fourteen (14) days of receipt of our order. In no event will any CD-ROM Devices be delivered to us later than thirty (30) days after receipt of our order. All CD-ROM Devices will be bulk-packed for shipment to us in accordance with our specifications. (6) Payment for all CD-ROM Devices ordered and shipped to us shall be made within thirty (30) days of delivery of the CD-ROM Devices or our receipt of your invoices, whichever is later. All sales to us shall be final and we shall have no right to return any unsold or returned CD-ROM Devices except defective units. Any units returned as defective will be accompanied by statements describing the defect(s). We will pay all sales taxes or equivalent taxes resulting directly from the sale and delivery of the CD-ROM Devices to us. (b) (1) If we so elect in any instance, we may procure the duplication of CD-ROM Devices, including packaging, from other sources. If we do, this subparagraph 6(b) will apply instead of subparagraph 6(a). (2) All CD-ROM Devices duplicated under this subparagraph (b) will be of a quality comparable to the quality of CD-ROM Devices containing the Program concerned distributed by you. (3) You will furnish to us, promptly after our request: (i) Any master, duplicating or other materials relating to the Program that we may require for the manufacture of first class quality CD-ROM Devices suitable for commercial distribution; (ii) Duplicating film for the production of Packaging Materials and labels, or, if we so elect, graphic materials suitable for our use in cre~ting our own Packaging Materials and labels (including modified Packaging Materials to conform with section 6(a)(3)); and (iii) Any technical assistance and information (including but not limited to copyright, trademark, patent and credit information) that we require to duplicate CD-ROM Devices and Packaging Materials. We will reimburse you for your actual costs (excluding all origination charges) incurred in furnishing materials and assistance to us under this section 6(b)(3). After the end of the Term, we will return those materials to you or, at your request, destroy them and furnish you with an affidavit attesting to such destruction. 7. Termination and Post-Termination Sales For six (6) months after the end of the Term ("Sell-Off Period"), we may advertise, distribute and sell CD-ROM Devices duplicated or in the process of duplication by you or by us at the end of the Term. We will pay royalties and render statements regarding those sales in the same manner as during the Term. After the end of the Sell-Off Period, we will notify you of the number and types of CD-ROM Devices remaining on hand and you may, at your option exercisable by notice within thirty (30) days of our notice, purchase any such CD-ROM Devices at our actual duplicating costs plus shipping and handling charges or instruct us to destroy them. You will pay all amounts payable in connection with the sale of all such CDROM Devices purchased by you. 8. Advertising, Promotion, Packaging and Labels; Review Samples. (a) We shall have the right to use and authorize others to use the names, likenesses and voices of the performers and other persons who have rendered services in connection with the Programs, and biographical information about them, for advertising and purposes of trade in connection with the CD-ROM Devices and in institutional advertising for our company in all formats, markets and media now known or hereafter devised. (b) We may use synopses and excerpts from the Program(s) and pre-existing advertising, publicity and promotional materials for the Program(s), in advertising, promoting and publicizing the CD-ROM Devices in any medium and by any method, including but not limited to compact disc samplers and electronic catalogs, and may authorize others to do so, without additional payment. You will furnish us with such technical assistance and information as we may reasonably require to prepare such advertising, promotion and publicity materials. At our request, you shall promptly deliver to us a reasonable quantity of pre-existing advertisements, publicity pieces and promotion materials concerning all the components of the Program as are available to you, including but not limited to: (1) copies of critics' reviews or other commentaries; (2) a synopsis of the advertising credits used for distribution; (3) a list of principal performers and their roles, creators, animators, and other significant contributors to the Program (including but not limited to voice-over and character voice talent); (4) a list of all underlying and pre-existing materials contained in the Program or upon which the Program is based and the name of the licensor or supplier; and (5) a music cue sheet in customary form containing titles, composers, timings, copyrights owners and publishers. We will reimburse you for your actual costs (excluding all creative costs) incurred in furnishing materials and assistance to us under this subparagraph 8(b). After the end of the Term, we will return such materials to you or, at your request, destroy them and furnish you with an affidavit attesting to such destruction. (c) We shall have the right to use the labels, trademarks, trade names, designs and artwork owned, controlled, or distributed by you on CD-ROM Devices and in packaging, advertising and other marketing materials for them. (d) You will furnish us with five (5) samples of each Program in your catalog during the Term for review purposes. 9. Warranties and Representations. You warrant and represent: (a) You have the right and power to enter into and fully perform this agreement; (b) No Materials (defined below), or any use of them in accordance with this agreement will violate any law, infringe upon the rights of any person or entity, or otherwise cause us to incur liability to any third party. "Materials," in this subparagraph (b), means the Programs and any related materials, including computer software programs, technology, graphics, dramatic, literary, musical, or artistic elements, ideas, or other intellectual properties contained in or furnished by you for use in connection with the Programs or the packaging, advertising, promotion or marketing of CD-ROM Devices made from them; and (c) We will not be required to make any payments or incur any liability by reason of our exercise of our rights under this agreement, except the payments specifically provided for in this agreement. 10. Indemnity. You will at all times indemnify and hold us and our licensees harmless from and against any and all claims, damages, liabilities, cost and expenses, including legal expenses and reasonable counsel fees, arising out of any breach or alleged breach by you of any warranty or representation made by you in this agreement. Pending the resolution of any claim in respect of which we are entitled to be indemnified, we will not withhold monies which would otherwise be payable to you under this agreement in an amount exceeding your potential liability to us under this paragraph. 11. Withdrawal of Programs You may terminate our rights under paragraph 2 in any Program for all or part of the Territory ("Terminated Area") if the payments you are required to make to others by reason of our distribution of it exceed the royalties we are required to pay you. You will give us at least three (3) months' prior notice of any such termination. 12. Assignment. Either party may assign its rights under this agreement in whole or in part to any subsidiary or controlling corporation, to any entity owned or controlled by it, or to any entity acquiring a substantial portion of its assets, and such rights may be assigned by any such assignee. No such assignment shall relieve such party of any of its obligations under this agreement. 13. Notices. All notices under this agreement shall be in writing and shall be given by courier or other personal delivery or by registered or certified mail at the appropriate address indicated above or at a substitute address designated by notice by the party concerned. Each notice to us shall be addressed for the attention of our Senior Vice President, Business and Government Affairs, and a copy of each notice sent to us shall be sent simultaneously to our Senior Vice President and General Counsel. Notices shall be deemed given when delivered to the courier, personally delivered, or mailed, except that a notice of change of address shall be effective only from the date of its receipt. 14. Miscellaneous (a) Force Majeure. If we are materially hampered in the duplication, advertising, distribution or sale of CD-ROM Devices because of act of God, accident, fire, labor dispute, riot or civil disorder, act of public enemy, enactment or act of any government or governmental instrumentality (whether federal, state, local or foreign), failure of technical facilities, failure or delay of transportation facilities, or other cause of a similar or different nature not reasonably within our control, then we will have the right, without limiting our other rights, to suspend the running of the Term by notice to you, for the duration of such contingency. All dates and periods of time prescribed in this agreement and occurring during or affected by any such suspension may be postponed or extended, at our discretion, for a period of time equivalent to the duration of the suspension. (b) Entire agreement; Captions. This agreement contains the entire understanding of the parties relating to its subject matter and cannot be changed orally. Paragraph captions are included for convenience only and will not limit the interpretation of any provision. (c) Waiver; Remedies. A waiver of any term or condition of this agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings, obligations, and agreements contained in this agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either party. (d) Applicable Law. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF NEW YORK, AND ITS VALIDITY, INTERPRETATION AND LEGAL EFFECT WILL BE GOVERNED BY THE LAWS OF THAT STATE APPLICABLE TO CONTRACTS ENTERED INTO AND ENTIRELY PERFORMED THERE. THE NEW YORK COURTS (STATE AND FEDERAL), ONLY, WILL HAVE JURISDICTION OF ANY CONTROVERSIES REGARDING THIS AGREEMENT; ANY ACTION OR OTHER PROCEEDING WHICH INVOLVES SUCH A CONTROVERSY WILL BE BROUGHT IN THOSE COURTS, IN NEW YORK COUNTY, AND NOT ELSEWHERE. ANY PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY, AMONG OTHER METHODS, BE SERVED BY DELIVERING IT OR MAILING IT, BY REGISTERED OR CERTIFIED MAIL, DIRECTED TO THE APPLICABLE ADDRESS ABOVE OR SUCH OTHER ADDRESS AS THE PARTY CONCERNED MAY DESIGNATE PURSUANT TO PARAGRAPH 13. ANY SUCH DELIVERY OR MAIL SERVICE WILL HAVE THE SAME EFFECT AS PERSONAL SERVICE WITHIN THE STATE OF NEW YORK. (e) Severability The invalidity or unenforceability of any provision of this agreement shall in no way affect the validity or enforceability of any other provision of this agreement. (f) Breach. Neither party shall be entitled to recover damages or to terminate the Term by reason of any breach of this agreement by the other party, unless the latter party has failed to remedy the breach concerned within twenty-one (21) days after notice. THE COLUMBIA HOUSE COMPANY By: /s/ AJG --------------------------------- WAREVER CORP. By: /s/ Craig R. Hendricks --------------------------------- Our taxpayer identification number is 87-0498368. Under the penalties of perjury, I certify that this information is true, correct, and complete. /s/ Craig R. Hendricks, President --------------------------------- For: /WAREVER CORP. SCHEDULE A (Reference: Section 6(a)(4)) SCHEDULE A Product Description Price - - ------- ----------- ----- Action Plus LE Powerful, yet easy-to-use productivity too $49.95 including contact manager, scheduler, and word processor. Designed to increase your sales and help you service your customers better. Pricing: Units per Order Cost of Goods --------------- -------------- 50 - 100 $5.88 101-250 $5.49 251-500 $5.19 501-1,000 $4.89 1,001+ $4.49 Action Spreadsheet Excel-compatible, Windows spreadsheet Pricing: Units per Order Costs of Goods --------------- -------------- 50 - 100 $2.47 101-250 $2.19 251 - 500 $1.98 501-1,000 $1.89 1,001+ $1.77 Action Planner Helps you manage your time better. Includes $29.95 Personal scheduler and day planner. Prints to popular Day planners. Pricing: Units per Order Cost of Goods --------------- -------------- 50 - 100 $2.94 101-250 $2.71 251-500 $2.45 501 - 1,000 $2.29 1,001+ $2.05 EX-10.8 14 LICENSE AGREEMENT LICENSE AGREEMENT THIS LICENSE AGREEMENT (herein referred to as the "Agreement") is entered into in duplicate effective for all purposes and in all respects as of the 13th day of April, 1999, by and between WAREVER, INC., a Utah Corporation, with its principal place of business located at 112 West Business Park Drive, Draper, Utah, 84020 (herein referred to as "Warever"), and PLUS MARK, Inc. an Ohio Corporation (a wholly owned subsidiary of American Greetings Corporation, an Ohio Corporation), with its principal place of business located at One American Road, Cleveland, Ohio, 44144-2398 (herein referred to as "Plus Mark"), and SNARR AND DYER LICENSING, LLC, a Utah Limited Liability company having its principal place of business at 4728 Dearcreek Road, Salt Lake City, UT 84124 ("Snarr"). RECITALS 1. Warever is in the business of researching, developing, and marketing certain proprietary computer software products and related instructional, reference, learning, and training manuals and systems. 2. Plus Mark owns all right, title, and interest to the name and mark "DateWorks", along with the associated good will. 3. Snarr owns United States Patent No. 5,222,764, along with certain improvements and variations with respect to the inventions covered thereby (the "Patent"), and the name and mark "Pocket-It", along with the associated good will, and has licensed the same, along with the Patent, to Plus Mark. 4. Warever has and is currently developing a customized software program known as "Pocket-It" (herein referred to as the "Pocket-It Software"). The Pocket-It Software, as defined in Section 1 C below, is a modification of an existing proprietary software program owned by Warever (herein referred to as the "Riptide Software"). The Riptide Software is similar to the Pocket-It Software, but is not part of this Agreement. Warever owns all right, title, and interest in and to said Riptide Software. 5. Except as set forth on Schedule A, which is attached hereto and incorporated herein, Warever owns all right, title, and interest in and to the Pocket-It Software. 6. Plus Mark desires to obtain certain reproduction and marketing rights from Warever to the Pocket-It Software on the terms and conditions described herein. NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows: OPERATIVE PROVISIONS 1. Definitions. For purposes of this Agreement, the following definitions shall apply to the respective terms: A. "Warever" shall be defined to mean WAREVER, INC., a Utah Corporation; and any of its designated agents or affiliates. B. "Plus Mark" shall be defined to mean PLUS MARK, an Ohio Corporation (a wholly owned subsidiary of American Greetings Corporation, an Ohio Corporation); and any of its designated agents or affiliates. C. The "Pocket-It Software" shall be defined to mean that certain Pocket-It customized computer software program, developed by Warever., and any related or derivative works, including books, manuals, outlines, tapes, videos, etc., developed by Warever for use in connection with the Pocket-It Software. The Pocket-It Software is a companion to the Pocket-It paper-based planning system. The Pocket-It Software enables the user to print a variety of reports directly onto the Pocket-It planning system's forms. The Pocket-It Software is intended to be marketed and sold in conjunction with the Pocket-It paper-based planning system. Except as set forth in Schedule A, Warever possesses full ownership rights in and to the Pocket-It Software. D. The "Riptide Software" shall be defined to mean that certain Riptide computer software program, and any related or derivative works, including source code, books, manuals, outlines, tapes, videos, etc. The Riptide Software is similar to the Pocket-it Software, but is not part of this Agreement. Warever possesses full ownership rights in and to the Riptide Software. 2. Development of the Pocket-it Software; Conditions Precedent. Warever shall be responsible to develop the Pocket-it Software for delivery to Plus Mark on or before April 19, 1999. The obligations of PlusMark under this Agreement are subject to satisfaction, at or prior to April 19, 1999, of the condition that PlusMark shall have approved the Pocket-It Software for initial release. Such approval shall be in writing and shall not be unreasonably withheld. If Plus Mark determines that product modifications or enhancements are necessary in order to approve the initial release of Pocket-It Software, the parties will use commercially reasonable efforts to work together in an expeditious manner to implement those modifications or enhancements, and the deadline for completion of the Pocket-It Software shall be extended during such time, for a period not to exceed sixty (60) days. Except for the initial product release, any product modifications or enhancements will be implemented in a subsequent release of the product and will not prevent current product from being marketed and sold. 3. Reproduction, Marketing and Sales. Warever hereby grants to Plus Mark an exclusive license to make, have made, reproduce, have reproduced, package, market, distribute, promote, use, and sell the Pocket-It Software through any retail outlets throughout the United States of America during the term of this Agreement. The parties understand, acknowledge, and agree that Warever may reproduce, package, market, and sell, or contract with other individuals or entities to reproduce, package, market, and sell, the Riptide Software throughout the world during the term of this Agreement. The parties further understand and acknowledge that Plus Mark and Snarr are in no way prohibited from developing or having developed other software for use in connection with the Pocket-It paper-based planning system, provided such software does not infringe any of Warever's rights with respect to the Pocket-It Software. 4. Customer Registration and Support. For all Pocket-It Software sold pursuant to this Agreement, Plus Mark shall be responsible for inserting customer registration cards in each package for the purpose of capturing the names, addresses, telephone numbers, e-mail addresses, and other information to identify each customer that purchases the Pocket-It Software. The registration card is to be mailed by the Customer to Warever Corporation's corporate address provided. Warever shall then be responsible to register all the customers who send in a registration card or register by electronic means, and provide them with appropriate and reasonable product support. The parties acknowledge and agree that Plus Mark and Warever jointly own all right, title, and interest in and to the customer information. One of the primary, but not exclusive, purposes for which Warever is to use the customer information is to ascertain feature preferences by the customers. Such customer feature preferences will be considered by Warever for implementation in future version releases of the Pocket-It Software. 5. Royalty Payments. As consideration therefor, Plus Mark hereby agrees to pay Warever a royalty fee of Five and 00/100 Dollars ($5.00) for each individual Pocket-it Software program (unit) sold by a retail outlet throughout the United States of America during the term of this agreement and for which PlusMark is paid by the retailer, less all returns. Plus Mark shall send (by United States mail) to Warever within thirty (30) days following the end of each month a report for the previous month detailing all sales of the Pocket-It Software by the retail outlets, which said report shall include information concerning: (a) the name, address, and telephone number of each retail outlet; (b) the dates and number of the Pocket-It Software programs (units) sold by each retail outlet; and (c) the appropriate royalty fee payment. 6. Inspection and Auditing. PlusMark shall keep and maintain complete and accurate records of the transactions underlying the reports to be furnished hereunder. All books of accounts and records shall be kept available for at least two (2) years from the date of the report to which they relate. Warever may, at Warever's expense and on ninety (90) days' advance written notice to PlusMark, conduct an annual audit of PlusMark's books of accounts and records relating to the reports to be flirnished hereunder. Such audit shall be conducted during regular business hours at a mutually agreeable time and place and shall not materially interfere with the conduct of PlusMark's business. 7. License. Subject to the terms and conditions herein set forth, Warever hereby grants to Plus Mark an exclusive, non-transferable License to use the Pocket-It Software solely for the purposes set forth in Sections 3 and 4 above. This License shall become effective upon the date of this Agreement, and shall continue throughout the term of this Agreement. This License shall terminate upon the termination of this Agreement. The termination of the License shall in no way restrict the right of PlusMark and/or resellers to sell, advertise, and promote those individual Pocket-It Software programs which were produced during the term of this Agreement, so long as Warever continues to be compensated for the products sold according to the terms of this Agreement. Warever warrants and represents that it (1) has authority in all respects to enter this Agreement; (2) holds all such rights, title, and interest in the Pocket-It Software as required to permit Warever to enter into this Agreement; and (3) that the obligations and rights herein granted shall be binding upon its successors and assigns. 8. Ownership of the Pocket-It Software. The Pocket-It Software shall be the sole and exclusive property of Warever and shall not be reproduced, marketed, distributed, sold, licensed, used, revealed, disclosed, or communicated, directly or indirectly, by Plus Mark to any person or entity whatsoever other than pursuant to the License and for the purposes specifically set forth herein. Plus Mark acknowledges Warever's ownership, right, title, and interest in the Pocket-It Software, and of the copyrights, trademarks, and patents thereto and in any and all derivative works therefrom. Plus Mark further acknowledges that it does not acquire any rights of ownership in the Pocket-It Software by reason of performing its duties hereunder and/or providing certain contributions in the development of the Pocket-It Software. 9. Discoveries and Improvements. Warever shall own those modifications, improvements and developments to the Pocket4t Software made by Warever independently of PlusMark during the term of this Agreement and PlusMark shall own those modifications, improvements and developments to the Pocket-It Software made by PlusMark independently of Warever during the term of this Agreement. The parties shall jointly own all jointly developed modifications, improvements and developments made during the term of this Agreement. Neither party shall preclude the other from using any independent or joint developments as long as such party continues to distribute, promote or sell the Pocket-It Software. 10. Copying Restrictions and Requirements. Plus Mark agrees that on each copy of the Pocket-It Software it shall properly reproduce all notices of Warever's patent, copyright, trademark, or trade secret rights as provided by Warever. Plus Mark also agrees that on each copy of the Pocket-It Software it shall property reproduce Warever's logo, design style, and layout as provided by Warever. Furthermore, Plus Mark shall also include in each package (unit) of the Pocket-It Software program a shrinkwrap license agreement to be provided by Warever. Nothing in section 10 shall restrict PlusMark from reproducing on copies of the Pocket-It Software any Pocket-It patent, copyright, trademark rights, logo, design style and layout, or any other patent, copyright, trademark rights, logo, design style and layout, in the manner and style as PlusMark sees fit. 11. Indemnification. A. By Warever. Warever hereby agrees to indemnify, defend, and hold harmless PlusMark, its subsidiaries, affiliates, and their respective officers, directors, employees, and agents, from and against all claims, losses, damages, expenses, obligations, penalties, demands, suits, procedures, assessments, judgments, costs and liabilities (including the reasonable costs of collection, investigation, attorney's fees and other reasonable costs of defense) arising out of or resulting from: (1) any breach or alleged breach of any warranty or representation; (2) the authorized use by PlusMark of the Poeket-It Software; (3) any claims of infringement, including all copyright, trademark, patents, or other intellectual property rights associated with the Pocket-It Software (except claims based on the intellectual property rights listed in Schedule A), or on the negligence or intentional misconduct of PlusMark; or (4) Warever's performance of its obligations under this Agreement. B. By PlusMark. PlusMark hereby agrees to indemnify, defend and hold harmless Warever, its subsidiaries, affiliates, and their respective officers, directors, employees and agents, from and against all claims, losses, damages, expenses, obligations, penalties, demands, suits, procedures, assessments, judgments, costs and liabilities (including the reasonable costs of collection, investigation, attorney's fees and other reasonable costs of defense) arising out of or resulting from: (1) any breach or alleged breach of any warranty or representation; (2) the authorized use by PlusMark of the Pocket-It Software: (3) PlusMark's performance of its obligations under this Agreement. C. General. The parties agree to provide prompt written notification of any claim requiring indemnification, and agree to reasonably cooperate in the defense of any such claim. The party obligated to provide indemnification may do so with attorneys of its own choosing, and shall have authority to settle or otherwise dispose of such claim. The provisions of this Section 11 shall survive the termination or expiration of this Agreement. 12. Independent Contractor Status. It is understood and agreed that the parties are independent contractors and not officers, employees, partners, agents, or affiliates of the other party or its customers and clients, and the parties agree not to make any representations to the contrary. Any conduct in which either party engages in connection with or in the performance of this Agreement shall be solely in its capacity as an independent contractor, and nothing in this Agreement shall be construed to the contrary. Each party agrees, that as an independent contractor, it does not have authority to sign contracts, notes, or obligations, or to make, purchase, acquire, or dispose of any property for or on behalf of the other or any of its customers and clients, and shall only have authority to perform those services specifically described herein. Nothing in this Agreement shall be construed as creating any partnership, joint venture, or other joint arrangement. Each party is solely and completely liable for all labor and direct expenses in connection with any of its obligations to be performed hereunder. 13. Confidential Information A. Warever Confidential Information. For the purposes of this Agreement, "Warever Confidential Information" shall mean all information, without limitation, pertaining to Warever's trade secrets, financial and other business data, technical information, and development of the Pocket-It Software, including, but not limited to, drawings, tools, models, written technical information, materials, data, know-how, source code, and oral communications, provided that such information has been adequately identified as proprietary or confidential or could be reasonably considered to be proprietary or confidential. Any written or pictorial embodiments of the Warever Confidential Information provided by Warever to PlusMark in accordance with this Agreement are the property of Warever and shall be returned to Warever upon termination of this Agreement. B. PlusMark Confidential Information. For the purposes of this Agreement, PlusMark Confidential Information shall include, without limitation, reports, trade secrets, technical, financial, and other business data and documentation, and all information pertaining to PlusMark's manufacture, production and marketing of the Pocket-It Software and the Pocket-It and Pocket-It paper-based planning systems, including but not limited to, drawings, tools, models, written technical information, materials, data, know-how, and oral communications, provided that such information has been adequately identified as proprietary or confidential or could be reasonably considered to be proprietary or confidential, including all written and oral information already received by Warever from PlusMark prior to the execution of this Agreement, and including the terms and existence of this Agreement. Any written or pictorial embodiments of the PlusMark Confidential Information provided by PlusMark to Warever in accordance with this Agreement are the property of PlusMark and shall be returned to PlusMark upon terinination of this Agreement. C. Exclusions The parties agree that neither the Warever Confidential Information nor the PlusMark Confidential Information shall include any information that: 1. is made public by the disclosing party; 2. is or hereafter becomes part of the public domain through no wrongful act, fault or negligence on the part of the receiving party or parties; 3. the receiving party or parties can reasonably demonstrate is already in the possession of such receiving party or parties and not subject to an existing agreement of confidentiality; 4. is received from a third party without restriction and without breach of this Agreement; 5. was independently developed by the receiving party or parties as evidenced by its/their records; or 6. the receiving party or parties are required to disclose pursuant to a valid order of a court or other governmental body; provided however, that the recipient of the confidential information shall first have given notice to the disclosing party or parties and shall give the disclosing party or parties a reasonable opportunity to interpose an objection or obtain a protective order requiring that the confidential information so disclosed be used only for the purposes for which the order was issued. D. Survival. The parties further agree, for a period of three (3) years following the termination of this Agreement, not to disclose Confidential Information of the other party to any third party, except as provided in this Agreement, unless specifically authorized by the other party in writing. The provisions of this section 13 will survive the termination or expiration of this Agreement. E. Covenant Not to Compete. Plus Mark covenants and agrees that it shall not at any time during the term of this Agreement, and for a period of one (1) year after the termination of this Agreement (except termination by PlusMark pursuant to Section 14B (1)), engage in any business that develops and/or markets a product for sale to retail outlets in the United States of America that is similar to and/or in competition with the Pocket-It Software, or solicit or influence (or attempt to solicit or influence) any of the suppliers, customers, employees, or other clients of Warever to terminate their dealings or employment with Warever to work for PlusMark. The parties understand and acknowledge that this Section 13E applies only to PlusMark and does not bind or purport to obligate American Greetings Corporation or any of its subsidiaries, divisions, or affiliates other than PlusMark. 14. Default and Remedies. A. Default. The occurrence of any of the following shall constitute a default and breach of this Agreement: 1. Failure to observe or perform any of the parties' respective covenants, agreements, or obligations hereunder; or 2. The filing of a voluntary or involuntary petition by or against either party under any law for the purpose of adjudicating such party bankrupt; or for extending time for payment, adjustment, or satisfaction of such party's liabilities; or for reorganization, dissolution, or arrangement on account of or to prevent proceedings, and all consequent orders, adjudication, custodies, and supervision are not dismissed, vacated, or otherwise permanently stayed or terminated within sixty (60) days after the assignment, filing, or other initial event. B. Remedies. If any material breach occurs, the non-breaching party has the following remedies in addition to all other rights and remedies provided by law or equity, to which the non-breaching party may resort cumulatively or in the alternative: 1. The non-breaching party may, at its election, terminate this Agreement by giving the breaching party notice of termination pursuant to the provisions herein. On the giving of notice, all the breaching party's rights in the Agreement shall immediately terminate. 2. The rights and remedies of any of the parties hereto shall not be mutually exclusive and the election of one remedy for any one item shall not foreclose or prevent an election of any other remedy for another item, or for the same item at a later time. In general, the respective rights and obligations hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to or shall limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other party for a breach or threatened breach of any provision hereof, it being the intention of this Section to make clear the agreement of the parties that the respective rights and obligations of the parties hereunder shall be enforceable in equity as well as at law or otherwise. 3. The parties specifically agree that any breach of Section 13 of this Agreement by one party will cause immediate and irreparable damage and injury to the other, and confirm that damages at law may be an inadequate remedy for a breach or threatened breach of such provisions. In the event of such breach, the nonbreaching party shall be entitled by right to an injunction (without the necessity of posting any bond in connection therewith) restraining the breaching party from violating any of said provisions. 15. Marketing Requirements. Except as set forth in Section 17B of this Agreement, Plus Mark hereby agrees in good faith to reasonably and actively market the Pocket-It Software to the various American Greeting retail outlets throughout the United States of America and to the end user/customer. 16. Term of Agreement. Subject to the provisions for termination contained herein, this Agreement and the License granted hereunder shall commence on the effective date hereof and shall continue for a period of two (2) years from the delivery date (on or before April 19, 1999) of the Pocket-It Software from Warever to Plus Mark. Following the expiration of the said two (2) year period, this Agreement and the License granted hereunder shall continue for an indefinite period of time until terminated as provided in Section 17 below. 17. Termination of Agreement. A. By Either Party. In addition to any other provisions for termination contained herein, after the initial two (2) term hereof as set forth in Section 16 above, either party may terminate this Agreement at any time and for any cause by giving the other party at least sixty (60) days prior written notice in accordance with the notice provisions set forth herein. B. By Plus Mark for Discontinuance of Pocket-It Business. If PlusMark discontinues selling the Pocket-It paper-based planning system at any time with or without cause in PlusMark's sole discretion, then this Agreement shall terminate on thirty (30) days' advance written notice of such discontinuation to Warever. 18. General Provisions. A. Severability. In the event that any condition, covenant, or other provision herein contained is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement, and shall in no way affect any other covenant or condition herein contained. If such condition, covenant, or other provision shall be deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. B. Entire Agreement. This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements, whether written or oral. No promise, representation, warranty, or covenant not included in this Agreement has been or is relied upon by the parties to this Agreement. C. Covenants and Conditions. Each provision of this Agreement performable by either party shall be deemed to be both a covenant and a condition. D. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, successors, legal representatives and assigns; provided that this provision shall not be construed as permitting assignment, substitution, delegation, or other transfer of rights or obligations by each party except with the prior written consent of the other party, which consent shall not be unreasonably withheld. E. Headings. The headings to the various Sections and Paragraphs of this Agreement are for convenience and ease of reference only and do not define, limit, augment, or describe the scope, content, or intent of this Agreement or any part or parts of this Agreement. F. Notices. All notices given under any of the provisions of this Agreement must be in writing and shall be deemed to have been given either: (a) when delivered in person to the recipient named below; or (b) upon deposit in United States mail, either registered or certified, return receipt requested, postage prepaid, addressed to the party or person intended as follows: "Warever" WAREVER, INC. Craig R. Hendricks, President 112 West Business Park Drive Draper, Utah 84020 1-800-766-7229 "Plus Mark" PLUS MARK, INC. An American Greetings Company Kurt A. Spitler, Vice President of Sales & Marketing One American Road Cleveland, Ohio 44144-2398 1-800-321-3040 with a copy to AMERICAN GREETINGS CORPORATION One American Road Cleveland, OH 44144 Attention: General Counsel "Snarr" SNARR AND DYER LICENSING, LLC, 4728 Dearcreek Road Salt Lake City, UT 84124 Either party may, by notice given at any time or from time to time, require subsequent notices to be given to another individual person, whether a party, officer, or representative, or to a different address, or both. Notices given before actual receipt of notice of change shall not be invalidated by the change. G. Time. Time is of the essence of each term, provision, condition, and covenant of this agreement. H. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. I. Gender and Number. The singular number include the plural whenever the context so indicates. The neuter gender includes the feminine and masculine, the masculine includes the feminine and neuter, and the feminine includes the masculine and neuter, and each includes corporation, partnership, limited liability company, or other legal entity when the context so requires. The word "person" means person or persons or other entity or entities or any combination of persons and entities. J. Governing Law, Dispute Resolution, Limitation on Damages. The validity, interpretation, and performance of this Agreement will be determined in accordance with the laws of the State of Ohio without regard to conflict of laws rules. The parties will attempt to settle all disputes amicably within 30 days of receipt of written notice of a dispute through non-binding mediation. However, if they are unsuccessful, any dispute arising out of or relating to this Agreement (other than the right to secure injunctive relief) shall be settled by binding arbitration in Cleveland under Ohio law. Such arbitration shall be administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In no event shall either party be liable for any indirect, special, incidental, or consequential damages (whether defined as such or provided for under applicable case law, statute, or otherwise) in any way connected with this Agreement, even if the party has advance notice of the possibility of such damages. K. Waiver. Unless otherwise indicated herein, failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall not constitute a waiver of any such breach or any other covenant, agreement, term, or condition. Any party, by notice delivered in the manner provided in this Agreement, may, but shall be under no obligation to waive any of its rights or any conditions to its obligation hereunder, or any duty, obligation, or covenant of any other party. No waiver shall affect or alter the remainder of this Agreement, but each and every other covenant, agreement, term, and condition hereof shall continue in frill force and effect with respect to any other then existing or subsequently occurring breach. To be effective, any waiver must be signed by both parties hereto. L. Modification and Amendment. This Agreement may be amended or modified only by an instrument in writing signed by all the parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement effective the date and year set forth above. "WAREVER" WAREVER, INC. A Utah Corporation By: /s/ Craig R. Hendricks ----------------------------- CRAIG R. HENDRICKS, President "PLUS MARK" An Ohio Corporation, a wholly owned subsidiary of American Greetings Company, an Ohio Corporation By: /s/ Kurt A. Spitler ---------------------------------------------------- KURT A. SPITLER, Vice President of Sales & Marketing SNARR AND DYER LICENSING, LLC A Utah Limited Liability Company By: /s/ Doug Snarr -------------------------- DOUG SNARR, President Schedule A All Trademarks, Trade Names, Patents, Copyrights, Tradedress, and other intellectual property related to the Pocket-It paper-based planning system and the Pocket-It product line. EX-21.1 15 SUBSIDIARIES OF THE COMPANY LIST OF SUBSIDIARIES OWNERSHIP GOVERNING INTEREST OF THE NAME JURISDICTION COMPANY Coaching Institute, Inc. Utah 85% Warever Corp. Utah 85% -----END PRIVACY-ENHANCED MESSAGE-----