EXHIBIT 10.4
REVOLVING LOAN AND SECURITY AGREEMENT
This Revolving Loan and Security Agreement ("Agreement") is entered
into this date by and between Xxxxxxx Dynasty, LC, a Utah limited liability
company ("Lender") and Quest Group International, Inc., a Nevada corporation
("Borrower").
WHEREAS, the Lender is a stockholder and affiliate of the Borrower and
both the Lender and the Borrower believe that it is in their mutual interest to
enter into this Agreement.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Periodic Loans. During the term hereof, Lender hereby agrees to make
periodic loans (collectively and individually, the "Loans") to the Borrower in
an aggregate principal amount at any one time outstanding not to exceed FIFTY
THOUSAND DOLLARS ($50,000) ("Maximum Amount"). Beginning on the date hereof and
ending on the twelve month anniversary hereof, unless terminated earlier
pursuant to the default provisions of this Agreement, from time to time Borrower
may notify the Lender of its need to borrow funds pursuant to this Agreement.
Within five business days of receipt of such notice from the Borrower seeking to
borrow funds, the Lender shall forward such funds to the Borrower up to, but not
in excess of, the Maximum Amount. All amounts lent hereunder shall be evidenced
by ten percent (10%) promissory notes in substantially the same form as attached
hereto as Exhibit "A" (the "Notes"). Borrower shall deliver to Lender Notes in
the principal amount of funds lent on each date that Lender provides funds to
Borrower hereunder.
Section 2. Finance Charges and Other Consideration. All principal and interest
then outstanding shall bear interest at the rate of ten percent (10%) per annum.
As additional consideration, Lender shall be entitled to the following payments:
2.1 In addition to the repayment of the principal and interest owing on
the Loans, Lender shall be entitled to a payment equal to two percent (2%) of
Net Sales in perpetuity (the "Override Bonus"). For purposes hereof, the term
"Net Sales" shall mean the Borrower's gross sales less returns and charge-backs.
These payments are to be paid quarterly and each quarterly payment shall be paid
within thirty (30) days after the end of the quarterly period in question. The
quarterly periods shall end on March 31, June 30, September 30 and December 31.
2.2 Notwithstanding Section 2.1, no Override Bonus shall be payable
pursuant to Section 2.1 in connection with any monthly period in which (i) the
Borrower's average pre-tax monthly income does not exceed $20,000 or (ii) the
Borrower has outstanding loan obligations that are evidenced by promissory notes
that are owing to XxXxxxxx Enterprises Inc. Profit Sharing Plan and Trust,
Xxxxxxx Dynasty, LC and/or Xxxxx Xxxxx. If Borrower's average pre-tax monthly
income would exceed $20,000, but for the Override Bonus referenced in Section
2.1 and/or the payment of the override bonuses (as described in the Employment
Agreements of Xxxxx Xxxxx and Xxxxxx Xxxxxxxx) then the Lender, Xxxxx Xxxxx and
Xxxxxx Xxxxxxxx will be entitled to override bonuses on a pro rata basis in the
maximum amount that Borrower can pay and still maintain average pre-tax monthly
income of $20,000 during the subject period.
2.3 In addition to the payments referenced in Section 2.1 and the
repayment of the principal and interest owing on the Loans, Lender shall be
entitled to payments of (i) $5,000 per month beginning in September 2001 through
December 2001, (ii) $10,000 per month when net sales are $200,000 per month and
(iii) $20,000 per month beginning in January 2003 and continuing in perpetuity.
These payments are to be paid on the last day of the month during which the
payment in question first becomes owing. The payment referenced in this Section
2.2 may be assigned by the Lender with or without the written authorization of
the Borrower provided that the assignment complies in all respects with
applicable laws and regulations, including, but not limited to, applicable
securities laws.
2.4 The Lender may, in its discretion, defer the payments described in
Section 2.3 on a monthly basis in the event that the Borrower's pre-tax monthly
income does not exceed $20,000 during the month in question. In the event of
such deferral, interest shall accrue on the deferred amounts at the rate of 8%
per annum. In addition, all deferred payments and accrued interest owing thereon
shall be due and payable on demand.
Section 3. Payments. All principal and interest outstanding shall be due and
payable by the Borrower to the Lender in a single balloon payment on September
18, 2002. Notwithstanding the foregoing, if not more than $25,000 in principal
is owing on September 18, 2002 then all principal and interest outstanding on
September 18, 2002 shall be due and payable by the Borrower to the Lender in a
single balloon payment on September 18, 2003. The Borrower may, from time to
time, in the Borrower's discretion, make one or more periodic payments to the
Lender. Such payments shall be credited to the Borrower's account on the date
that such payment is physically received by the Lender. Such payments shall be
applied first to the interest outstanding, and then to the principal
outstanding.
Section 4. Conditions Precedent. The obligation of Lender to disburse all or any
part of the Loan under this Agreement is subject to the satisfaction, on or
before each date funds are lent hereunder, of all the conditions set out below
in this Section 4. Lender may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by Lender of any of its other rights or
remedies, at law or in equity, if Borrower shall be in default of any of its
representations, warranties, or covenants under this Agreement.
4.1 From the date hereof to the date of each disbursement, there shall
not have been any material adverse change in the financial condition or the
results of operations of Borrower, and Borrower shall not have sustained any
material loss or damage to its assets, whether or not insured, that materially
affects its ability to conduct a material part of its business.
4.2 No action, suit, or proceeding before any court or any governmental
body or authority pertaining to the transaction contemplated by this Agreement
or to its consummation, shall have been instituted or threatened on or before
the date of disbursement.
4.3 The execution and delivery and performance of this Agreement and
any note or other instrument or agreement required under this Agreement by
Borrower shall have been duly authorized by all necessary corporate action, and
Lender shall have received copies of all resolutions pertaining to that
authorization, certified by the secretary of Borrower as being in full force and
effect on the date of first disbursement.
Section 5. Grant of Security Interest.
5.1 For the purpose of securing the payment of the Notes, and the
payment and performance of all obligations and covenants contained in the Notes,
in this Agreement, or in any other instrument securing the Notes or relating to
the obligations of the Borrower thereunder (hereinafter referred to as the
"Indebtedness"), Borrower hereby grants and conveys to Lender a security
interest in the following described property of Borrower (individually and
collectively, the "Collateral"), whether now owned or hereafter acquired:
A. All goods, machinery, equipment, inventory and all other
tangible personal property of any nature whatsoever, wherever located,
including raw materials, work in process, finished parts and products,
supplies, spare parts, replacement parts, merchandise for resale,
computers, tapes, disks and computer equipment;
B. All rights to receive the payment of money, including
accounts and receivables, rights to receive the payment of money under
contracts, franchises, licenses, permits, subscriptions or other
agreements (whether or not earned by performance), and rights to
receive payments from any other source;
C. All of the following: (i) contracts, franchises, licenses,
permits, subscriptions and other agreements and all rights thereunder;
(ii) rights granted by others which permit the Borrower to sell or
market items of personal property; (iii) United States and foreign
common law and statutory copyrights and rights in literary property and
rights and licenses thereunder; (iv) trade names, United States and
foreign trademarks, service marks, Internet domain names, registrations
of any of the foregoing and related good will; (v) United States and
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foreign patents and patent applications; (vi) computer software,
designs, models, know-how, trade secrets, rights in proprietary
information, formulas, customer lists, backlog, orders, subscriptions,
royalties, catalogues, sales material, documents, good will, inventions
and processes; (vii) judgments, causes in action and claims, whether or
not inchoate, and (viii) all other general intangibles and intangible
property and all rights thereunder;
D. All of the following: (i) all shares of capital stock or
other evidence of beneficial interest in any corporation, business
trust or limited liability company; (ii) all limited partnership
interests in any limited partnership; (iii) all general partnership
interests in any general or limited partnership; (iv) all joint venture
interests in any joint venture; and (v) all options, warrants and
similar rights to acquire such capital stock or such interests;
E. All rights to receive profits or surplus of, or other
distributions (including income, return of capital and liquidating
distributions) from, any partnership, joint venture or limited
liability company, including any distributions by any such Person to
partners, joint venturers or members;
F. All debt from time to time owing to the Borrower from any
person, organization or entity;
G. All chattel paper, non-negotiable instruments, negotiable
instruments, documents and investment property;
H. All leases of personal property, whether the Borrower is
the lessor or the lessee thereunder;
I. All general or special deposit accounts, including any
demand, time, savings, passbook or similar account maintained by the
Borrower with any bank, trust company, savings and loan association,
credit union or similar organization, and all money, cash and cash
equivalents of the Borrower, whether or not deposited in any such
deposit account;
J. All collateral granted by third parties to, or held by, the
Borrower with respect to the accounts, pledged securities, chattel
paper, instruments, leases and other items of collateral;
K. All books and records, including books of account and
ledgers of every kind and nature, all electronically recorded data
(including all computer programs, disks, tapes, electronic data
processing media and software used in connection with maintaining the
Borrower's books and records), all files, correspondence and all
containers for the foregoing;
L. All insurance policies which insure against any loss or
damage to any other Collateral or which are otherwise owned by the
Borrower;
M. All other property, assets and items of value of every kind
and nature, tangible or intangible, absolute or contingent, legal or
equitable; and
N. All proceeds, including insurance proceeds, and products of
the items of collateral described or referred to in Sections 5A. and
5N. and, to the extent not included in the foregoing, all distributions
with respect to the securities included as part of the Collateral.
5.2 Notwithstanding Sections 5.1A. through 5.1N., the Collateral shall
not include:
A. Any contract, license, permit or franchise that validly
prohibits the assignment by the Borrower of rights under, or the
creation by the Borrower of a security interest in, such contract,
license, permit or franchise (or in any rights or property obtained by
the Borrower under such contract, license, permit or franchise);
provided, however, that the provisions of this Section 5.2 shall not
prohibit the security interests created by this Agreement from
extending to the proceeds of such contract, license, permit or
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franchise (or such rights or property) or to the monetary value of the
good will and other general intangibles of the Borrower relating
thereto; or
B. any rights or property to the extent that any valid and
enforceable law or regulation applicable to such rights or property
prohibits the creation of a security interest therein; provided,
however, that the provisions of this Section 5.2 shall not prohibit the
security interests created by this Agreement from extending to the
proceeds of such rights or property or to the monetary value of the
good will and other general intangibles of the Borrower relating
thereto.
5.3 All Collateral shall be free and clear of any liens and
restrictions on the transfer thereof, including, without limitation, contractual
provisions which prohibit the assignment of rights under contracts, except for
(a) nonconsensual liens imposed by law and (b) liens and restrictions on
transfer approved in writing by Borrower.
Section 6. Debtor's Covenants.
6.1 The Borrower will not dispose of, transfer, or conceal any of the
Collateral, excepting only transfers in the ordinary course of business.
6.2 The Borrower shall pay when due any and all taxes assessed on the
Collateral.
Section 7. Default Provisions. The occurrence of one or more of the following
events shall constitute an event of default:
A. If the Borrower fails to pay any sum when due under one or
more of the Notes, or any other event of default occurs with respect to the
Indebtedness.
B. Failure of the Borrower to comply with or perform any of
the terms, covenant, and conditions of this Agreement.
C. If any levy, attachment, garnishment, lien, execution or
other process is issued against or otherwise attaches to the Collateral (other
than any liens that may attach in favor of XxXxxxxx Enterprises Inc. Profit
Sharing Plan and Trust and/or Xxxxx Xxxxx in connection with funds lent to the
Borrower), whether for taxes or any other debt or claim and whether or not any
such attachment or other process is issued before or after entry of judgment.
D. If the Borrower ceases conducting business, dissolves,
terminates its existence, becomes insolvent, files a voluntary petition for
bankruptcy, has filed against it an involuntary petition in bankruptcy that is
not dismissed within sixty (60) days of the filing date, or is the subject of an
assignment for the benefit of creditors.
E. If any representation by the Borrower, then, in connection
with this Agreement, the Notes, or any other related instrument, whether made
before or after execution of this Agreement, was false in any material respect
when made.
Section 8. Remedies. Upon default, the Lender shall have the following rights,
in addition to any other rights afforded by law:
A. The Borrower agrees that notice of any disposition of or
use of the Collateral shall be deemed commercially reasonable and to have been
given to and received by the Borrower if transmitted by certified mail, return
receipt requested, at least fourteen (14) days prior to the proposed disposition
or use. The Borrower further agrees that any public sale of the Collateral, or
any portion thereof, may be postponed by the Lender (or its agent) for a period
of not to exceed seven days, by announcement at the time and place of the sale,
without need to re-notice or advertise. Notwithstanding the foregoing, the
Lender shall not be required to dispose of the Collateral or any portion thereof
by public auction.
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B. Lender shall be entitled to notify any account debtor, any
obligor on an instrument, and any other person in custody or control of any of
the Collateral (including all banks and financial institutions holding funds of
the Borrower), to make payments on and/or to deliver the Collateral to Lender or
its Agent.
Section 9. Acceleration. At the option of the Lender, and without demand or
notice, all principal and any unpaid interest shall become immediately due and
payable upon a default as set forth in Section 7 above.
Section 10. Miscellaneous.
10.1 The Borrower shall pay to the Lender, on demand, any and all
expenses, including attorney's fees, incurred or paid by Lender in protecting or
enforcing its rights upon or under the Notes or the Collateral, and such
expenses are secured hereunder. If the Borrower shall default in the performance
of any of the provisions of this Agreement, Lender may cure the default for the
Borrower's account, and any monies expended in doing so shall be paid on demand,
together with interest from the date expended at twelve percent (12%) per annum.
10.2 The Borrower agrees to execute and deliver such financing
statements, certificates of title or other evidence of title or ownership, and
other instruments as Lender may reasonably request in order to perfect or
protect the security interest granted hereunder. A copy of this Agreement may be
filed as a financing statement.
10.3 This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter contained in this Agreement. All prior
and contemporaneous agreements, representations and understandings of the
parties, oral or written, are superseded by and merged in this Agreement. No
supplement, modification or amendment of this Agreement shall be binding unless
in writing and executed by the Borrower and the Lender.
10.4 The provisions of this Agreement shall be binding upon the
Borrower, its legal representatives, successors or assigns, and shall be for the
benefit of the Lender and its respective successors and assigns.
10.5 The headings of this Agreement are for purposes of reference only
and shall not limit or define the meaning of any provision of this Agreement.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which shall constitute one and the same
instrument.
10.6 If any action is brought by either party in respect to its rights
under this Agreement, or to obtain an interpretation thereof, the prevailing
party shall be entitled to reasonable attorneys' fees and court costs as
determined by the court.
10.7 No waiver of any of the provisions of this Agreement shall
constitute a waiver of any other provision, whether or not similar, nor shall
any waiver be a continuing waiver. Except as expressly provided in this
Agreement, no waiver shall be binding unless executed in writing by the party
making the waiver. Either party may waive any provision of this Agreement
intended for its benefit; provided, however, such waiver shall in no way excuse
the other party from the performance of any of its other obligations under this
Agreement.
10.8 This Agreement shall be governed by the laws of the State of Utah.
Any legal action to enforce or obtain an interpretation of this Agreement may be
filed in the Fourth Judicial District Court of Utah County, or the Third
Judicial District Court of Salt Lake County, and the parties consent to the
exercise of personal over them by said courts.
Section 11. Notices; Addresses. Any notices required or permitted hereunder
shall be in writing and shall be given by personal delivery; by deposit in the
United States mail, certified mail, return receipt requested, postage prepaid;
or by established express delivery service, freight prepaid. Notices shall be
delivered, addressed, or transmitted to the parties at the following addresses,
which may be changed by a notice given to the other party in accordance with
this Section. The date notice is deemed to have been given, received and become
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effective shall be the date on which the notice is delivered, if notice is given
by personal delivery, two (2) days following the date of deposit in the mail, if
the notice is sent through the United States mail, or the date of actual
receipt, if the notice is sent by express delivery service.
The Borrower's address is:
Quest Group International, Inc.
Attn. President
XX Xxx 0000
Xxxxxxx Xxxx, XX 00000
Telephone: 000-000-0000
Fax: 000-000-0000
The Lender's address, and the address from which information
respecting this security interest may be requested, is:
Xxxxxxx Dynasty, LC
0000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the 1st day of September, 2001.
"BORROWER" "LENDER"
QUEST GROUP INTERNATIONAL, INC., XXXXXXX DYNASTY, LC.
a Nevada corporation a Utah limited liability company
Federal Empl. ID No. N/a
By /s/ Xxxxx Xxxxx By /s/ Xxxx Xxxxxxx
--------------------------------- ------------------
Its: President Its: Manager
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EXHIBIT A
QUEST GROUP INTERNATIONAL, INC.,
a Nevada corporation
10% SECURED PROMISSORY NOTE
No. ________ $____________ USD
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), OR UNDER ANY OTHER APPLICABLE STATE SECURITIES LAWS.
THIS PROMISSORY NOTE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS.
1. Promise to Pay. Quest Group International, Inc., a Nevada
corporation ("Corporation"), for value received, hereby promises to pay to
_____________________, ("Holder"), the principal sum of ____________________
Dollars ($____________), with interest at the rate of ten percent (10%) per
annum until this Note has been paid in full.
2. Payments. All principal and interest outstanding shall be due and
payable by the Corporation to the Holder in a single balloon payment on
September 18, 2002. Notwithstanding the foregoing, if not more than $25,000 in
principal is owing on September 18, 2002 then all principal and interest
outstanding on September 18, 2002 shall be due and payable by the Corporation to
the Holder in a single balloon payment on September 18, 2003. The Corporation
may, from time to time, in the Corporation's discretion, make one or more
periodic payments to the Holder. Such payments shall be credited to the
Corporation's account on the date that such payment is physically received by
the Holder. Such payments shall be applied first to the interest outstanding,
and then to the principal outstanding. Payments shall be made in lawful money of
the United States of America to Holder at the address provided to the
Corporation by the Holder, as appears on this instrument below or at such other
addresses as sent by Holder to the Corporation.
3. Default. The occurrence of one or more of the following events shall
constitute an event of default:
3.1 The nonpayment of the principal and/or interest of this
Note when the same shall have become due and payable.
3.2 Filing by the Corporation of a petition in bankruptcy or
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Corporation's debts, whether under the United States Bankruptcy Code or
any other applicable federal or state law; entry of an order for relief under
the United States Bankruptcy Code, whether pursuant to a voluntary or
involuntary petition; the filing of an involuntary petition seeking adjudication
of the Corporation as a debtor under the United States Bankruptcy Code or
similar federal law, if said petition is not dismissed within sixty (60) days;
entry of a decree or order appointing a receiver, liquidator, assignee, or
trustee of the Corporation, or any substantial part if its property, or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60) days; or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Corporation in furtherance of any such
action.
3.3 Default by the Corporation under the Revolving Loan and
Security Agreement, which default is not cured within ten (10) days of written
notice thereof (or within such longer cure period as allowed by the Revolving
Loan and Security Agreement).
4. Acceleration. At the option of the Holder, and without demand or
notice, all principal and any unpaid interest shall become immediately due and
payable upon a default as set forth in Section 3 above.
4. Restrictions on Transfer. This Note has not been registered under
the Securities Act of 1933. This Note, or any right hereunder, may not be
enforced against the Corporation by any Holder, except the original Holder
herein, and the Corporation shall not be obligated to recognize any purported
transferee or assignee, (i) unless there is an effective registration covering
the Note or underlying right under the Securities Act of 1933 and applicable
state securities laws, (ii) unless the Corporation receives an opinion of an
attorney, licensed to practice within the United States, that the transfer of
the Note, or any underlying right, complies with the requirements of the
Securities Act of 1933 and any relevant state securities law, or (iii) unless
the transfer is made pursuant to Rule 144 under the Securities Act of 1933. Any
permitted transferee or assignee shall be subject to the restrictions and to the
terms of this Note and the Revolving Loan and Security Agreement, and the
Corporation may require said transferee or assignee to execute and deliver such
further instruments evidencing or acknowledging the same.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Corporation.
6. Notices. Any notices required or permitted hereunder shall be in
writing and shall be given by personal delivery; by deposit in the United States
mail, certified mail, return receipt requested, postage prepaid; or by
established express delivery service, freight prepaid. Notices shall be
delivered, addressed, or transmitted to the Corporation and to Holder at the
following addresses, which may be changed by a notice given to the other party
in accordance with this Section. The date notice is deemed to have been given,
received and become effective shall be the date on which the notice is
delivered, if notice is given by personal delivery, two (2) days following the
date of deposit in the mail, if the notice is sent through the United States
mail, or the date of actual receipt, if the notice is sent by express delivery
service.
The Corporation's address is:
Quest Group International, Inc.
Attn. President
XX Xxx 0000
Xxxxxxx Xxxx, XX 00000
Telephone: 801-__________
Fax: 801-__________
The Holder's address, and the address from which information
respecting this security interest may be requested, is:
Xxxxxxx Dynasty, LC
----------------------------
----------------------------
----------------------------
7. Miscellaneous.
7.1 This Note is one of a series of 10% Secured Promissory Notes (the
"Notes") issued by the Corporation, which Notes total an aggregate amount of not
more than Fifty Thousand Dollars (U.S.) ($50,000 USD). The obligations of the
Corporation under the Notes are secured by a Revolving Loan and Security
Agreement, and the rights and duties of the Corporation and Holder are subject
to the terms of the Revolving Loan and Security Agreement.
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7.2 The headings of this Note are for purposes of reference only and
shall not limit or define the meaning of any provision of this Note.
7.3 If suit or action is instituted in connection with any controversy
arising out of this Note, or in the enforcement of any rights hereunder, the
prevailing party shall be entitled to recover in addition to costs such sums as
the court may adjudge as reasonable attorney's fees, including attorney's fees
incurred in any appeal.
7.4 This Note shall be governed by the laws of the State of Utah. Any
legal action to enforce or obtain an interpretation of this Note may be filed in
the Fourth Judicial District Court of Utah County, or the Third Judicial
District Court of Salt Lake County, and the parties consent to the exercise of
personal over them by said courts.
7.5 In computing any period of time pursuant to this Note, the day of
the act, event or default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday, or a legal holiday, in which
event the period shall begin to run on the next day which is not a Saturday,
Sunday, or legal holiday, in which event the period shall run until the end of
the next day thereafter which is not a Saturday, Sunday, or legal holiday.
7.6 Nothing herein shall be construed to be to the benefit of any third
party, nor is it intended that any provision shall be for the benefit of any
third party.
IN WITNESS WHEREOF, this Note is executed by Quest Group International,
Inc., to be effective as of the _____ day of _______________, 200__.
QUEST GROUP INTERNATIONAL, INC.,
a Nevada corporation
By____________________________
Its President
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STATE OF UTAH )
ss:
COUNTY OF UTAH )
On this ____ day of ______________, 200__, before me appeared
____________, to me personally known, who being duly sworn did say that he/she
is the President of Quest Group International, Inc., the within named
corporation, and that the instrument was signed in behalf of said corporation
and acknowledged the instrument to be the free act and deed of the corporation.
______________________________________
NOTARY PUBLIC
My Commission Expires: Residing at: _________________________
___________________________
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