As filed with the Securities and Exchange Commission on November 8,
1996.
REGISTRATION NO.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LITIGATION ECONOMICS, INC.
(Name of Small Business Issuer in its Charter)
Nevada 7392 86-0793960
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No)
227 South Ninth Avenue, Pocatello, Idaho 83201, (208) 233-8001
(Address and Telephone Number of Registrant's Principal Place of
Business)
Cornelius A. Hofman II, 227 South Ninth Avenue Pocatello, Idaho 83201,
(208) 233-8001
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Cletha A. Walstrand, Esq., Poulton & Yordan, 4 Triad Center, Suite 500-A
Salt Lake City, Utah 84180 (801) 355-1341
Approximate Date of Proposed Sale to the Public: As soon as practicable
from time to time after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____ <PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. _____ <PAGE>
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 check the following box. _____ <PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. _____ <PAGE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a) may determine.
<PAGE>
Litigation Economics, Inc.
CROSS-REFERENCE SHEET
Pursuant to Rule 404(a)
Item Number and Heading Heading in Prospectus
1. Front of the Registration Statement
and Outside Front Cover Page of
Prospectus . . . . . . . . . . . . . . Facing pages; Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk Factors . .Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . . . Prospectus Summary; Use of
Proceeds;Description of Business
5. Determination of Offering Price . . . . Cover Page; Prospectus Summary;
Risk Factors; Determination of
Offering Price
6. Dilution . . . . . . . . . . . . . . . .Dilution; Comparative Data
7. Selling Security Holders . . . . . . . .Not applicable
8. Plan of Distribution . . . . . . . . . .Front Cover Page; Plan of
Distribution
9. Legal Proceedings . . . . . . . . . . . Legal Matters
10.Directors, Executive Officers,
Promoters and Control Persons . . . . Directors, Executive Officers,
Promoters and Control Persons
11.Security Ownership of Certain
Beneficial Owners and Management . . . Security Ownership of Certain
Beneficial Owners and Management
12.Description of the Securities . . . . Description of Securities
13.Interest of Named Experts and Counsel . Not Applicable
14.Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . . . Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
15.Organization Within Last Five Years . .Organization Within Last Five Years
16.Description of Business . . . . . . . .Description of Business
17.Management's Discussion and Analysis
or Plan Of Operation . . . . . . . . . Plan of Operations
18.Description of Property . . . . . . . Description of Property
19.Certain Relationships and
Related Transactions . . . . . . . . Not Applicable
20.Market for Common Equity and
Related Stockholder Matters . . . . . .Front Cover Page; Risk Factors;
Shares Eligible for Future Sale
21.Executive Compensation . . . . . . . . Executive Compensation
22.Financial Statements . . . . . . . . . Financial Statements
23.Changes In and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . Not Applicable
<PAGE>
50,000 Minimum / 100,000 Maximum Shares
Litigation Economics, Inc.
Common Stock
Litigation Economics, Inc. (the "Company") is offering 50,000
Minimum and 100,000 Maximum shares of its $.001 par value common stock,
(the "Common Stock" or the "Shares") to the public at a price of $1.00 per
Share.
Prior to this offering, there has been no public market for the
Shares of Common Stock, and there can be no assurance that a market will
develop upon completion of this offering or, if a market should develop,
that it will continue. The initial public offering price has been
arbitrarily determined by the Company and bears no necessary relationship
to assets, shareholders equity or any other recognized criteria of value.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND INVESTORS SHOULD EXPECT
IMMEDIATE SUBSTANTIAL DILUTION. THE SECURITIES OFFERED HEREIN SHOULD NOT
BE PURCHASED BY ANY INVESTOR WHO CANNOT AFFORD TO SUSTAIN THE TOTAL LOSS
OF THEIR INVESTMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY NOR HAS THE
COMMISSION OR ANY AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Discounts Proceeds to
Public(1)(3) and Commissions(1)(3) Company(2)(3)
Per Share $1.00 $.00 $1.00
Total $50,000/$100,000 $.00 $50,000/$100,000
(1) The offering will be managed by the Company and the Shares
will be offered and sold by officers of the Company, without
any discounts or other commissions. See "Plan of
Distribution."
(2) Proceeds to the Company are shown before deducting offering
expenses payable by the Company estimated at $20,000,
including legal and accounting fees and printing costs.
(3) The offering is being conducted by the Company on a "best
efforts" basis. If the Company is unable to sell at least the
Minimum Offering, all of the funds received by the Company
will be returned to the investors. Proceeds will be deposited
no later than noon of the next business day after receipt into
an escrow account with Mr. Ron Bitton, Professional Escrow
Services, P. O. Box 2466, 920 Deon Drive, Suite B, Pocatello,
Idaho 83206, pending receipt of subscriptions totalling
$50,000 (the minimum offering). If subscriptions for all
50,000 Shares of the Minimum Offering have not been received
within 120 days from the date hereof (unless extended by the
Company for up to 30 additional days), all proceeds will be
promptly refunded to subscribers without interest thereon or
deduction therefrom. Subscribers will have no right to return
or use of their funds during the offering period, which may
last up to 150 days.
The Shares are being offered by the Company subject to prior sale,
receipt and acceptance by the Company, approval of certain matters by
counsel, and certain other conditions. The Company reserves the right to
withdraw or cancel such offer and reject any order, in whole or in part.
The date of this Prospectus is November __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under
the Securities Act of 1933, as amended (the "Securities Act), with respect
to the securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information contained in the Registration Statement. For further
information regarding both the Company and the Securities offered hereby,
reference is made to the Registration Statement, including all exhibits
and schedules thereto, which may be inspected without charge at the public
reference facilities of the Commission's Washington, D.C. office, 450
Fifth Street, N.W., Washington, D.C. 20549. Copies may be obtained from
the Washington, D.C. office upon request and payment of the prescribed
fee.
As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and, in accordance therewith, will file
reports and other information with the Commission. Reports and other
information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act will be available for
inspection and copying at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: New York
Regional Office, 75 Park Place, New York, New York 10007; Chicago Regional
Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
Copies of the Company's Annual, Quarterly and other Reports which
will be filed by the Company with the Commission commencing with the
Quarterly Report for the first quarter ended after the date of this
Prospectus (due 45 days after the end of such quarter) will also be
available upon request, without charge, by writing Litigation Economics,
Inc., 227 South Ninth Avenue, Pocatello, Idaho 83201.
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE
SECURITIES COMMISSION OR OTHER STATE REGULATORY AUTHORITY, AND NO SUCH
REGULATORY AUTHORITY HAS PASSED UPON THE TERMS OF THIS OFFERING OR
APPROVED THE MERITS THEREOF. INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THIS OFFERING IN EVALUATING THE MERITS AND
RISKS OF THE OFFERING AND MAKING AN INVESTMENT DECISION.
THIS PROSPECTUS SHOULD BE READ IN ITS ENTIRETY BY ANY PROSPECTIVE INVESTOR
PRIOR TO HIS OR HER INVESTMENT.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information and consolidated financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its entirety, and
particularly the information set forth in "RISK FACTORS."
The Company
Litigation Economics, Inc. (the "Company") through its wholly owned
subsidiary, G.E.C., Inc., ("GEC") intends to engage in the business of
marketing and providing economic damage consulting services to attorneys
involved in litigation and to engage in and perform any and all activities
customary in connection therewith throughout the United States. The
Company intends to provide economic, financial, statistical, and other
types of analysis and services necessary to litigation involving disputes
regarding economic damages. The Company intends to use the proceeds of
this Offering to market and advertise the Company's services, buy computer
equipment and other assets and lease properties so that the Company can
begin marketing and providing services by early 1997.
The Offering
Securities Offered: Minimum of 50,000 Shares, Maximum of 100,000
Shares of Common Stock, $.001 par value ("Common
Stock") of the Company. See "Description of
Securities".
Offering Price: $1.00 per Share
Plan of Distribution: The offering will be managed by the Company and
the Shares will be offered and sold by officers
of the Company, without any discounts or other
commissions. Offering proceeds will be placed in
escrow pending completion or termination of the
offering. The offering will terminate 120 days
from the date hereof (or 150 days if extended by
the Company for an additional 30 days), and funds
held in escrow will be promptly returned to
subscribers, unless the offering minimum is
completed on or before that date upon receipt of
subscriptions for the minimum offering amount.
See "Plan of Distribution."
Escrow Agent: Mr. Ron Bitton, Professional Escrow Services, P. O. Box
2466, 920 Deon Drive, Suite B, Pocatello, Idaho 83206
will serve as escrow agent for receipt of the proceeds
from this offering.
Use of Proceeds: Management intends to use the net proceeds from this
offering primarily for the purposes of acquiring
supplies and equipment, marketing and advertising the
Company's services, covering the initial operating
expenses and providing the Company with working capital.
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<PAGE>
Transfer Agent: Interwest Transfer Company, Inc., 1981 East Murray-Holladay
Road, Salt Lake City, Utah 84117, Telephone
(801) 272-9294, has agreed to serve as transfer agent
upon completion of this offering.
Securities
Outstanding: The Company presently has 1,500,000 shares
of Common Stock issued and outstanding.
Upon completion of this offering, at least
1,550,000 shares will be issued and
outstanding if the minimum offering is
achieved and 1,600,000 shares will be
issued and outstanding if the maximum
offering is achieved. In addition, the
Company has adopted a Stock Option Plan
pursuant to which up to 500,000 shares of
Common Stock may be issued upon the
exercise of options which the Board of
Directors has the authority to grant to
officers, directors and employees. See
"1996 Stock Option Plan." The Company is
also authorized to issue up to 5,000,000
shares of preferred stock, the rights and
preferences of which may be designated in
series by the Board of Directors. To the
extent of such authorization, such
designations may be made without
shareholder approval. The Board of
Directors has not designated any series or
issued any shares of preferred stock. The
designation and issuance of series of
preferred stock in the future would create
additional securities which would have
dividend and liquidation preferences over
the Common Stock offered hereby.
Risk Factors: The Company is a start up company with no
operating history; consequently, an investment in
the Company is highly speculative. Investors
will suffer substantial dilution in the book
value per share of the Common Stock compared to
the purchase price. In seeking to implement its
proposed business, the Company could incur
substantial losses during the development stage,
and require additional funding for which it has
no commitments. Management has other interest
which may conflict with the interests of the
Company. Until such time, if ever, that the
Company generates sufficient revenue to pay
management salaries, members of management will
not be employed full time and will only devote a
minimal amount of time to the affairs of the
Company. No person should invest in the Company
who cannot afford to risk loss of the entire
investment. See "Risk Factors."
Summary Selected
Financial Data: The Company is a development stage company and has no
revenues or earnings from operations. As of August 31,
1996:
Total Assets $ 5,492
Total Liabilities $ 2,188
Shareholder Equity $ 3,304
Net Tangible Book Value $ 3,304
Net Tangible Book Value per Share $ 0.022
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<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high
degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth
elsewhere in this Prospectus, including the Consolidated Financial
Statements and Notes, prior to making an investment in the Company.
Risks Inherent in a New Start Up Company
1. No Operating History. The Company will not commence
operations until the proceeds of this Offering are available, therefore,
the Company has no operating history. Businesses which are starting up or
in their initial stages of development present substantial business and
financial risks and may suffer significant losses from which they can not
recover. The Company will face all of the challenges of a new business
enterprise, including but not limited to, locating suitable office space,
engaging the services of qualified support personnel and consultants,
establishing budgets, implementing appropriate financial controls and
internal operating policies and procedures.
2. Limited Capital/Need for Additional Capital. The Company
presently has no significant operating capital and is totally dependent
upon receipt of the proceeds of the Offering, to continue production and
marketing of its product. Upon completion of the Offering, even if the
entire Offering amount is raised, the amount of capital available to the
Company will be extremely limited, and may not be sufficient to enable the
Company to fully commence its proposed business operations without
additional fund raising. The Company has no commitments for additional
cash funding beyond the proceeds expected to be received from this
Offering.
3. Dependence on the Efforts of Management. The success of the
Company will depend in large measure on the efforts and assistance of its
management. The officers and directors have experience in financial
analysis and economics which will be important to the Company's success.
However, as compared to many other public companies, the Company lacks a
depth of managerial and technical personnel. Accordingly, there is a
greater likelihood that the loss of their services would impair the
ability of the Company to effectively carry out its operations. Further,
all but one of the directors will maintain part to full time employment
outside the Company and may not be able to devote sufficient attention to
the Company to ensure its success until earnings justify additional time
be devoted to the Company. Such outside employment may also create
conflicts of interest. There is no assurance such conflicts could be
resolved favorably for the Company.
4. Payment of Dividends. The Company has not paid dividends on
its common stock and does not anticipate paying dividends on its common
stock in the foreseeable future. There is no assurance that the Company's
operation will generate net profits from which to pay cash dividends.
Investors who anticipate the need of immediate income from an investment
should not purchase the shares being offered hereby.
5. Limited Liability of Officers and Directors. The Nevada
Revised Statutes provides that the Company shall provide indemnification
of officers and directors and certain employees under certain
circumstances and payment of expenses outlined in the statute. The Bylaws
of the Company provide that the officers and directors of the Company
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<PAGE>
shall be indemnified to the fullest extent allowable under the statute.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of
expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being offered, the Company 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.
Risks Related to the Nature of the Proposed Business
6. Uncertain Market Acceptance. The Company's proposed business
is based on a perceived need for a cost effective, accurate method of
determining the economic damages of an injured party during the pre-trial
settlement phase of litigation. There is no assurance of market
acceptance of this concept, and the Company's business will be subject to
all the risks associated with introducing a new marketing concept. The
Company has undertaken no independent market study to determine the
feasibility of this concept.
7. Competition. The Company will operate in a highly competitive
environment. Competition ranges from a large number of sole practitioners
to a variety of large, national consulting firms. Many of the Company's
competitors are larger and have significantly greater financial resources,
operating experiences, management experience, and other capabilities than
the Company.
8. Reliance on Short Term Terminable Leases for Office Space.
The Company intends to lease office space. So as not to incur excessive
long term liabilities, the Company intends to lease space on a short term,
terminable basis. These leases may be terminable as frequently as each
month. The Company has no assurance that it will be able to negotiate
leases on these terms. Further, if the Company is able to negotiate short
term terminable leases, it is foreseeable that these leases would be
terminated by the lessors as soon as the lessor found someone willing to
lease the property on a longer term basis. Should this be the case, the
Company will likely incur significant expense in searching for and
configuring new office space to meet its needs. Also, the Company could
incur significant inconvenience and loss of time and income if it is
required to change office space on a frequent basis.
9. Proprietary Information. PreVal(TM) is a proprietary computer
aided damage analysis system designed by Cornelius A. Hofman, II and used
exclusively by the Company. The Company anticipates registering the
trademark PreVal(TM) under federal trademark law. However, until such
registration is complete, the Company will take appropriate internal and
external safeguards to ensure proprietary information is adequately
protected, nevertheless, there are no guarantees information will not leak
out.
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<PAGE>
10. Potential for Indirect Government Regulation. Over the last
decade, state and federal legislatures have begun imposing legal
limitations on the recovery of certain types of non-economic damages, this
tort reform trend has picked up steam over the last several years. To
date, the changes to the legal system proposed as a part of the tort
reform movement have been limited to the recovery of nonpecuniary damages
(those not capable of monetary calculation). While the Company's services
do not fall under the limitations of the current tort reform movement,
there is no guarantee that the legislative structure of tort reform will
not change. If legislation were passed placing caps on pecuniary damages,
such legislation may materially adversely affect the Company.
11. Potential for Conflict of Interest with General Economic
Consulting, Inc. General Economic Consulting, Inc. provides consulting
services similar to the Company's. The Company intends to subcontract
some consulting work to General Economic Consulting. The Company does not
intend to subcontract any PreVal(TM) work to General Economic Consulting or
to any other company. PreVal(TM) is a computer aided service developed by
one of the officers of the Company and was created for analyzing economic
damages. The PreVal(TM) service will only be offered by the Company and will
not be subcontracted to General Economic Consulting, Inc. One of the
Company's directors is also a director of General Economic Consulting. It
is contemplated that the Company may enter into non-arms length
transactions with members of the Company's management, members of General
Economic Consulting's management, and the management of other potential
subcontractors, including but not limited to, the leasing or use of
facilities and the possible purchase of various assets. Management
intends that such transactions be entered into on a fair and reasonable
basis to the Company; however, due to the non-arms length nature of such
transactions there is no assurance of this.
Risks Related to the Offering
12. Best Efforts Offering/No Firm Commitment. The Shares are
offered by the Company on a "best efforts" basis. There is no underwriter
and no firm commitment from anyone to purchase all or any of the Shares
offered. No assurance can be given that all of the Shares will be sold.
If the Company is unable to sell at least the Minimum Offering, all of the
funds received by the Company will have to be returned to the investors
and the Company will have no funds available for operations.
13. Uncertain Public Market for Shares. At present, the Company's
shares are not traded publicly. There is no assurance that a trading
market will develop, or, if developed, that it will be sustained. A
purchaser of shares may, therefore, find it difficult to resell the
securities offered herein should he or she desire to do so. Furthermore,
the shares are not marginable and it is unlikely that a lending
institution would accept the Company's common stock as collateral for a
loan.
14. Arbitrary Offering Price. The offering price of the shares
was arbitrarily determined by the Company. There is no relationship
between the offering price of the shares and the Company's assets,
earnings, book value, net worth or other economic or recognized criteria
or future value of the Company's shares.
15. Volatility of Stock Price. If a public market develops for
the Shares, many factors will influence the market prices. The Shares
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<PAGE>
will be subject to significant fluctuation in response to variations in
operating results of the Company, investor perceptions of the Company,
supply and demand, interest rates, general economic conditions and those
specific to the industry, developments with regard to the Company's
activities, future financial condition and management.
16. Uncertain Sufficiency of Funds. The Company believes that the
net proceeds from the sale of the Shares offered hereby (assuming that all
Shares offered hereby are sold) will provide the Company with sufficient
capital to fund the initial marketing and operating costs of the Company.
Many factors may, however, affect the Company's cash needs, including the
Company's possible failure to generate revenues from the sale of its
services.
17. Broad Discretion as to Use of Proceeds. The Company's
Management shall have wide discretion as to the exact allocation and
priority and timing of the allocation of funds raised from the Offering.
The allocation of the Proceeds of the Offering may vary significantly
depending upon numerous factors, including the success that the Company
has marketing its services. Accordingly, management will have broad
discretion with respect to the expenditure of the net proceeds of the
Offering. Investors purchasing the shares of the Common Stock offered
hereby will be entrusting their funds to the Company's management, upon
whose judgement the Subscribers must depend. See "Use of Proceeds."
18. Continuation of Management Control. The Company's present
officers, directors and principal shareholders own a majority of the
Company's outstanding common stock and they may purchase shares in the
Offering. However, even if the officers, directors and principal
shareholders do not purchase any of the securities offered hereby, such
persons will still own a majority of the outstanding voting stock.
Therefore, the Company's present management and principal stockholders
will continue to be able to elect all the directors and otherwise
absolutely control the Company and investors in the Offering will have no
ability to remove, control or direct such management. See "Principal
Stockholders."
19. Applicability of Low Priced Stock Risk Disclosure
Requirements. The securities of the Company will be considered low priced
securities under rules promulgated under the Exchange Act. Under these
rules, broker-dealers participating in transactions in low priced
securities must first deliver a risk disclosure document which describes
the risks associated with such stocks, the broker-dealer's duties, the
customer's rights and remedies, and certain market and other information,
and make a suitability determination approving the customer for low priced
stock transactions based on the customer's financial situation, investment
experience and objectives. Broker-dealers must also disclose these
restrictions in writing to the customer and obtain specific written
consent of the customer, and provide monthly account statements to the
customer. The likely effect of these restrictions will be a decrease in
the willingness of broker-dealers to make a market in the stock, decreased
liquidity of the stock and increased transaction costs for sales and
purchases of the stock as compared to other securities.
20. Benefits to Present Stockholders/Disproportionate Risks.
Collectively the existing shareholders own 1,500,000 shares of the
Company's presently outstanding Common Stock, for which they paid $6,000
cash. If the minimum number of Shares offered hereby are sold, upon
completion of the Offering present stockholders will own 97% of the then
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<PAGE>
outstanding Common Stock, and investors in the Offering will own the other
3%, for which they will have paid $50,000 cash. If the maximum number of
Shares offered hereby are sold, upon completion of the Offering present
stockholders will own 94% of the then outstanding Common Stock, and
investors in the Offering will own the other 7%, for which they will have
paid $100,000 cash. Thus, investors in the Offering will contribute to
the capital of the Company a disproportionately greater percentage than
the ownership they receive. Present stockholders will benefit from a
greater share of the Company if successful, while investors in the
Offering risk a greater loss of cash invested if the Company is not
successful. See "Comparative Data."
21. Dilution. Investors who purchase the shares will experience
immediate dilution in the book value of the common stock which they
acquire. The present shareholders of the Company acquired their common
stock at an average cost of $0.004 per share, substantially less than the
$1.00 per Share to be paid by investors in this Offering. Dilution may
also occur if the Company issues additional shares at a price lower than
the offering price stated herein. A substantial portion of the 50,000,000
authorized shares of common stock of the Company will remain unissued if
all shares offered hereby are sold. The Board of Directors has, however,
the power to issue such shares without shareholder approval. Following
the Offering, any additional issuances of shares by the Company from its
authorized but unissued shares would have the effect of further diluting
the book value of shares and the percentage ownership interest of
investors in this Offering.
22. Potential Issuance of Additional Common and Preferred Stock.
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, of which no more than 1,600,000 shares will be issued and
outstanding upon completion of the Offering. To the extent of such
authorization, the Board of Directors of the Company will have the
ability, without seeking shareholder approval, to issue additional shares
of Common Stock in the future for such consideration as the Board of
Directors may consider sufficient. The issuance of additional Common
Stock in the future will reduce the proportionate ownership and voting
power of the Common Stock offered hereby. The Company is also authorized
to issue up to 5,000,000 shares of preferred stock, the rights and
preferences of which may be designated in series by the Board of
Directors. To the extent of such authorization, such designations may be
made without shareholder approval. The Board of Directors has not
designated any series or issued any shares of preferred stock. The
designation and issuance of series of preferred stock in the future would
create additional securities which would have dividend and liquidation
preferences over the Common Stock offered hereby. See "Description of
Securities."
23. Shares Eligible for Future Sale. Of the 1,500,000 Common
Shares presently outstanding, 500,000 Shares were acquired by David N.
Nemelka in a private placement. Also, 1,000,000 Common Shares were
acquired by Cornelius A. Hofman II and Stacey A. Hofman pursuant to an
Agreement and Share of Plan Exchange, in which Mr. and Mrs. Hofman
exchanged all of the issued and outstanding shares of G.E.C., Inc. These
shares are subject to any of the resale limitations imposed by Rule 144.
While these shares are not being offered for sale presently, they may at
some time in the future be sold, pursuant to Rule 144, into any public
market that may develop for the Common Stock. Future sales by current
shareholders could depress the market prices of the Common Stock in any
such market.
24. Cumulative Voting and Pre-emptive Rights. There are no pre-emptive
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rights in connection with the Company's common stock. Cumulative
voting in the election of directors is not permitted. Accordingly, the
holders of a majority of the shares of common stock, present in person or
by proxy, will be able to elect all of the Company's Board of Directors.
Even if all the Shares are sold the current shareholders will own a
majority interest in the Company. Accordingly, the present shareholders
will continue to elect all of the Company's directors and generally
control the affairs of the Company. (See "Description of Securities.")
USE OF PROCEEDS
The following table sets forth management's present estimate of the
allocation of net proceeds expected to be received from this offering.
Actual expenditures may vary from these estimates. Pending such uses, the
Company will invest the net proceeds in investment-grade, short-term,
interest bearing securities.
If Minimum If Maximum
Amount Sold Amount Sold
Total Proceeds $50,000 $100,000
Less:
Offering Expenses 17,000 17,000
Filing Fees 3,000 3,000
Net Proceeds from Offering Available $30,000 $80,000
Use of Net Proceeds
Acquisition of Supplies $10,000 $20,000
and Equipment (1)
Marketing and Advertising(2) 10,000 25,000
Initial Operating Expenses 10,000 35,000
and Working Capital (3)
Total Use of Net Proceeds $30,000 $80,000
_________________________________________
(1) This is the approximate amount of net proceeds of the Offering which
the Company estimates will be used to purchase the equipment and supplies
necessary to operate the Company.
(2) This represents the amount the Company estimates it will expend
producing marketing literature, contacting potential clients, including
the placement of advertising materials in direct mail.
(3) The Company intends to use a significant portion of the net proceeds
to cover operating expenses and provide working capital during the initial
development phase of operations. The Company believes this amount is
sufficient to provide the operating capital necessary to operate the
business for the first twelve months.
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DETERMINATION OF OFFERING PRICE
The offering price of the shares was arbitrarily determined by the
Company. There is no relationship between the offering price of the
shares and the Company's assets, earnings, book value, net worth or other
economic or recognized criteria or future value of the Company's shares.
DILUTION
As of the date of this Offering, the Company has 1,500,000 common
shares issued and outstanding and a net tangible book value of $3,304 or
$ .0022 per share.
The proceeds from the sale of shares will vary depending on the
total number of shares sold.
Assuming only a minimum of 50,000 shares offered are sold there
would be a total of 1,550,000 common shares issued and outstanding. If
only the minimum of 50,000 shares are sold, the net proceeds to the
Company after deducting offering costs of $20,000 would be $30,000.
Adding the net proceeds to the net tangible book value, the total net
tangible book value of the Company would be $33,304. Dividing the net
worth of the Company by the number of shares outstanding discloses a per
share book value of approximately $ .021 per share. Therefore, the
shareholders who purchased pursuant to the Offering will suffer an
immediate dilution in the book value of their shares of approximately $
.98 or approximately 98% and the present shareholders will receive an
immediate book value increase of approximately $ .019 per share.
If all 100,000 common shares offered hereunder are sold, there would
be a total of 1,600,000 common shares issued and outstanding. If the
maximum 100,000 shares are sold the net proceeds to the Company after
deducting the offering costs of $20,000 will be $80,000. Adding the net
offering proceeds to the net tangible book value of the Company would be
$83,304. Dividing the total book value of the Company by the number of
shares outstanding discloses a per share book value of approximately $
.052. Therefore, the shareholders who purchased pursuant to the Offering
will suffer an immediate dilution in the book value of their shares of
approximately $.95 or approximately 95% and the present shareholders will
receive and immediate book value increase of $ .050 per share.
"Dilution" means the difference between the price of the Shares
purchased by purchasers in the offering from the pro forma net tangible
per share after giving effect to the offering.
"Net tangible book value" is obtained by subtracting the total
liabilities from the total tangible assets (total assets less intangible
assets and offering expenses). Net tangible book value per share is
determined by dividing the number of shares outstanding into the net
tangible book value of shares immediately after the offering.
COMPARATIVE DATA
The following chart illustrates the pro forma proportionate
ownership in the Company, upon completion of the Offering, of present
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stockholders and of investors in the Offering, compared to the relative
amounts paid and contributed to capital of the Company by present
stockholders and by investors in this Offering, assuming no changes in net
tangible book value other than those resulting from the Offering.
Shares Owned Percent Cash Paid Percent Average
Price/share
(4) (5)
Present Shareholders 1,500,000 97%/94% $6,000 11%/6% $0.004
New Investors 50,000 3 % $50,000 89% $1.00
(Minimum)
New Investors 100,000 6% $100,000 94% $1.00
(Maximum)
SELLING SECURITY HOLDERS
None of the directors, executive officers or control persons of the
Company are selling Common Shares held by them, directly or indirectly,
pursuant to the Offering.
PLAN OF DISTRIBUTION
The Offering will not be sold through selling agents. The officers
and directors of the Company will sell the Common Shares offered hereunder
on a "best efforts" basis.
LEGAL PROCEEDINGS
To the knowledge of the officers and directors of the Company,
neither the Company nor any of its officers or directors is a party to any
material legal proceeding or litigation and such persons know of no
material legal proceeding or litigation contemplated or threatened. There
are no judgments against the Company or its officers or directors. None
of the officers or directors has been convicted of a felony or misdemeanor
relating to securities or performance in corporate office.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
The following table sets forth the directors, executive officers
promoters and control persons of the Company, their ages, and all offices
and positions held within the Company. Directors are elected for a period
of one year and thereafter serve until their successor is duly elected by
the stockholders and qualified. Officers and other employees serve at the
will of the Board of Directors.
_______________________________
(4) If the Minimum Offering is sold.
(5) If the Maximum Offering is sold.
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Name of Director Age Term Served as Positions with
Director/Officer the Company
_______________________ ___ _______________ ______________________
Cornelius A. Hofman II 29 --- Chief Executive Officer,
President & Chairman
Edward B. Schow 29 --- Vice-president & Director
Stacey A. Hofman 27 --- Secretary/Treasurer
& Director
Cornelius A. Hofman 64 --- Director
The above four individuals will serve as officers and/or directors
of the Company. Cornelius Hofman II and Stacey Hofman are husband and
wife, and Cornelius Hofman and Cornelius Hofman II are father and son. A
brief description of their positions, proposed duties and their background
and business experience follows:
Cornelius A. Hofman II will serve as CEO, President, and Chairman of
the Board of Directors of the Company. As such, his duties will include
primary responsibility for the financing, marketing, computer systems,
leasing, and general management of the Company. He has experience working
for General Economic Consulting, Inc., an economic consulting company
providing economic valuation services to governments, businesses, and
attorneys. Since June 1995, he has been working as an economist for
General Economic Consulting, Inc. From 1994 to 1995 he was an Economic
Consultant and Manager at Crowe Chizek & Company in South Bend, Indiana.
From 1992 to 1994 he attended the Graduate School of Business at the
University of Chicago where he earned a MBA in Economics. Mr. Hofman
received a B.A. in Asian Studies from Cornell University and an M.A. in
Japanese Studies from the University of Pennsylvania. After graduating
from Cornell and while attending the University of Pennsylvania and the
University of Chicago, Mr. Hofman worked as a Analyst on a full-time and
part-time basis for General Economic Consulting, Inc.
Edward B. Schow will serve as Vice-President and a Director of the
Company. As such, his duties will include marketing, creating and
maintaining client and potential client databases, managing the production
of the Company newsletter, coordinating and managing the subcontracting of
consulting engagements, performing research and analysis on economic
consulting projects, and working with subcontractors to maintain top
quality service. Since June 1994, Mr. Schow has been working at First
Security Bank were he currently serves as a Manager. From September 1993
to June 1994, he worked at Fidelity Investments. Mr. Schow received his
bachelor's degree in Finance from Idaho State University.
Stacey A. Hofman will serve as Secretary/Treasurer and a Director of
the Company. As such her duties will include handling receipts and
deposits and managing the books. Mrs. Hofman attended Brigham Young
University from 1987 to 1989. She worked as a dental assistant in New
York from 1989 to 1991. For the past year, Mrs. Hofman has performed
various book keeping and administrative functions for General Economics
Consulting, Inc.
Cornelius A. Hofman will serve as a Director of the Company. As
such his duties will include providing consulting advice to the Company's
management and other employees. Mr. Hofman is currently Chairman of the
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Department of Economics at Idaho State University. He received his Ph.D.
in Economics from the University of Utah and since 1960 he has been
teaching economics at the university level. In 1970, he founded General
Economic Consulting, Inc., and has served as the President and CEO from
inception to the present time.
David N. Nemelka was the President, Secretary, Treasurer and a
director of the Company until he resigned August 27, 1996. Mr. Nemelka is
no longer an officer or director of the Company, however he is a control
person of the Company. While Mr. Nemelka is no longer employed by the
Company, it will from time to time rely upon him to provide the Company
with business consulting services. Since April 1995, Mr. Nemelka has been
an officer and director of H & N Fly Tackle, Co., a public company that
produces fishing "flies" for sale on a wholesale basis. Since November
1994, he has been the CEO of Wild Wings, Inc., a public company which
operates a hunting and sporting clays club in Springville, Utah. Since
July 1994, he has been self-employed pursuing personal business projects,
one of which is managing McKinley Capital, a financial consulting company
located in Springville, Utah. From June 1993 to July 1994 he was an
Assistant Brand Manager at Proctor & Gamble in Cincinnati, Ohio. From
September 1991 to May 1993, he attended the Wharton Business School at the
University of Pennsylvania from which he earned an MBA. From January 1989
to July 1994, he served as President of Tri-Nem, Inc., a public company
that merged with Innovus Multimedia, Inc., (a NASDAQ company) in July
1994. From August 1989 until August of 1991, David served as Chief
Executive Officer of Northstar Adventures, an Alaskan fishing lodge, which
he co-founded. From August 1988 to August 1991 he served as President and
co-founder of Certified Share Transfer Company, a stock transfer company.
Mr. Nemelka received his B.S. in business finance from Brigham Young
University and his MBA in finance from the Wharton Business School.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Name and Address Amount & Nature of % of After Offering
Beneficial Ownership Class Minimum/Maximum
(6)
Cornelius A. Hofman II 500,000 (7) 33.3% 32.3% / 31.3%
227 South Ninth Avenue
Pocatello, Idaho 83201
___________________________________________
(6) The term "beneficial owner" refers to both the power of investment (the
right to buy and sell) and rights of ownership (the right to receive
distributions from the Company and proceeds from the sales of shares).
Inasmuch as these rights may be held or shared by more than one person,
each person who has a beneficial ownership interest in shares is deemed to
be the beneficial owners of the same shares because there is shared power
of investment or shared rights of ownership.
(7) Cornelius Hofman and Stacey Hofman are married. Therefore, each of them
should be deemed to be the beneficial owner of not only the shares held in
their individual names, but also the shares held by each other.
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Stacey A. Hofman 500,000 (8) 33.3% 32.3% / 31.3%
227 South Ninth Avenue
Pocatello, Idaho 83201
Edward B. Schow -0- -0- -0-
1625 Juniper Drive
Idaho Falls, Idaho 83404
David N. Nemelka 500,000 33.3% 32.3% / 31.3%
899 South Artistic Circle
Springville, Utah 84664
All officers and directors
as a group (3 persons) 1,000,000 66.6% 64.5% / 62.5%
TOTAL 1,500,000 100.0% 96.8% / 93.8%
DESCRIPTION OF THE SECURITIES
The following statements are qualified in their entirety by
reference to the detailed provisions of the Company's Articles of
Incorporation and Bylaws, copies of which will be furnished to an investor
upon written request therefor. The Shares being registered pursuant to
the registration statement of which this prospectus is a part are shares
of Common Stock, all of the same class and entitled to the same rights and
privileges as all other shares of Common Stock.
Description of Common Stock. The Company's authorized capital stock
consists of 50,000,000 shares of Common Stock with a $.001 par value. As
of the date of this Registration Statement, the Company has outstanding
1,500,000 shares of its Common Stock, all of which is validly issued,
fully paid and nonassessable. Holders of the Company's Common Stock are
entitled to receive dividends when declared by the Board of Directors out
of funds legally available therefore. Any such dividends may be paid in
cash, property or shares of the Company's Common Stock. The Company has
not paid any dividends since its inception. All dividends will be subject
to the discretion of the Company's Board of Directors, and will depend
upon, among other things, the operating and financial conditions of the
Company, its capital requirements and general business conditions.
Therefore, there can be no assurance that any dividends on the Company's
Common Stock will be paid in the future.
All shares of the Company's Common Stock have equal voting rights
and, when validly issued and outstanding will have one vote per share on
all matters to be voted upon by the shareholders. Cumulative voting in
the election of directors is not allowed, and a quorum for shareholder
meetings shall result from a majority of the issued and outstanding shares
_____________________________________
(8) See footnote 7 above.
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present in person or by proxy. Accordingly, the holders of a majority of
the shares of Common Stock present, in person or by proxy at any legally
convened shareholders' meeting at which the Board of Directors is to be
elected, will be able to elect all directors and the minority shareholders
will not be able to elect a representative to the Board of Directors.
Shares of the Company's Common Stock have no pre-emptive or
conversion rights, no redemption or sinking fund provisions, and are not
liable for further call or assessment. Each share of the Company's Common
Stock is entitled to share pro rata any assets available for distribution
to holders of its equity securities upon liquidation of the Company.
During the pendency of the offering, subscribers will have no rights
as stockholders of the Company until the offering has been completed and
the Shares have been issued to them.
Description of Preferred Stock. The Company is also presently
authorized to issue 5,000,000 shares of $.001 par value Preferred Stock.
Under the Company's Articles of Incorporation, as amended, the Board of
Directors has the power, without further action by the holders of the
Common Stock, to designate the relative rights and preferences of the
preferred stock, and issue the Preferred Stock in such one or more series
as designated by the Board of Directors. The designation of rights and
preferences could include preferences as to liquidation, redemption and
conversion rights, voting rights, dividends or other preferences, any of
which may be dilutive of the interest of the holders of the Common Stock
or the Preferred Stock of any other series. The issuance of Preferred
Stock may have the effect of delaying or preventing a change in control of
the Company without further shareholder action and may adversely effect
the rights and powers, including voting rights, of the holders of Common
Stock. In certain circumstances, the issuance of Preferred Stock could
depress the market price of the Common Stock. The Board of Directors
effects a designation of each series of Preferred Stock by filing with the
Nevada Secretary of State a Certificate of Designation defining the rights
and preferences of each such series. Documents so filed are matters of
public record and may be examined in accordance with procedures of the
Nevada Secretary of State, or copies thereof may be obtained from the
Company.
Description of Stock Options. The Board of Directors has adopted
the Litigation Economics, Inc., 1996 Stock Option Plan (the "Plan")
allowing the Company to offer its key employees, officers, directors,
consultants and sales representatives, an opportunity to acquire a
proprietary interest in the Company. The various types of incentive
awards which may be provided under the Stock Option Plan will enable the
Company to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its business. To
date the Company has not issued any Options pursuant to the Plan.
The total number of shares reserved and available for distribution
under the Plan shall be 500,000 shares. These shares will underlie the
Options issued by the Company pursuant to the Plan. The Option holders
will not be protected against dilution if the Company should issue
additional shares of Common Stock in the future. Neither the Options, nor
the shares underlying the Options have pre-emptive rights.
In the case of any reclassification, change, consolidation, merger,
sale or conveyance of Common Stock of the Company to another corporation,
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the Company will make adequate provision whereby the registered holders of
any outstanding Option offered in this Offering will have right thereafter
to receive an exercise of the Options immediately prior to the
reclassification, change, consolidation, merger, sale or conveyance of
common stock by the Company.
Management intends to keep this Prospectus and Registration
Statement current, with respect to all material changes in the business
and financial conditions of the Company, during the exercise period of the
Stock Options. Notwithstanding the stated exercise period, the exercise
of the Options will not be allowed unless a current Prospectus is in
effect.
Other provisions of the Options are set forth below. This
information is subject to the provisions of the Plan and the Stock Option
Certificates representing the Options. The following information is a
summary of the Litigation Economics, Inc., 1996 Stock Option Plan and is
qualified in its entirety by reference to the plan. (See the "Litigation
Economics, Inc., 1996 Stock Option Plan" attached hereto as Exhibit 29).
1. The Common Stock underlying the Options offered pursuant to
the Plan are subject to the same rights and restrictions as the Company's
other shares of authorized Common Stock. (See "Description of Common
Stock").
2. Once an Option is granted, it may not be called by the
Company.
3. The Common Stock underlying the Options offered pursuant to
this Registration Statement are offered in registered form. The Options
may not be sold prior to six months from the date of the grant of the
related award without prior approval of the Company.
4. Unless exercised within the time provided for exercise, the
Options will automatically expire.
5. The exercise price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant and
may not be less than 100% of Fair Market Value of the Stock, provided
however, that the exercise price of an Incentive Stock Option granted to
a 10% Stockholder shall not be less that 110% of the Fair Market Value of
the Stock.
6. There is no minimum number of shares of equity securities
which must be purchased upon exercise of the Option.
7. The Option holders, in certain instances, are protected
against dilution of their interest represented by the underlying shares of
Common Stock upon the occurrence of stock dividends, stock splits,
reclassifications and mergers.
8. The holders of the Options shall have the right to vote on any
matter submitted to the holders of the Company's equity securities and
they are entitled to receive and retain all regular cash dividends and
other cash equivalent distributions as the Board may in its sole
discretion designate, pay or distribute.
Transfer Agent. Interwest Transfer Company, Inc., 1981 East Murray-Holladay
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Road, Salt Lake City, Utah 84117, Telephone (801) 272-9294, has
agreed to serve as transfer agent and registrar for the Company's
outstanding securities upon completion of this offering.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The statements under the heading "Certain Federal Income Tax
Considerations," to the extent such statements refer to matters of tax
law, are solely the opinions of management. Management has not sought or
obtained any formal legal opinion as to such matters, and no conclusion of
counsel is binding on the Internal Revenue Service or the courts in any
event. There can be no assurance that the Internal Revenue Service or
the courts will not reach different conclusions regarding the transactions
contemplated hereby. This discussion does not address certain Federal
income tax consequences that are the result of special rules, such as
those that apply to life insurance companies, tax exempt entities, foreign
corporations, and non-resident alien individuals. In addition, the
discussion does not address alternative minimum tax considerations and is
limited to investors who will hold Common Stock as "capital assets"
(generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
discussion also assumes that the Common Stock will be traded on an
established securities market. This discussion is based on relevant
provisions of the Code, the Treasury Regulations promulgated thereunder
(the "Regulation"), revenue rulings published in the Internal Revenue
Bulletin and judicial decisions in effect at the date of this Prospectus.
There can be no assurance that future changes in applicable law or
administrative and judicial interpretations thereof will not adversely
affect the tax consequences discussed herein.
The tax treatment to a holder of Common Stock may vary depending on
such holder's particular situation. Potential investors should consult
their own tax advisors as to the tax treatment that may be anticipated to
result from the ownership or disposition of common stock in their
particular circumstances, including the application of foreign, state or
local tax laws or estate and gift tax considerations.
State and Local Income Taxes. A holder of Common Stock may be
liable for state and local income taxes with respect to dividends paid or
gain from the sale, exchange or redemption of Common Stock. Many states
and localities do not allow corporations a deduction analogous to the
Federal dividends received deduction. Prospective investors are advised
to consult their own tax advisors as to the state, local and other tax
consequences of acquiring, holding and disposing of Common Stock.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named herein was or is a promoter, underwriter,
voting trustee, director, officer or employee of the Company. Further,
none of the experts was hired on a contingent basis and none of the
experts named herein will receive a direct or indirect interest in the
Company.
Legal Matters
Certain legal matters will be passed upon for the Company by Poulton
& Yordan, of Salt Lake City, Utah.
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Accounting Matters
The financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Jones, Jensen & Co.,
Certified Independent Public accountants, located in Salt Lake City, Utah,
as indicated in their report with respect thereto, and are included herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "act") may be permitted to directors, officers
and controlling persons for the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that any claim for indemnification against such
liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of
the small business issuer in the defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer
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 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.
ORGANIZATION WITHIN LAST FIVE YEARS
The Company is a start-up company and has no operating history. As
soon as the money from this Offering is made available, the Company
expects to make all arrangements necessary so that it can commence
operations in early 1997.
DESCRIPTION OF BUSINESS
Company History
The Company was incorporated under the laws of the state of Nevada
on April 27, 1995 as Landmark Leasing, Corp., ("Landmark") for the purpose
of becoming a leasing company of residential property, commercial property
and/or vehicles. Landmark's only transaction was to acquire a pick-up
truck for $2,000 which the Company was unsuccessful in leasing. The
Company later sold the truck to David N. Nemelka for $2,000. Since
Landmark was unsuccessful in acquiring assets which it could lease,
Landmark deemed it to be in its best interest to focus its efforts in
another direction. After investigating various business opportunities,
Landmark determined there to be a need for companies which could provide
economic damage consulting to attorneys involved in litigation. Pursuant
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to its desire to enter into the economic damage consulting industry,
Landmark changed its name to Litigation Economics, Inc., (the "Company")
on August 27, 1996. The Company also entered into an Agreement and Plan
of Share Exchange dated August 27, 1996, whereby it acquired G.E.C., Inc.
("GEC"), a privately held Idaho corporation, formed for the purpose of
providing economic damage consulting to litigating attorneys. GEC was
incorporated on July 31, 1996. The Company acquired all of the one
million shares of GEC common stock in a one share per one share exchange
with the shareholders of GEC. Pursuant to the Agreement and Plan of Share
Exchange, the Company issued one million shares of Litigation Economics
common stock to the shareholders of GEC in exchange for one million shares
of GEC common stock, which constituted all of the issued and outstanding
equity securities of GEC. Pursuant to the Plan of Share Exchange, GEC
will continue to operate as a wholly owned subsidiary of the Company, and
all of the Company's damage consulting services will be provided through
GEC.
Business of the Company
The Company, through its wholly owned subsidiary, GEC, intends to
engage in the business of providing economic, financial and statistical
analysis and other types of services that are necessary for attorneys
involved in disputes regarding economic damages. The Company will perform
any activities customary in connection therewith. Attorneys litigating
cases that involve disputes regarding economic damages will be the target
market for the Company's services. In the United States, there are more
than 125,000 attorneys that specialize in litigation and over 50,000
specialize in wrongful job termination, wrongful death and/or personal
injury related litigation. To successfully litigate such cases, attorneys
often retain the expertise of economists, statisticians and other
financial experts. Furthermore, the recent spate of changes in the laws
limiting the recoverability of non-economic damages have had a dramatic
effect on the tort system. Attorneys are now compelled to expend more
time and effort in examining and proving economic damages. The Company
believes that recent tort reform measures have elevated the importance of
the economist, and other experts related to the examination of economic
damages, as consultants in the litigation process and the Company hopes to
exploit the increased need for services in this area.
The Company will provide its economic consulting services based on
a computer aided damage analysis system designed by Cornelius A. Hofman
II, called PreVal(TM) . Mr. Hofman is the President and a director of GEC,
as well as the President and a director of the Company, he paid $1,000 and
assigned the rights to PreVal(TM) to GEC in return for one million shares of
common stock of GEC(9). The Company, through its wholly owned subsidiary GEC
holds the exclusive right to use PreVal(TM) which it intends to market to
attorneys involved in litigation, particularly to attorneys engaged in the
pre-trial, settlement phase of litigation.
Attorneys hire economists to assess economic damages and to provide
a report spelling out their opinion regarding such damages, and to testify
at trial. Attorneys usually delay the hiring of economists until after it
is clear a settlement cannot be reached and the case will go to trial
because (1) the economist's report typically costs $2,000 to $4,000; (2)
many attorneys think they can satisfactorily settle the case without
_________________________________
(9) 500,000 shares of GEC Common Stock were issued to Cornelius A. Hofman II
and 500,000 shares of GEC Common Stock were issued to Stacey A. Hofman, Mr.
Hofman's wife in exchange for $1,000 and the rights to PreVal(TM).
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substantiating economic losses; and (3) the current litigation practice is
to rely on the services of economists as experts only at trial.
PreVal(TM) was developed as a cost effective alternative to the current
paradigm of economic damage analysis. Generally, if an attorney needs to
establish the loss suffered by a client, the attorney will either employ
the services of an economist or if the attorney believes such expense is
unjustified, she will attempt to estimate the value of the economic loss
by herself. If an economist is hired, the economist will perform
extensive research and evaluation based upon review of documents and
forecasting of economic variables. The economist will prepare an
independent economist's report outlining his findings and the factors used
to determine the damages suffered by the injured party. The attorney will
use the report as a basis for settling damages or if the case can not be
settled, the economist's report can be used at trial to try to establish
the present value of the damages suffered by the injured party.
Generally, if a case goes to trial, an economist will also be called upon
to testify with regard to economic issues. The cost for the services of
a competent economists vary from $4,000 to $6,000 depending upon the
nature and complexity of the case.
However, many personal injury, wrongful death and wrongful
termination cases are handled on a contingent fee basis and since ninety-five
percent of all cases are settled before trial, the cost of hiring an
economist, in most cases may seem unjustified. Rather than incur that
cost, the attorney will attempt to estimate of the present value of the
economic loss suffered by the injured party and try to settle the case
based on that estimate. Generally, an economist is brought in to perform
the appropriate analysis only after it is apparent that the case can not
be settled and litigation on the issue of damages is imminent.
The Company believes that it is in the best interest of both the
attorney and the injured party to have an economic damage analysis
performed long before the case goes to trial. However, the Company
recognizes that the cost of an economist's report may be unnecessary
during the pre-trial settlement phase of litigation. The Company believes
that its PreVal(TM) service provides a cost effective method for determining
the present value of the loss suffered by the injured party. The service
provides attorneys with an accurate determination of economic loss during
the pre-trial settlement phase of litigation, and provides attorneys the
advantage of determining the losses suffered by the injured party prior to
trial so the attorney and the client have a better understanding of the
losses at issue. PreVal(TM) is also beneficial to attorneys because it
allows the attorney to focus on economic damage issues early in the case,
thus allowing the attorney to better prepare for conflicts regarding the
economic disputes at issue should the case go to trial. Through the use
of PreVal(TM) the Company can provide an accurate estimate of the economic
loss suffered by the injured party at a fraction of the cost charged for
a traditional economic analysis. As stated, the cost for an independent
economist's report generally ranges from $2,000 to $4,000. The cost of
preparing an independent economists report utilizing the PreVal(TM) analysis
typically ranges from $400 to $600. The PreVal(TM) service incorporates the
use of computer modeling combined with specifically requested information
provided to the Company from the injured party's attorney to determine the
present value of the economic loss suffered by the injured party. The
Company is able to provide an accurate estimate of the economic loss at a
greatly reduced cost because the Company relies on the attorney to provide
the information it uses in determining the loss, thus eliminating the
costs of the extensive research associated with an economist's report.
The Company, after receiving the information from the attorney, will use
its PreVal(TM) program to prepare an independent economist's report which the
attorney can use as a basis for negotiating a settlement.
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In the event the case is not settled and the attorney so desires,
the Company will then perform the extensive research and verification
process necessary to prepare for trial for an additional fee.
In addition to providing an independent economist's report, the
Company will provide economists to testify as expert witnesses.
Initially, Cornelius Hofman II will handle all of the Company's expert
witness needs for which the Company will charge a fee. However, if the
Company can establish itself in the industry and develop a clientele for
its services, it will be difficult, if not impossible, for Mr. Hofman to
fulfill all of the client's expert witness needs. Rather than hire more
economists, the Company intends to associate with a network of independent
litigation consultants to provide expert testimony for the Company's
clients when Mr. Hofman is unavailable. Independent litigation
consultants provide services similar to those provided by the Company.
The Company does not intend to subcontract any PreVal(TM) work to any network
affiliated consultants. Once a client is referred to an economist
affiliated with a network, the Company's involvement with that client's
legal matter will generally be terminated and the Company will charge no
fee for the referral. The Company will likely receive no fee or
remuneration for referring clients to the network affiliated economists.
Competition
Within the industry, the Company will face competition from numerous
competitors. The most common type of company providing economic related
services are sole practitioners who concentrate on servicing small to
mid-size law firms handling wrongful job termination, wrongful death and/or
personal injury related cases. These consulting companies are frequently
operated by college professors looking to supplement their teaching
income. Service and quality are not a major focus, rather answering the
phone when they are in the office and fitting their consulting practice
around their academic schedule is the standard approach. There are also
larger companies in the industry. These larger companies usually have a
dedicated litigation consulting group and tend to focus on larger types of
business litigation that typically have voluminous documents. These
larger cases often require litigation support services related to the
handling of documents and usually require a larger staff of consultants.
There is cross-specialization among both types of consulting firms, and
the larger consulting firms are beginning to offer a larger variety of
services to attorneys in an effort to satisfy more of the attorney's
litigation support needs.
The market for the Company's services is very competitive and
competition is based on many factors including price and quality of
service. The Company believes that it can compete in the industry because
it believes it offers high quality services at a fraction of the cost of
other providers of similar services. The Company will have to compete
with manufacturers of economic loss analysis software. This software
allows an attorney to make a rough estimate of the damages suffered by the
injured party, but this estimate may not be as accurate as the estimate
rendered by PreVal(TM), and the software does not supply the attorney with
a signed independent economist's report. The Company is confident that it
can provide better customer service and a better quality product than the
sole practitioners because the Company will focus all of its time and
efforts in the industry, rather than doing it on a part time, as available
basis. The Company also believes it can compete against the larger
companies because the PreVal(TM) system allows the Company to provide its
economic analysis at a fraction of the cost charged by the larger
companies handling large cases. However, in the event a case is not
settled and goes to trial, the Company likely will incur greater expenses,
and the overall price the Company would have to charge for providing trial
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related services may not be less expensive than the price a person could
receive from any of the Company's competitors. For the reasons described
above, the Company believes its services will appeal to litigation
attorneys specializing in wrongful job termination and personal injury
related litigation who need a variety of economic related litigation
consulting services.
Advertising and Marketing Strategy
The Company intends to market its services through a variety of
targeted marketing programs. The Company anticipates utilizing the
various lawyer association meetings, forums, and conventions by dispensing
information and educating potential clients about the Company's services
and business practices. Direct mail and direct solicitation will also be
utilized to contact potential clients. The Company intends to issue a
bimonthly or quarterly newsletter to targeted attorneys, advertising the
Company's services and providing other beneficial information to potential
clients. Additionally, the Company may utilize regional and/or national
legal publications to advertise.
Employees
The Company has no full-time employees at present and it has no
formal employment agreements or other contractual arrangements with its
officers or anyone else regarding the commitment of time or the pay of
salaries or other compensation. However, the officers intend to devote
such time as may be necessary for the development of the Company's
business. Upon the completion of the Offering, it is anticipated that Mr.
Schow will terminate his other employment to become a full-time employee
of the Company prior to commencement of operations in early 1997. It is
anticipated that the other officers will maintain outside employment and
devote only a portion of their time to the affairs of the Company. They
will not be employed full time and will not receive a regular salary or
wage unless and until the Company's business operations have been
developed to a point where salaries can be paid. Each officer and
director will be entitled to reimbursement of any reasonable out of pocket
expenses actually incurred on behalf of the Company. It is anticipated
that Cornelius Hofman II will eventually work full time for the Company.
It is not anticipated that Stacey Hofman will devote more than part-time
to the Company for the foreseeable future. Furthermore, it is not
anticipated that Cornelius Hofman will ever be a full-time employee of the
Company. The Company intends to hire other full-time employees as needed,
but will not do so unless and until the Company's business operations so
justify. The Company also intends to hire other part-time employees as
needed, subject to its ability to pay such persons. The exact amount of
any compensation to be paid has not been determined but management
intends, to the extent possible, to only pay compensation out of revenues
and to keep payments to a minimum until operations have fully commenced.
PLAN OF OPERATIONS
The Company's purpose is to engage in the business of marketing and
providing economic related litigation consulting services to litigation
attorneys throughout the country. The Company initially intends to target
the 25,000 plus litigation attorneys specializing in personal injury,
employment law, medical malpractice, and other related areas in the market
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areas surrounding the following locations: Idaho, Chicago, Salt Lake
City, Los Angeles, Dallas and Phoenix. The Company will provide its
prospective clients a place to retain the variety of economic consulting
services they may need to successfully litigate any given case.
Specifically, the Company intends to provide economic, financial,
statistical, and other types of analyses necessary in litigation that
involves a dispute regarding economic damages. Furthermore, the Company
will market PreVal(TM), a new economic consulting service provided to
attorneys in the settlement-phase of litigation.
The Company's plan of operation for the next twelve months is to
raise funds through the Offering, secure office space, purchase operating
assets (i.e., computer equipment, office supplies, marketing databases,
etc.), market its services, and commence active business operations. In
addition to providing capital to help defray various start up
expenditures, management believes that a principal use of the offering
proceeds will be to provide initial working capital necessary upon
commencement of operations until sufficient revenues are generated to
cover such operating expenditures. In order to commence active business
operations by early 1997 management is engaging in a number of planning
stage and preliminary activities. These activities include the following:
(i) Locating office space and negotiating agreements to lease
office space in Idaho, Chicago, Salt Lake City, Los Angeles, Dallas
and Phoenix;
(ii) Prepare brochures and other marketing literature for use in
the Company's marketing efforts;
(iii)Enter into litigation consulting service contracts.
The Company does not intend to staff offices in each of the markets
it intends to exploit. The Company will instead maintain only one staffed
office which will be the principal executive office located in Pocatello,
Idaho. The Company intends to negotiate rental agreements with office
share complexes in each of the above mentioned markets. Generally, an
office share complex provides a small office, a mailing location and a
manager who, if instructed, will forward the mail to wherever the renter
indicates. This arrangement also provides the Company with a local phone
number for customers to call. The phones will automatically forward all
calls to the Company's principal executive office in Pocatello, Idaho.
The Company will inform its customers that it is located in Idaho, to
avoid potential conflicts. In the event the customer needs to meet
directly with someone from the Company, Cornelius Hofman II will fly to
that location, at the Company's expense (this cost will not be billed to
the customer) to meet with the customer. Mr. Hofman has done this in
Chicago in connection with his consulting efforts for General Economic
Consulting, Inc., and has enjoyed a great deal of success operating in
this manner. The Company believes that this approach is the most cost
effective way it can reach a broad market for its services.
Inasmuch as there is no assurance that the Offering will be
successful or that the Company will receive any net proceeds therefrom,
the Company has not entered into any contracts or commitments for leasing
of offices, purchasing of equipment, and buying customer databases.
Therefore, there is no assurance the Company will be able, with the
proceeds of this offering, to lease sufficient office space, acquire
sufficient equipment, purchase sufficient potential client databases to
commence operations. There is also no assurance that the Company will be
able to sell enough PreVal(TM) orders or generate enough business to operate
profitably.
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DESCRIPTION OF PROPERTY
The Company owns no real property. Further, the Company does not
currently lease any office space or facilities. The Company will use the
home office of Mr. Cornelius A. Hofman II, its Chief Executive Officer &
President, in Pocatello, Idaho as its principal executive offices until
the Company's business requires more extensive administrative facilities.
Until revenues so justify, the Company will pay no rent or reimbursement
for the use of Mr. Hofman's home office.
The Company intends to locate appropriate office space and negotiate
agreements to lease office space in Idaho, Chicago, Salt Lake City, Los
Angeles, Dallas and Phoenix. Management has not entered into any leasing
arrangements for office space, and there is no assurance that the Company
will be able, with the proceeds of this Offering, to lease sufficient
office space in these locations. However, based on management's early
stage activities and the negotiations and discussions with the management
of certain office buildings, management believes that the Company will be
able to lease the necessary office space in or near the locations
mentioned above.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At present, the Company's shares are not traded publicly. There is
no assurance that a trading market will develop, or, if developed, that it
will be sustained. A purchaser of shares may, therefore, find it
difficult to resell the securities offered herein should he or she desire
to do so when eligible for public resales. Furthermore, the shares are
not marginable and it is unlikely that a lending institution would accept
the Company's common stock as collateral for a loan.
The Company, pursuant to this Registration Statement, proposes to
publicly offer a minimum of 50,000 shares and a maximum of 100,000 shares
of the Company's Common Stock. To date, no shares of Common Stock are
subject to outstanding options, warrants to purchase or securities
convertible into common stock. No shares of the Company's Common Stock
have been sold pursuant to Rule 144 of the Securities Act. The Registrant
has agreed to register no shares of Common Stock held by existing security
holders for resale.
EXECUTIVE COMPENSATION
To date, no compensation has been paid to any person associated with
the Company and the Company presently has no formal employment agreements
or other contractual arrangements with the officers, directors or anyone
else regarding the commitment of time or the pay of salaries or other
compensation.
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FINANCIAL STATEMENTS
The audited financial statements of the Company appearing in the
Registration Statement have been examined by Jones, Jensen & Co.
Certified Public Accountants, as indicated in its report contained herein.
The financial statements are included in the Registration Statement in
reliance upon the report of that firm as an expert in auditing and
accounting.
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No dealer, salesman or other
person is authorized to give any
information or to make any
representations other than those
contained in this Prospectus in
connection with the offer made
hereby. If given or made, such LITIGATION ECONOMICS, INC.
information or representations
must not be relied upon as having
been authorized by the Company.
This Prospectus does not
constitute an offer to sell or a
solicitation of an offer to buy
any of the securities covered
hereby in any jurisdiction or to 50,000 Minimum / 100,000 Maximum
any person to whom it is unlawful
to make such offer or solicitation Shares of Common Stock
in such jurisdiction. Neither the
delivery of this Prospectus nor
any sale made hereunder shall, in
any circumstances, create any
implication that there has been no ___________________________
change in the affairs of the
Company since the date hereof.
___________________________________
TABLE OF CONTENTS Page
AVAILABLE INFORMATION 2
PROSPECTUS SUMMARY 3 PROSPECTUS
RISK FACTORS 5
SHARES ELIGIBLE FOR FUTURE
SALE 9
USE OF PROCEEDS 10
DETERMINATION OF
OFFERING PRICE 10
DILUTION 11
COMPARATIVE DATA 11 _________________________
PLAN OF DISTRIBUTION 12
MANAGEMENT 12
PRINCIPAL SHAREHOLDERS 14
DESCRIPTION OF SECURITIES 15
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS 17 November 8, 1996
LEGAL MATTERS 18
EXPERTS 18
DESCRIPTION OF BUSINESS 19
MANAGEMENT'S PLAN OF
OPERATION 23
CERTAIN TRANSACTIONS 25
FINANCIAL STATEMENTS 27
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of
the registrant are insured or indemnified in any manner against any
liability which they may incur in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act
provides that each corporation shall have the following powers:
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 interest 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, or
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
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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 refereed to
in subsections 1 and 2, or in defense of any claim, issue or
matter therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless
ordered by a court or advanced pursuant to subsection 5, must be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a
quorum consisting of directors who were not parties to the
act, suit or proceeding;
(c) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel, in a
written opinion; or
(d) If a quorum consisting of directors two were not
parties to the act, suit or proceeding cannot be obtained,
by independent legal counsel in a written opinion.
5. The certificate or articles of incorporation, the
bylaws or an agreement made by the corporation may provide that
the expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by aa court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any
rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses
may be entitled under the certificate or articles of
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<PAGE>
incorporation or any bylaw, agreement, vote of stockholders
of disinterested directors or otherwise, for either an
action in his official capacity or an action in another
capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made
pursuant to subsection 5, may not be made to or on behalf of
any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to
the cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the
benefit of the heirs, executors and administrators of such a
person.
7. The registrant's Articles of Incorporation limit
liability of its Officers and Directors to the full extent
permitted by the Nevada Business Corporation Act.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to
be paid by the Company in connection with the Offering described in the
Registration Statement.
Amount
SEC registration fee $100
Blue sky fees and expenses $1,000
Printing and shipping expenses $2,500
Legal fees and expenses $12,000
Accounting fees and expenses $3,400
Transfer and Miscellaneous expenses $1,000
Total $20,000
* All expenses except SEC registration fee are estimated.
ITEM 26. Recent Sales of Unregistered Securities
On August 27, 1996, 500,000 shares of unregistered Company common
stock were issued to Mr. Cornelius Hofman II in exchange for 500,000
shares of G.E.C., Inc., ("GEC") common stock, in a one share per one
share exchange pursuant to the Plan of Share Exchange.
On August 27, 1996, 500,000 shares of unregistered Company common
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<PAGE>
stock were issued to Mrs. Stacey Hofman, in exchange for 500,000 shares
of GEC common stock in a one share per one share exchange pursuant to an
Agreement and Plan of Share Exchange.
ITEM 27. Exhibits Index
SEC
Reference Exhibit No. Document
3 3 Articles of Incorporation
3 3 By-Laws
4 3 Instruments defining the rights
of security holders, including indentures
(included in By-Laws)
5 5 Opinion on Legality
21 21 Subsidiaries of the small business issuer
23 23 Consents of Experts and Counsel
24 24 Power of Attorney
27 27 Financial Data Schedule
99 99 Litigation Economics, Inc.,
1996 Stock Option Plan.
ITEM 28. Undertakings
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registration hereby
undertakes to file with the Securities and Exchange Commission such
supplementary and periodic information, documents, and reports as may be
prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred to that section.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to its Articles of
Incorporation or provisions of the Nevada Revised Statutes, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
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<PAGE>
question, whether or not such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each of such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered herein, and the Offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in
the City of Salt Lake, State of Utah, on November 8, 1996.
LITIGATION ECONOMICS, INC.
By:/s/ Cletha A. Walstrand
As Power of Attorney For
Cornelius A. Hofman, II
Chairman (Chief Executive Officer)
Director and President
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<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Cletha A. Walstrand, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act
and thing, requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent,
or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signatures Title Date
/s/ Cletha A. Walstrand Chairman November 8, 1996
As Power of Attorney For (Chief Executive Officer)
Cornelius A. Hofman, II Director and President
/s/ Cletha A. Walstrand Director and Vice President November 8, 1996
As Power of Attorney For
Edward B. Schow
/s/ Cletha A. Walstrand Director, Secretary November 8, 1996
As Power of Attorney For Treasurer
Stacey A. Hofman
/s/ Cletha A. Walstrand Director November 8, 1996
As Power of Attorney For
Cornelius A. Hofman
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LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1996
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . 3
Consolidated Balance Sheet . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity . . . . . 6
Consolidated Statement of Cash Flows . . . . . . . . . . 7
Notes to the Consolidated Financial Statements . . . . . 8
<PAGE>
JONES, JENSEN & COMPANY
349 SOUTH 200 EAST, SUITE 500
SALT LAKE CITY, UTAH 84111
(801) 328-4408
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Litigation Economics, Inc. and Subsidiary
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Pocatello, Idaho
We have audited the accompanying consolidated balance sheet of Litigation
Economics, Inc. and Subsidiary (formerly Landmark Leasing, Corp.) (a
development stage company) as of August 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows
from inception of the development stage on July 31, 1996 through August
31, 1996. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides 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
Litigation Economics, Inc. and Subsidiary (formerly Landmark Leasing,
Corp.) (a development stage company) as of August 31, 1996 and the results
of their operations and their cash flows from inception of the development
stage on July 31, 1996 through August 31, 1996 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company is a development stage
company with no significant operating results to date, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the
Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ JONES, JENSEN & COMPANY
Jones, Jensen & Company
September 12, 1996
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
August 31,
1996
CURRENT ASSETS
Cash $ 5,492
___________
Total Current Assets 5,492
___________
TOTAL ASSETS $ 5,492
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 2,188
___________
Total Liabilities 2,188
___________
STOCKHOLDERS' EQUITY
Preferred stock authorized 5,000,000 shares
at $0.001 par value; no shares were
issued or outstanding -
Common stock authorized 50,000,000 shares
shares at $0.001 par value; 1,500,000
shares issued and outstanding 1,500
Additional paid-in capital 3,849
Deficit accumulated during the development stage (2,045)
________
Total Stockholders' Equity 3,304
________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,492
________
The accompanying notes are an integral part of these
consolidated financial statements
-4-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Consolidated Statement of Operations
From Inception
on July 31,
1996 Through
August 31,
1996
REVENUE $ -
GENERAL AND ADMINISTRATIVE EXPENSES 2,797
______
INCOME (LOSS) FROM OPERATIONS (2,797)
______
OTHER INCOME
Interest income 32
Gain on sale of asset 720
______
Total Other Income 752
______
NET INCOME (LOSS) $(2,045)
_______
NET LOSS PER SHARE $ -
_______
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 483,871
_______
The accompanying notes are an integral part of
these consolidated financial statements
-5-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
_________ ________ ________ __________
Balance, July 31, 1996 - $ - $ - $ -
Common stock issued for
cash at $0.001 per share 1,000,000 1,000 4,000 -
Recapitalization of G.E.C., Inc. 500,000 500 (151) -
Net loss for the period ended
August 31, 1996 - - - (2,045)
_________ _______ ________ ________
Balance, August 31, 1996 1,500,000 $ 1,500 $ 3,849 $(2,045)
_________ _______ ________ ________
The accompanying notes are an integral part of
these consolidated financial statements
-6-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Consolidated Statement of Cash Flows
From Inception
on July 31,
1996 Through
August 31,
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,045)
Adjustments to reconcile net income
to net cash used by operating activities:
Common stock issued for investment
in subsidiary 349
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 2,188
_____
Net Cash (Used) by Operating Activities 492
_____
CASH FLOWS FROM INVESTING ACTIVITIES: -
_____
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 5,000
_____
Net Cash Provided by Financing Activities 5,000
_____
NET INCREASE (DECREASE) IN CASH 5,492
CASH AT BEGINNING OF PERIOD -
______
CASH AT END OF PERIOD $ 5,492
______
Cash Paid for:
Interest $ -
Income taxes $ -
The accompanying notes are an integral part
of these consolidated financial statements
-7-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
August 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operating History
The Company was incorporated in the State of Nevada on April 27,
1995, under the name of Landmark Leasing, Corp.
The Company planned on operating as a leasing company of residential
property, commercial property, vehicles, and related activities.
The Company has not entered into any of these activities and
accordingly remains a development stage company. The Company
changed its name to Litigation Economics, Inc. on August 22, 1996.
On August 22, 1996, the Company acquired all of the outstanding
stock of G.E.C., Inc., (the Subsidiary) for 1,000,000 shares of the
Company's common stock. The acquisition of the Subsidiary was
recorded as a recapitalization of the Subsidiary, whereby the
acquired company is treated as the surviving entity for accounting
purposes. The Subsidiary was formed on July 31, 1996 in the State
of Idaho. The Subsidiary is engaged in the field of economic
advising and consulting, and is considered a development stage
company per Statement of Financial Accounting Standards #7.
Summary of Significant Accounting Policies
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
b. Net Earnings (Loss) Per Share
The computation of earnings (loss) per share of common stock is
based on the weighted average number of shares outstanding at the
date of the financial statements.
c. Provision for Taxes
At August 31, 1996, the Company has net operating loss carryforwards
of approximately $2,000 that may be offset against future taxable
income through 2011. No tax benefit has been reported in the
financial statements, because the Company believes there is a 50% or
greater chance the carryforwards will expire unused. Accordingly,
the potential tax benefits of the loss carryforward are offset by a
valuation allowance of the same amount.
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<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
August 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
e. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
f. Principles of Consolidation
The consolidated financial statements include accounts of Litigation
Economics, Inc. and its wholly-owned subsidiary, G.E.C., Inc.
Intercompany transactions have been eliminated.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash and has not had significant
operations since the inception of its development stage. Without
realization of additional adequate financing it would be unlikely
for the Company to pursue and realize its objectives. The Company
plans to obtain such additional financing through a merger with
existing operating companies. In the interim officers of the
Company have committed to meeting its operating expenses.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company sold a vehicle to a related party in 1996 for a gain of
$720.
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________________________________
LITIGATION ECONOMICS, INC.
(Exact name of Issuer in its Charter)
227 South Ninth Avenue
Pocatello, Idaho 83201
(Address of Principal Executive Office)
_____________________________________________
EXHIBITS
<PAGE>
EXHIBIT 3
ARTICLES OF INCORPORATION
BYLAWS
<PAGE>
Articles Of Incorporation
Of
LANDMARK LEASING
WE, THE UNDERSIGNED natural persons of the age of eighteen (18)
years or more, acting as incorporators of a corporation under the Nevada
Business Corporation Act, adopt the following Articles of Incorporation.
Article I
Name
The Name of the corporation is Landmark Leasing, INC.
Article II
Duration
The duration of the corporation is perpetual.
Article III
Purposes
The purpose or purposes for which this corporation is engaged are:
(a) To be a leasing company of residential property, commercial
property and vehicles etc.. Also, to acquire, develop, explore, and
otherwise deal in and with all kinds of real and personal property and all
related activities, and for any and all other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription,
or otherwise; and to hold, own, mortgage, pledge, hypothecate, sell,
assign, transfer, exchange, or otherwise dispose of or deal in or with its
own corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created
or issued by any person, firm, associate, or corporation, or
instrumentalities thereof; to make payment therefor in any lawful manner
or to issue in exchange therefor in any lawful manner or to issue in
exchange therefor its unreserved earned surplus for the purchase of its
own shares, and to exercise as owner or holder of any securities, any and
all rights, powers, and privileges in respect thereof.
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<PAGE>
(c) To do each and everything necessary, suitable, or proper for
the accomplishment of any of the purposes or the attainment of any one or
more of the subjects herein enumerated, or which may, at any time, appear
conducive to or expedient for the protection or benefit of this
corporation, and to do said acts as fully and to the same extent as
natural persons might, or could do in any part of the world as principals,
agents, partners, trustees, or otherwise, either alone or in conjunction
with any other person, association, or corporation.
(d) The foregoing clauses shall be construed both as purposes and
powers and shall not be held to limit or restrict in any manner the
general powers of the corporation, and the enjoyment and exercise thereof,
as conferred by the laws of the State of Nevada; and it is the intention
that the purposes and powers specified in each of the paragraphs of this
Article III shall be regarded as independent purposes and powers.
Articles IV
Stock
(a) Common Stock. The aggregate number of shares of Common Stock
which the Corporation shall have authority to issue is 50,000,000 shares
at a par value of $.001 per share. All stock when issued shall be fully
paid and non-assessable, shall be of the same class and have the same
rights and preferences.
No holder of shares of Common Stock of the Corporation shall be
entitled, as such, to any pre-emptive or preferential rights to subscribe
to any unissued stock or any other securities which the Corporation may
now or thereafter be authorized to issue.
Each share of Common Stock shall be entitled to one vote at a
stockholders meetings, either in person or by proxy. Cumulative voting in
elections of Directors and all other matters brought before stockholders
meeting, whether they be annual or special, shall not be permitted.
(b) Preferred Stock. The aggregate number of share of Preferred
Stock which the Corporation shall have authority to issue is 5,000,000
shares, par value $.001, which may be issued in series, with such
designations, preferences, stated values, rights, qualifications or
limitations as determined solely by the Board of Directors of the
Corporation.
Article V
Amendment
These Articles of Incorporation may be amended by the affirmative
Vote of "a majority" of the shares entitled to vote on each such
amendment.
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<PAGE>
Article VI
Shareholders Rights
The authorized and treasury stock of this corporation may be issued
at such time, upon such terms and conditions and for such consideration as
the Board of Directors shall determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this
corporation.
Article VII
Initial Office and Agent
The registered office of the Corporation in the State of Nevada is
3230 E. Flamingo Road, Suite 156, Las Vegas, NV 89121. The registered
agent in charge thereof at such address is Gateway Enterprises, Inc.
Article VIII
Directors
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business corporation
act provides that the directors may act in certain instances where the
Articles of Incorporation authorize such action by the directors, the
directors are hereby given authority to act in such instances without
specifically numerating such potential action or instance herein.
The directors are specifically given the authority to mortgage or
pledge any or all assets of the business with stockholders' approval.
The number of directors constituting the initial Board of Directors
of this corporation is one (1). The names and addresses of persons who
are to serve as Directors until the first annual meeting of stockholders
or until their successors are elected and qualify are:
NAME ADDRESS
David N. Nemelka 899 south artistic circle
springville, ut 84663
Articles IX
Incorporators
The name and address of each incorporator is:
David N. Nemelka 899 South Artistic Circle
Springville, UT 84663
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<PAGE>
Article X
Common Directors - Transactions between Corporations
No contract or other transaction between this corporation and any on
or more of its directors or any other corporation, firm, association, or
entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship
or interest, or because such director or directors are present at the
meeting of the Board of Directors, or a committee thereof, which authori-
zes, approves, or ratifies such contract or transaction, or because his or
their votes are counted for such purpose if: (a) the fact of such
relationship or interest is disclosed or known to the Board of Directors
or committee which authorizes, approves, or ratifies the contract or
transaction by vote or consent sufficient for the purpose without counting
the votes or consents of such interested director; or (b) the fact of such
relationship or interest is disclosed or known to the stockholders
entitled to vote and they authorize, approve, or ratify such contract or
transaction by vote or written consent, or (c) the contract or transaction
is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or committee
there of which authorizes, approves or ratifies such contract or
transaction.
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.
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<PAGE>
Under penalties of perjury, I declare that these Articles of
Incorporation have been examined by me and are, to the best of my
knowledge and belief, true, correct and complete.
Dated this 10th day of April, 1995
__________
/S/DAVID N. NEMELKA
David N. Nemelka
STATE OF UTAH )
) ss.
COUNTY OF )
On the 10th day of April, 1995, personally appeared before
me, David N. Nemelka, who being by me first duly sworn, declared that he
was the person who signed the foregoing document as incorporator and that
the statements therein contained are true.
IN WITNESS THEREOF, I have hereunto set my hand and seal this
day of April, 1995.
___________________________
NOTARY PUBLIC
Residing at ______________________
My commission expires: ______________________
_____________________________
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
LANDMARK LEASING, CORP.
(After Issuance of Stock)
I, the undersigned David N. Nemelka, the President, Secretary and
Treasurer of Landmark Leasing, Corp., do hereby certify:
That the Board of Directors of Landmark Leasing, Corp., at a
meeting duly convened, held on August 22, 1996, adopted a resolution to
amend the articles of incorporation as follows:
Article I is hereby amended to read as follows:
ARTICLE I
NAME
The name of the corporation is Litigation Economics, Inc.
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 500,000 that the
said change(s) and amendment have been consented to and approved by a
majority vote of the stockholders holding at least a majority of each
class of stock outstanding and entitled to vote thereon.
________________________________________
David N. Nemelka, President and Secretary
State of Utah )
: ss.
County of Utah )
On August 2_, 1996, personally appeared before me, a Notary
Public, David N. Nemelka, who acknowledged that he executed the above
instrument.
_______________________________________
<PAGE>
BY-LAWS
of
Landmark Leasing, Corp.
A NEVADA CORPORATION
ARTICLE I
Offices
Section I. The principal office of the Corporation shall be
at 899 South Artistic Circle, located in Springville, Utah 84663. The
Corporation may have such other offices, either within or without the
State of Utah as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
The registered office of the Corporation required by the
Nevada Business Corporation Act to be maintained in the State of Nevada
may be, but need not be, identical with the principal offices in the State
of Nevada, and the address of the registered office may be changed, from
time to time, by the Board of Directors.
ARTICLE II
Stockholders
Section 1. ANNUAL MEETING. The annual meeting of
stockholders shall be held at the principal office of the Corporation, at
899 South Artistic Circle, Springville, UT 84663 or at such other places
on the third Friday of April, or at such other times as the Board of
Directors may, from time to time, determine. If the day so designated
falls upon a legal holiday then the meeting shall be held upon the first
business day thereafter. The Secretary shall serve personally or by mail
a written notice thereof, not less than ten (10) nor more than fifty (50)
days previous to such meeting, addressed to each stockholder at his
address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which all stockholders not present
have waived notice in writing, the giving of notice as above required may
be dispensed with.
Section 2. SPECIAL MEETINGS. Special meetings of
stockholders other than those regulated by statute, may be called at any
time by a majority of the Directors. Notice of such meeting stating the
place, day and hour and the purpose for which it is called shall be served
personally or by mail, not less than ten (10) days before the date set for
such meeting. If mailed, it shall be directed to a stockholder at his
address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which stockholders not present have
waived notice in writing, the giving of notice as above described may be
dispensed with. The Board of Directors shall also, in like manner, call
a special meeting of stockholders whenever so requested in writing by
stockholders representing not less than ten percent (10%) of the capital
stock of the Corporation entitled to vote at the meeting. The President
may in his discretion call a special meeting of stockholders upon ten (10)
days notice. No business other than that specified in the call for the
meeting shall be transacted at any special meeting of the stockholders,
except upon the unanimous consent of all the stockholders entitled to
notice thereof.
Section 3. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. For the purpose of determining stockholders entitled to receive
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any dividend; or
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<PAGE>
in order to make a determination of stockholders 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 not to exceed, in
any case, fifty (50) days. If the stock transfer books shall be closed
for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for a least
ten (10) days immediately preceding 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 stockholders, such date in
any case to be not more than fifty (50) days, and in case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of stockholders, is to be
taken. If the stock transfer books are not closed, and no record date is
fixed for the determination of stockholders entitled to receive notice of
or to vote at a meeting of stockholders, or stockholders 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 as to stockholders. When a
determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
Section 4. VOTING. At all meetings of the stockholders of
record having the right to vote, subject to the provisions of Section 3,
each stockholder of the Corporation is entitled to one (1) vote for each
share of stock having voting power standing in the name of such
stockholder on the books of the Corporation. Votes may be cast in person
or by written authorized proxy.
Section 5. PROXY. Each proxy must be executed in writing by
the stockholder of the Corporation or his duly authorized attorney. No
proxy shall be valid after the expiration of eleven (11) months from the
date of its execution unless it shall have specified therein its duration.
Every proxy shall be revocable at the discretion of the person
executing it or of his personal representatives or assigns.
Section 6. 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 noted 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 stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of
the pledge, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
Shares of its own stock belonging to the Corporation or held
by it in a fiduciary capacity 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.
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<PAGE>
Section 7. ELECTION OF DIRECTORS. At each election for Directors
every stockholder entitled to vote at such election shall have the right
to vote, in person or by proxy, the number of shares owned by him for as
many persons as there are Directors to be elected and for whose election
he has a right to vote. There shall be no cumulative voting.
Section 8. 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 the stockholders.
If a quorum shall not be present or represented, the
stockholders entitled to vote thereat, present in person or by proxy,
shall have the power to adjourn the meeting, from time to time, until a
quorum shall be present or represented. At such rescheduled meeting at
which a quorum shall be present or represented any business or any
specified item of business may be transacted which might have been
transacted at the meeting as originally notified.
The number of votes or consents of the holders of stock having
voting power which shall be necessary for the transaction of any business
or any specified item of business at any meeting of stockholders, or the
giving of any consent, shall be a majority of the outstanding shares of
the Corporation entitled to vote.
Section 9. INFORMAL ACTION BY STOCKHOLDERS. Any action
required to be taken at a meeting of the stockholders, or any other action
which may be taken at a meeting of the stockholders, may be taken without
a meeting if a consent in writing setting forth the action so taken shall
be signed by all of the stockholders entitled to vote with respect to the
subject matter thereof.
ARTICLE III
Directors
Section 1. NUMBER. The affairs and business of this
Corporation shall be managed by a Board of Directors. The present Board
of Directors shall consist of one (1) member. Thereafter the number of
Directors may be increased to not more than nine (9) by resolution of the
Board of Directors. Directors need not be residents of the State of
Nevada and need not be stockholders of the Corporation.
Section 2. ELECTION. The Directors shall be elected at each
annual meeting of the stockholders, but if any such annual meeting is not
held, or the Directors are not elected thereat, the Directors may be
elected at any special meeting of the stockholders held for that purpose.
Section 3. TERM OF OFFICE. The term of office of each of the
Directors shall be one (1) year, which shall continue until his successor
has been elected and qualified.
Section 4. DUTIES. The Board of Directors shall have the
control and general management of the affairs and business of the
Corporation. Such Directors shall in all cases act as a Board, regularly
convened, and may adopt such rules and regulations for the conduct of
meetings and the management of the Corporation, as may be deemed proper,
so long as it is not inconsistent with these By-Laws and the laws of the
State of Nevada.
Section 5. DIRECTORS' MEETINGS. Regular meetings of the
Board of Directors shall be held immediately following the annual meeting
of the stockholders, and at such other time and places as the Board of
Directors may determine. Special meetings of the Board of Directors may
be called by the President or the Secretary upon the written request of
one (1) Director.
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<PAGE>
Section 6. NOTICE OF MEETINGS. Notice of meetings other than
the regular annual meeting shall be given by service upon each Director in
person, or by mailing to him at his last known address, at least three (3)
days before the date therein designated for such meeting, of a written
notice thereof specifying the time and place of such meeting, and the
business to be brought before the meeting, and no business other than that
specified in such notice shall be transacted at any special meeting. At
any Directors' meeting at which a quorum of the Board of Directors shall
be present (although held without notice), any and all business may be
transacted which might have been transacted if the meeting had been duly
called if a quorum of the Directors waive or are willing to waive the
notice requirements of such meeting.
Any Directors may waive notice of any meeting under the
provisions of Article XII. 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 convened
or called.
Section 7. VOTING. At all meetings of the Board of
Directors, each Director is to have one (1) vote. The act of a 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. VACANCIES. Vacancies in the Board occurring
between annual meetings shall be filled for the unexpired portion of the
term by a majority of the remaining Directors.
Section 9. REMOVAL OF DIRECTORS. Any one or more of the
Directors may be removed, with or without cause, at any time, by a vote of
the stockholders holding a majority of the stock, at any special meeting
called for that purpose.
Section 10. QUORUM. The number of Directors who shall be
present at any meeting of the Board of Directors in order to constitute a
quorum for the transaction of any business or any specified item of
business shall be a majority.
The number of votes of Directors that shall be necessary for
the transaction of any business of any specified item of business at any
meeting of the Board of Directors shall be a majority.
If a quorum shall not be present at any meeting of the Board
of Directors, those present may adjourn the meeting, from time to time,
until a quorum shall be present.
Section 11. COMPENSATION. By resolution of the Board of
Directors, the Directors may be paid their expenses, if any, of attendance
at each meeting of the Board of Directors or each may be paid a stated
salary as Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefore.
Section 12. 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 is 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 or certified 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.
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<PAGE>
ARTICLE IV
Officers
Section 1. NUMBER. The officers of the Corporation shall be:
President, Vice-President, Secretary, and Treasurer, and such assistant
Secretaries as the President shall determine.
Any officer may hold more than one (1) office.
Section 2. ELECTION. All officers of the Corporation shall
be elected annually by the Board of Directors at its meeting held
immediately following the meeting of stockholders, and shall hold office
for the term of one (1) year or until their successors are duly elected.
Officers need not be members of the Board of Directors.
The Board may appoint such other officers, agents and
employees as it shall deem necessary who shall have such authority and
shall perform such duties as, from time to time, shall be prescribed by
the Board.
Section 3. DUTIES OF OFFICERS. The duties and powers of the
officers of the Corporation shall be as follows:
PRESIDENT
The President shall preside at all meetings of the
stockholders. He shall present at each annual meeting of the stockholders
and Directors a report of the condition of the business of the
Corporation. He shall cause to be called regular and special meetings of
these stockholders and Directors in accordance with these By-Laws. He
shall appoint and remove, employ and discharge, and fix the compensation
of all agents, employees, and clerks of the Corporation other than the
duly appointed officers, subject to the approval of the Board of
Directors. He shall sign and make all contracts and agreements in the
name of the Corporation, subject to the approval of the Board of
Directors. He shall see that the books, reports, statements and
certificates required by the statutes are properly kept, made and filed
according to law. He shall sign all certificates of stock, notes, drafts,
or bills of exchange, warrants or other orders for the payment of money
duly drawn by the Treasurer; and he shall enforce these By-Laws and
perform all the duties incident to the position and office, and which are
required by law.
VICE-PRESIDENT
During the absence or inability of the President to render and
perform his duties or exercise his powers, as set forth in these By-Laws
or in the statutes under which the Corporation is organized, the same
shall be performed and exercised by the Vice-President; and when so
acting, he shall have all the powers and be subject to all the
responsibilities hereby given to or imposed upon such President.
SECRETARY
The Secretary shall keep the minutes of the meetings of the
Board of Directors and of the stockholders in appropriate books. He shall
give and serve all notices of the Corporation. He shall be custodian of
the records and of the corporate seal and affix the latter when required.
He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock issued and
outstanding; the manner and the time compensation for the same was paid;
the names of the owners thereof, alphabetically arranged; the number of
shares owned by each; the time at which each person became such owner; and
-5-
<PAGE>
the amount paid thereon; and keep such stock and transfer books open daily
during the business hours of the office of the Corporation, subject to the
inspection of any stockholder of the Corporation, and permit such
stockholder to make extracts from said books to the extent prescribed by
law. He shall sign all
certificates of stock. He shall present to the Board of Directors at
their meetings all communications addressed to him officially by the
President or any officer or stockholder of the Corporation; and he shall
attend to all correspondence and perform all the duties incident to the
office of Secretary.
TREASURER
The Treasurer shall have the care and custody of and be
responsible for all the funds and securities of the Corporation, and
deposit all such funds in the name of the Corporation in such bank or
banks, trust company or trust companies or safe deposit vaults as the
Board of Directors may designate. He shall exhibit at all reasonable
times his books and accounts to any Director or stockholder of the
Corporation upon application at the office of the Corporation during
business hours. He shall render a statement of the conditions of the
finances of the Corporation at each regular meeting of the Board of
Directors, and at such other times as shall be required of him, and a full
financial report at the annual meeting of the stockholders. He shall
keep, at the office of the Corporation, correct books of account of all
its business and transactions and such other books of account as the Board
of Directors may require. He shall do and perform all duties appertaining
to the office of Treasurer. The Treasurer shall, if required by the Board
of Directors, give to the Corporation such security for the faithful
discharge of his duties as the Board may direct.
Section 4. BOND. The Treasurer shall, if required by the
Board of Directors, give to the Corporation such security for the faithful
discharge of his duties as the Board may direct.
Section 5. VACANCIES, HOW FILLED. All vacancies in any
office shall be filled by the Board of Directors without undue delay,
either at its regular meeting or at a meeting specifically called for that
purpose. In the case of the absence of any officer of the Corporation or
for any reason that the Board of Directors may deem sufficient, the Board
may, except as specifically otherwise provided in these By-Laws, delegate
the power or duties of such officers to any other officer or Director for
the time being; provided, a majority of the entire Board concur therein.
Section 6. COMPENSATION OF OFFICERS. The officers shall
receive such salary or compensation as may be determined by the Board of
Directors.
Section 7. REMOVAL OF OFFICERS. The Board of Directors may
remove any officer, by a majority vote, at any time with or without cause.
ARTICLE V
Certificates of Stock
Section 1. DESCRIPTION OF STOCK CERTIFICATES. The
certificates of stock shall be numbered and registered in the order in
which they are issued. They shall be bound in a book and shall be issued
in consecutive order therefrom, and in the margin thereof shall be entered
the name of the person owning the shares therein represented, with the
number of shares and the date thereof. Such certificates shall exhibit
the holder's name and number of shares. They shall be signed by the
President or Vice President, and countersigned by the Secretary or
Treasurer and sealed with the Seal of the Corporation.
-6-
<PAGE>
Section 2. TRANSFER OF STOCK. The stock of the Corporation
shall be assignable and transferable on the books of the Corporation only
by the person in whose name it appears on said books, his legal
representatives or by his duly authorized agent. In case of transfer by
attorney, the power of attorney, duly executed and acknowledged, shall be
deposited with the Secretary. In all cases of transfer the former
certificate must be surrendered up and cancelled before a new certificate
may be issued. No transfer shall be made upon the books of the
Corporation within ten (10) days next preceding the annual meeting of the
stockholders.
Section 3. LOST CERTIFICATES. If a stockholder shall claim
to have lost or destroyed a certificate or certificates of stock issued by
the Corporation, the Board of Directors may, at its discretion, direct a
new certificate or certificates to be issued, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to
be lost or destroyed, and upon the deposit of a bond or other indemnity in
such form and with such sureties if any that the Board may require.
ARTICLE VI
Seal
Section 1. SEAL. The seal of the Corporation shall be as
follows:
NO SEAL IN USE AT THIS TIME
ARTICLE VII
Dividends
Section 1. WHEN DECLARED. The Board of Directors shall by
vote declare dividends from the surplus profits of the Corporation
whenever, in their opinion, the condition of the Corporation's affairs
will render it expedient for such dividends to be declared.
Section 2. RESERVE. The Board of Directors may set aside,
out of the net profits of the Corporation available for dividends, such
sum or sums (before payment of any dividends) as the Board, in their
absolute discretion, think proper as a reserve fund, to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as
the Directors shall think conducive to the interest of the Corporation,
and they may abolish or modify any such reserve in the manner in which it
was created.
ARTICLE VIII
Indemnification
Section 1. Any person made a party to or involved in any
civil, criminal or administrative action, suit or proceeding by reason of
the fact that he or his testator or intestate is or was a Director,
officer, or employee of the Corporation, or of any corporation which he,
the testator, or intestate served as such at the request of the
Corporation, shall be indemnified by the Corporation against expenses
reasonably incurred by him or imposed on him in connection with or
resulting from the defense of such action, suit, or proceeding and in
connection with or resulting from any appeal thereon, except with respect
to matters as to which it is adjudged in such action, suit or proceeding
that such officer, Director, or employee was liable to the Corporation, or
to such other corporation, for negligence or misconduct in the performance
of his duty. As used herein the term "expense" shall include all
obligations incurred by such person for the payment of money, including
-7-
<PAGE>
without limitation attorney's fees, judgments, awards, fines, penalties,
and amounts paid in satisfaction of judgment or in settlement of any such
action, suit, or proceedings, except amounts paid to the Corporation or
such other corporation by him.
A judgment of conviction whether based on plea of guilty or
nolo contendere or its equivalent, or after trial, shall not of itself be
deemed an adjudication that such Director, officer or employee is liable
to the Corporation, or such other corporation, for negligence or
misconduct in the performance of his duties. Determination of the rights
of such indemnification and the amount thereof may be made at the option
of the person to be indemnified pursuant to procedure set forth, from time
to time, in the By-Laws, or by any of the following procedures: (a) order
of the Court or administrative body or agency having jurisdiction of the
action, suit, or proceeding; (b) resolution adopted by a majority of the
quorum of the Board of Directors of the Corporation without counting in
such majority any Directors who have incurred expenses in connection with
such action, suit or proceeding; (c) if there is no quorum of Directors
who have not incurred expense in connection with such action, suit, or
proceeding, then by resolution adopted by a majority of the committee of
stockholders and Directors who have not incurred such expenses appointed
by the Board of Directors; (d) resolution adopted by a majority of the
quorum of the Directors entitled to vote at any meeting; or (e) Order of
any Court having jurisdiction over the Corporation. Any such
determination that a payment by way of indemnity should be made will be
binding upon the Corporation. Such right of indemnification shall not be
exclusive of any other right which such Directors, officers, and employees
of the Corporation and the other persons above mentioned may have or
hereafter acquire, and without limiting the generality of such statement,
they shall be entitled to their respective rights of indemnification under
any By-Law, Agreement, vote of stockholders, provision of law, or
otherwise in addition to their rights under this Article. The provision
of this Article shall apply to any member of any committee appointed by
the Board of Directors as fully as though each person and been a Director,
officer or employee of the Corporation.
ARTICLE IX
Amendments
Section 1. HOW AMENDED. These By-Laws may be altered,
amended, repealed or added to by the vote of the Board of Directors of the
Corporation at any regular meeting of said Board, or at a special meeting
of Directors called for that purpose provided a quorum of the Directors as
provided by law and by the Articles of Incorporation, are present at such
regular meeting or special meeting. These By-Laws and any amendments
thereto and new By-Laws added by the Directors may be amended, altered or
replaced by the stockholders at any annual or special meeting of the
stockholders.
ARTICLE X
Fiscal Year
Section 1. FISCAL YEAR. The fiscal year shall end on the
31st day of DECEMBER.
-8-
<PAGE>
ARTICLE XI
Waiver of Notice
Section 1. Whenever any notice is required to be given to any
shareholders or directors of the Corporation under the provisions of these
By-Laws, under the Articles of Incorporation or under the provisions of
the Nevada 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.
ADOPTED this 8th day of May 1995
Landmark Leasing, Corp.
A Nevada Corporation,
_______________________________
David N. Nemelka
President
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary\Treasurer of
Landmark Leasing, Corp.., A NEVADA CORPORATION: and
2. That the foregoing By-Laws, comprising Nine (9) pages, constitute
the By-Laws of said Corporation as duly adopted at a meeting of
the Board of Directors thereof duly held on the 8th day of
May 1995.
__________________________________
Joseph Udall
Secretary\Treasurer
(SEAL)
-9-
<PAGE>
EXHIBIT 5
OPINION ON LEGALITY
<PAGE>
POULTON & YORDAN
ATTORNEYS AT LAW
4 TRIAD CENTER, SUITE 500-A
SALT LAKE CITY, UTAH 84180
(801) 355-1341
October 24, 1996
Board of Directors
Litigation Economics, Inc.
227 South Ninth Avenue
Pocatello, Idaho 83201
Re: Opinion and Consent of Counsel with respect to
Registration Statement on Form SB-2
Gentlemen:
You have requested the opinion and consent of this law firm, as
counsel, with respect to the proposed issuance and public distribution of
certain securities of the Company pursuant to the filing of a registration
statement on Form SB-2 with the Securities and Exchange Commission.
The proposed offering and public distribution relates to 100,000
shares of Common Stock, $.001 par value (the "Common Stock"), to be
offered and sold to the public at a price of $1.00 per share. It is our
opinion that the shares of Common Stock will, when issued in accordance
with the terms and conditions set forth in the registration statement, be
duly authorized, validly issued, fully paid and nonassessable shares of
common stock of the Company in accordance with the corporation laws of the
State of Nevada.
We hereby consent to be named as counsel for the Company in the
registration statement and prospectus included therein.
Very truly yours,
POULTON & YORDAN
/S/ Cletha A. Walstrand
Cletha A. Walstrand
CAW/jt
<PAGE>
EXHIBIT (21)
Subsidiaries of the small business issuer
G.E.C., Inc.
an Idaho Corporation
doing business as G.E.C., Inc.
<PAGE>
EXHIBIT 23
CONSENTS OF EXPERTS AND COUNSEL
<PAGE>
POULTON & YORDAN
ATTORNEYS AT LAW
4 TRIAD CENTER, SUITE 500-A
SALT LAKE CITY, UTAH 84180
(801) 355-1341
October 24, 1996
Board of Directors
Litigation Economics, Inc.
227 South Ninth Avenue
Pocatello, Idaho 83201
Re: Opinion and Consent of Counsel with respect to
Registration Statement on Form SB-2
Gentlemen:
You have requested the opinion and consent of this law firm, as
counsel, with respect to the proposed issuance and public distribution of
certain securities of the Company pursuant to the filing of a registration
statement on Form SB-2 with the Securities and Exchange Commission.
The proposed offering and public distribution relates to 100,000
shares of Common Stock, $.001 par value (the "Common Stock"), to be
offered and sold to the public at a price of $1.00 per share. It is our
opinion that the shares of Common Stock will, when issued in accordance
with the terms and conditions set forth in the registration statement, be
duly authorized, validly issued, fully paid and nonassessable shares of
common stock of the Company in accordance with the corporation laws of the
State of Nevada.
We hereby consent to be named as counsel for the Company in the
registration statement and prospectus included therein.
Very truly yours,
POULTON & YORDAN
/s/ Cletha A. Walstrand
Cletha A. Walstrand
CAW/jt
<PAGE>
JONES, JENSEN & COMPANY
349 SOUTH 200 EAST, SUITE 500
SALT LAKE CITY, UTAH 84111
(801) 328-4408
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Prospectus constituting part of this
Registration Statement on Form SB-2 for Litigation Economics, Inc., of our
report dated August 31, 1996, relating to the Consolidated Financial
Statements dated August 31, 1996 of Litigation Economics, Inc., which
appears in such Prospectus. We also consent to the reference to us under
the heading "Experts".
/S/ JONES, JENSEN & COMPANY
Jones, Jensen & Company
Salt Lake City, Utah
November 8, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Cornelius A. Hofman, II, a legal resident of the City of
Pocatello. State of Idaho, have made, constituted, and appointed, and by
these presents do hereby make, constitute, and appoint Cletha A.
Walstrand, a legal resident of the City of Salt Lake City, State of Utah,
as my true and lawful Attorney-in-Fact for me and in my name, place, and
stead, to do, execute, and perform all and every act or acts, thing or
things, in law needful and necessary to be done in and about and in
relation to the following Matter:
S-B2 Registration Statement for Litigation Economics, Inc.
GRANTING UNTO AND AUTHORIZING my said Attorney-in-Fact full power of every
kind and character, as fully, and largely, and amply to all intents and
purposes whatsoever, as necessary to be exercised in relation to the said
Matter as I might or could do if acting personally.
Further, I hereby grant unto my said attorney all of the maximum of powers
as are allowed to fiduciaries by the applicable law of any jurisdiction.
I specifically further include the power to substitute and delegate
without limitation. Delegation may be accomplished by duly signed, dated,
and notarized written instrument. All of said powers are cumulative and
not exclusive, and failure to exercise forebearance in the exercise, or
sporadic exercise of any such power, shall in no way constitute a waiver
of such power nor a limitation of any kind on the ability of my
Attorney-in-Fact (including delegatees thereof) to so exercise.
This Power of Attorney shall not terminate upon my disability,
incompetency, illness, or incapacity as principal.
I hereby ratify and confirm all lawful acts and all acts undertaken in
good faith by my said Attorney-in-Fact (including delegatees thereof) by
virtue hereof, and no one dealing therewith shall have the duty nor the
power to question the authority of my said Attorney-in-Fact (or delegatees
thereof).
This Power is irrevocable and may be cancelled only by express written and
notarized agreement between myself and my said Attorney. In the event any
portion hereof shall be found to be invalid or unlawful by operation of
law or rule of court, then the same shall be considered severable but
shall not invalidate the entire power nor any acts undertaken hereunder,
<PAGE>
and this Power of Attorney shall continue in full force and effect as if
the invalid portion had never been a part hereof as to the jurisdiction or
jurisdictions in which such portion is found invalid or unlawful.
WITNESS my signature and seal:
__________________________________________________
Date (Seal)
State of Idaho
Pocatello, Idaho
The foregoing Power of Attorney was sworn to and acknowledged before me
this [DATE], by [NAME]
Notary Public
(Notary Seal)
My commission expires
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Stacey A. Hofman, a legal resident of the City of Pocatello,
State of Idaho, have made, constituted, and appointed, and by these
presents do hereby make, constitute, and appoint Cletha A. Walstrand, a
legal resident of the City of Salt Lake City, State of Utah, as my true
and lawful Attorney-in-Fact for me and in my name, place, and stead, to
do, execute, and perform all and every act or acts, thing or things, in
law needful and necessary to be done in and about and in relation to the
following Matter:
S-B2 Registration Statement for Litigation Economics, Inc.
GRANTING UNTO AND AUTHORIZING my said Attorney-in-Fact full power of every
kind and character, as fully, and largely, and amply to all intents and
purposes whatsoever, as necessary to be exercised in relation to the said
Matter as I might or could do if acting personally.
Further, I hereby grant unto my said attorney all of the maximum of
powers as are allowed to fiduciaries by the applicable law of any
jurisdiction. I specifically further include the power to substitute and
delegate without limitation. Delegation may be accomplished by duly
signed, dated, and notarized written instrument. All of said powers are
cumulative and not exclusive, and failure to exercise forebearance in the
exercise, or sporadic exercise of any such power, shall in no way
constitute a waiver of such power nor a limitation of any kind on the
ability of my Attorney-in-Fact (including delegatees thereof) to so
exercise.
This Power of Attorney shall not terminate upon my disability,
incompetency, illness, or incapacity as principal.
I hereby ratify and confirm all lawful acts and all acts undertaken
in good faith by my said Attorney-in-Fact (including delegatees thereof)
by virtue hereof, and no one dealing therewith shall have the duty nor the
power to question the authority of my said Attorney-in-Fact (or delegatees
thereof).
This Power is irrevocable and may be cancelled only by express
written and notarized agreement between myself and my said Attorney. In
the event any portion hereof shall be found to be invalid or unlawful by
operation of law or rule of court, then the same shall be considered
severable but shall not invalidate the entire power nor any acts
undertaken hereunder, and this Power of Attorney shall continue in full
force and effect as if the invalid portion had never been a part hereof as
to the jurisdiction or jurisdictions in which such portion is found
invalid or unlawful.
<PAGE>
WITNESS my signature and seal:
/S/ Stacey A. Hofman
______________________________________ (Seal)
30 October
Dated this _____ day of ______________, 1996
STATE OF IDAHO )
ss.
COUNTY OF ___________ )
The foregoing Power of Attorney was sworn to and acknowledged before
me this ____ day of _________________, 1996, by Stacey A. Hofman.
____________________________________
Notary Public (Notary Seal)
My commission expires:
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Cornelius A. Hofman, a legal resident of the City of
Pocatello, State of Idaho, have made, constituted, and appointed, and by
these presents do hereby make, constitute, and appoint Cletha A.
Walstrand, a legal resident of the City of Salt Lake City, State of Utah,
as my true and lawful Attorney-in-Fact for me and in my name, place, and
stead, to do, execute, and perform all and every act or acts, thing or
things, in law needful and necessary to be done in and about and in
relation to the following Matter:
S-B2 Registration Statement for Litigation Economics, Inc.
GRANTING UNTO AND AUTHORIZING my said Attorney-in-Fact full power of every
kind and character, as fully, and largely, and amply to all intents and
purposes whatsoever, as necessary to be exercised in relation to the said
Matter as I might or could do if acting personally.
Further, I hereby grant unto my said attorney all of the maximum of
powers as are allowed to fiduciaries by the applicable law of any
jurisdiction. I specifically further include the power to substitute and
delegate without limitation. Delegation may be accomplished by duly
signed, dated, and notarized written instrument. All of said powers are
cumulative and not exclusive, and failure to exercise forebearance in the
exercise, or sporadic exercise of any such power, shall in no way
constitute a waiver of such power nor a limitation of any kind on the
ability of my Attorney-in-Fact (including delegatees thereof) to so
exercise.
This Power of Attorney shall not terminate upon my disability,
incompetency, illness, or incapacity as principal.
I hereby ratify and confirm all lawful acts and all acts undertaken
in good faith by my said Attorney-in-Fact (including delegatees thereof)
by virtue hereof, and no one dealing therewith shall have the duty nor the
power to question the authority of my said Attorney-in-Fact (or delegatees
thereof).
This Power is irrevocable and may be cancelled only by express
written and notarized agreement between myself and my said Attorney. In
the event any portion hereof shall be found to be invalid or unlawful by
operation of law or rule of court, then the same shall be considered
severable but shall not invalidate the entire power nor any acts
undertaken hereunder, and this Power of Attorney shall continue in full
force and effect as if the invalid portion had never been a part hereof as
to the jurisdiction or jurisdictions in which such portion is found
invalid or unlawful.
<PAGE>
WITNESS my signature and seal:
/s/ C. A. Hofman
______________________________________ (Seal)
30 October
Dated this _____ day of ______________, 1996
STATE OF IDAHO )
ss.
COUNTY OF ___________ )
The foregoing Power of Attorney was sworn to and acknowledged before
me this ____ day of _________________, 1996, by Cornelius A. Hofman.
____________________________________
Notary Public (Notary Seal)
My commission expires:
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Edward B. Schow, a legal resident of the City of Idaho
Falls, State of Idaho, have made, constituted, and appointed, and by these
presents do hereby make, constitute, and appoint Cletha A. Walstrand, a
legal resident of the City of Salt Lake City, State of Utah, as my true
and lawful Attorney-in-Fact for me and in my name, place, and stead, to
do, execute, and perform all and every act or acts, thing or things, in
law needful and necessary to be done in and about and in relation to the
following Matter:
S-B2 Registration Statement for Litigation Economics, Inc.
GRANTING UNTO AND AUTHORIZING my said Attorney-in-Fact full power of every
kind and character, as fully, and largely, and amply to all intents and
purposes whatsoever, as necessary to be exercised in relation to the said
Matter as I might or could do if acting personally.
Further, I hereby grant unto my said attorney all of the maximum of
powers as are allowed to fiduciaries by the applicable law of any
jurisdiction. I specifically further include the power to substitute and
delegate without limitation. Delegation may be accomplished by duly
signed, dated, and notarized written instrument. All of said powers are
cumulative and not exclusive, and failure to exercise forebearance in the
exercise, or sporadic exercise of any such power, shall in no way
constitute a waiver of such power nor a limitation of any kind on the
ability of my Attorney-in-Fact (including delegatees thereof) to so
exercise.
This Power of Attorney shall not terminate upon my disability,
incompetency, illness, or incapacity as principal.
I hereby ratify and confirm all lawful acts and all acts undertaken
in good faith by my said Attorney-in-Fact (including delegatees thereof)
by virtue hereof, and no one dealing therewith shall have the duty nor the
power to question the authority of my said Attorney-in-Fact (or delegatees
thereof).
This Power is irrevocable and may be cancelled only by express
written and notarized agreement between myself and my said Attorney. In
the event any portion hereof shall be found to be invalid or unlawful by
operation of law or rule of court, then the same shall be considered
severable but shall not invalidate the entire power nor any acts
undertaken hereunder, and this Power of Attorney shall continue in full
force and effect as if the invalid portion had never been a part hereof as
to the jurisdiction or jurisdictions in which such portion is found
invalid or unlawful.
<PAGE>
WITNESS my signature and seal:
/s/ Edward B. Schow
______________________________________ (Seal)
31st October
Dated this _____ day of ______________, 1996
STATE OF IDAHO )
ss.
COUNTY OF ___________ )
The foregoing Power of Attorney was sworn to and acknowledged before
me this ____ day of _________________, 1996, by Edward B. Schow.
____________________________________
Notary Public (Notary Seal)
My commission expires:
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 5,492
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,492
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,492
<CURRENT-LIABILITIES> 2,188
<BONDS> 0
0
0
<COMMON> 1,500
<OTHER-SE> 1,804
<TOTAL-LIABILITY-AND-EQUITY> 5,492
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,045)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,045)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,045)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
ADDITIONAL EXHIBITS
LITIGATION ECONMICS, INC.
1996 STOCK OPTION PLAN
<PAGE>
Litigation Economics, Inc.
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of Litigation Economics, Inc. (the
"Company") 1996 Option Plan (the "Plan") is to enable the Company to offer
to its key employees, officers, directors, consultants and sales
representatives whose past, present and/or potential contributions to the
Company and its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a proprietary interest
in the Company. The various types of long-term incentive awards which may
be provided under the Plan will enable the Company to respond to changes
in compensation practices, tax laws, accounting regulations and the size
and diversity of its business.
1.2 Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Agreement" means the agreement between the Company and
the Holder setting forth the terms and conditions of an award under the
Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto and the regulations
promulgated thereunder.
(d) "Committee" means the Stock Option Committee of the
Board or any other committee of the Board, which the Board may designate
to administer the Plan or any portion thereof. If no Committee is so
designated, then all references in this Plan to "Committee" shall mean the
Board.
(e) "Common Stock" means the Common Stock of the Company,
par value $.001 per share.
(f) "Company" means Litigation Economics, Inc., a
corporation organized under the laws of the State of Nevada.
(g) "Deferred Stock" means Stock to be received, under an
award made pursuant to Section 9, below, at the end of a specified
deferral period.
(h) "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan.
(i) "Effective Date" means the date set forth in Section
13.1, below.
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(j) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder,
means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, the last sale price of the Common Stock in the
principal trading market for the Common Stock on the last trading day
preceding the date of grant of an award hereunder, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not
listed on a national securities exchange or quoted on the Nasdaq National
Market or Nasdaq SmallCap Market, but is traded in the over-the-counter
market, the closing bid price for the Common Stock on the last trading day
preceding the date of grant of an award hereunder for which such
quotations are reported by the OTC Bulletin Board or the National
Quotation Bureau, Incorporated or similar publisher of such quotations;
and (iii) if the fair market value of the Common Stock cannot be
determined pursuant to clause (i) or (ii) above, such price as the
Committee shall determine, in good faith.
(k) "Holder" means a person who has received an award under
the Plan.
(l) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(m) "Nonqualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section
10, below, that is valued in whole or in part be reference to, or is
otherwise based upon, Stock.
(p) "Parent" means any present or future parent corporation
of the Company, as such term is defined in Section 424(e) of the Code.
(q) "Plan" means Litigation Economics, Inc. 1996 Stock
Option Plan, as hereinafter amended from time to time.
(r) "Restricted Stock"means Stock, received under an award
made pursuant to Section 8, below, that is subject to restrictions under
said Section 8.
(s) "SAR Value" means the excess of the Fair Market Value
(on the exercise date) of the number of shares for which the Stock
Appreciation Right is exercised over the exercise price that the
participant would have otherwise had to pay to exercise the related Stock
Option and purchase the relevant shares.
(t) "Stock" means the Common Stock of the Company, par value
$.001 per share.
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(u) "Stock Appreciation Right" means the right to receive
from the Company, on surrender of all or part of the related Stock Option,
without a cash payment to the Company, a number of shares of Common Stock
equal to the SAR Value divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(w) "Stock Reload Option" means any option granted under
Section 6.3, below, as a result of the payment of the exercise price of a
Stock Option and/or the withholding tax related thereto in the form of
Stock owned by the Holder or the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of
the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such terms as the
Board may in each case determine, and shall be subject to removal at any
time by the Board.
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4, below, to award, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express provisions of
this Plan):
(a) to select the officers, key employees, directors,
consultants and sales representatives of the Company or any Subsidiary to
whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Reload Stock Options and/or Other Stock-Based Awards may from time
to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, number of shares, share price, any restrictions or
limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the
Committee shall determine);
(c) to determine any specified performance goals or such
other factors or criteria which need to be attained for the vesting of an
award granted hereunder;
(d) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash awards
made by the Company or any Subsidiary outside of this Plan;
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(e) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish,
including the crediting of interest on deferred amounts denominated is
cash and of dividend equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall
be deferred which may be either automatic or at the election of the
Holder; and
(g) to substitute (i) new Stock Options for previously
granted Stock Options, which previously granted Stock Options have higher
option exercise prices and/or contain other less favorable terms, and (ii)
new awards of any other type for previously granted awards of the same
type, which previously granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 4 and 12,
below, the Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as
it shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and to
determine the form and substance of all Agreements relating thereto), to
the otherwise supervise the administration of the Plan. Subject to
Section 12, below, all decisions made by the Committee pursuant to the
provisions of the Plan shall be made in the Committee's sole discretion
and shall be final and binding upon all persons, including the Company,
its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options (including but limited to Stock Reload Options or
Stock Appreciation rights granted in conjunction with an Incentive Stock
Option) or any Agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the Holder(s)
affected, to disqualify any Incentive Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of share of Common Stock
reserved and available for distribution under the Plan shall be 400,000
shares. Share of Stock under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares. If any shares of
Stock that have been granted pursuant to a Stock Option cease to be
subject to a Stock Option, or if any shares of Stock that are subject to
any Stock Appreciation Right, Restricted Stock, Deferred Stock award,
Reload Stock Option or Other Stock-Based Award granted hereunder are
forfeited or any such award otherwise terminates without a payment being
made to the Holder in the form of Stock, such shares shall again be
available for distribution in connection with future grants and awards
under the Plan. Only net shares issued upon a stock-for-stock exercise
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(including stock used for withholding taxes) shall be counted against the
number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event
of any merger, reorganization, consolidation, recapitalization, dividend
(other than a cash dividend), stock split, reverse stock split, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for
issuance under the Plan, in the number and exercise price of shares
subject to outstanding Options, in the number of shares and Stock
Appreciation Right price relating to Stock Appreciation Rights, and in the
number of shares and Stock Appreciation Right price relating to Stock
Appreciation Rights, and in the number of shares subject to, and in the
related terms of, other outstanding awards (including but not limited to
awards of Restricted Stock, Deferred Stock, Reload Stock Options and Other
Stock-Based Awards) granted under the Plan as may be determined to be
appropriate by the Committee in order to prevent dilution or enlargement
of rights, provided that the number of shares subject to any award shall
always be a whole number.
Section 4. Eligibility.
Awards may be made or granted to key employees, officers, directors,
consultants and sales representatives who are deemed to have rendered or
to be able to render significant services to the Company or its
Subsidiaries and who are deemed to have contributed or to have the
potential to contribute to the success of the Company. No Incentive Stock
Option shall be granted to any person who is not an employee of the
Company or a Subsidiary at the time of grant.
Section 5. Required Six-Month Holding Period.
Any equity security issued under this Plan may not be sold prior to
six months from the date of the grant of the related award without the
approval of the Company.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock
Options. Any Stock Option granted under the Plan shall contain such
terms, not inconsistent with this Plan, or with respect to Incentive Stock
Options, not inconsistent with the Code, as the Committee may from time to
time approve. The Committee shall have the authority to grant Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options
and which may be granted alone or in addition to other awards granted
under the Plan. To the extent that any Stock Option intended to qualify
as an Incentive Stock Option does not so qualify, it shall constitute a
separate Nonqualified Stock Option. An Incentive Stock Option may be
granted only within the ten-year period commencing from the Effective Date
and may only be exercised within ten years of the date of grant or five
years in the case of an Incentive Stock Option granted to an optionee
("10% Stockholder") who, at the time of grant, owns Stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.
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6.2 Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant and may not be less than 100% of the Fair Market Value
of the Stock as defined above; provided, however, that the exercise price
of an Incentive Stock Option granted to a 10% Stockholder shall not be
less than 110% of the Fair Market Value of the Stock.
(b) Option Term. Subject to the limitations in Section 6.1,
above, the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee and as set forth in Section 11, below. If the
Committee provides, in its discretion, that nay Stock Option is
exercisable only in installments, i.e., that it vests over time, the
Committee may waive such installment exercise provisions at any time at or
after the time of grant in whole or in part, based upon such factors as
the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular
case, Stock Options may be exercised in whole or in part at any time
during the term of the Option, by giving written notice of exercise to the
Company specifying the number of shares of Stock to be purchase. Such
notice shall be accompanied by payment in full of the purchase price,
which shall be in cash or , unless otherwise provided in the Agreement, in
shares of Stock (including Restricted Stock and other contingent awards
under this Plan) or, partly in cash and partly in such Stock, or such
other means which the Committee determines are consistent with the Plan's
purpose and applicable law. Cash payments shall be made by wire transfer,
certified or bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not be
required to deliver certificates for shares of Stock with respect to which
an Option is exercised until the Company has confirmed the receipt of good
and available funds in payment of the purchase price thereof. Payments in
the form of Stock shall be valued at the Fair Market Value of a share of
Stock on the date prior to the date of exercise. Such payments shall be
made by delivery of stock certificates in negotiable form which are
effective to transfer good and valid title thereto to the Company, free of
any liens or encumbrances. Subject to the terms of the Agreement, the
Committee may, in its sole discretion, at the request of the Holder,
deliver upon the exercise of a Nonqualified Stock Option a combination of
shares of Deferred Stock and Common Stock; provided that, notwithstanding
the provision of Section 9 of the Plan, such Deferred Stock shall be fully
vested and not subject to forfeiture. A Holder shall have none of the
rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of
the Option.
(e) Transferability. No Stock Option shall be transferable
by the Holder other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
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Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holders'
employment by the Company or a Subsidiary terminates by reason of death,
any Stock Option held by such Holder, unless otherwise determined by the
Committee at the time of grant and set forth in the Agreement, shall be
fully vested and may thereafter be exercised by the legal representative
of the estate or by the legatee of the Holder under the will of the
Holder, for a period of one year (or such other greater or lesser period
as the Committee may specify at grant) from the date of such death or
until the expiration of the stated term of such Stock Option, which ever
period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in the
Agreement, shall be fully vested and may thereafter be exercised by the
Holder for a period of one year (or such other greater or lesser period as
the Committee may specify at the time of grant) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Other Termination. Subject to the provisions of Section
14.3, below, and unless otherwise determined by the Committee at the time
of grant and set forth in the Agreement, if a Holder is an employee of the
Company or a Subsidiary at the time of grant and if such Holder's
employment by the Company or any Subsidiary terminates for any reason
other than death or Disability, the Stock Option shall thereupon
automatically terminate, except that if the Holder's employment is
terminated by the Company or a Subsidiary without cause or due to Normal
Retirement, then the portion of such Stock Option which has vested on the
date of termination of employment may be exercised for the lesser of three
months after termination of employment or the balance of such Stock
Option's term.
(i) Additional Incentive Stock Option Limitation. In the
case of an Incentive Stock Option, the aggregate Fair Market Value of
Stick (determined at the time of grant of the Option) with respect to
which Incentive Stock Options become exercisable by a Holder during any
calendar year (under all such plans of the Company and its Parent and
Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at
any time, in its sole discretion, offer to buy out a Stock Option
previously granted, based upon such terms and conditions as the Committee
shall establish and communicate to the Holder at the time that such offer
is made.
(k) Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by and shall be subject to the terms of, the Agreement
executed by the Company and the Holder.
6.3 Stock Reload Option. The Committee may also grant to the
Holder (concurrently with the grant of an Incentive Stock Option and at or
after the time of grant in the case of a Nonqualified Stock Option) a
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Stock Reload Option up to the amount of shares of Stock held by the Holder
for at least six months and used to pay all or part of the exercise price
of an Option and, if any, withheld by the Company as payment for
withholding taxes. Such Stock Reload Option shall have an exercise price
equal to the Fair Market Value as of the date of the Stock Reload Option
grant. Unless the Committee determines otherwise, a Stock Reload Option
may be exercised commencing one year after it is granted and shall expire
on the date of expiration of the Option to which the Reload Option is
related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock
Appreciation Rights to participants who have been, or are being granted,
Options under the Plan as a means of allowing such participants to
exercise their Options without the need to pay the exercise price in cash.
In the case of a Nonqualified Stock Option, a Stock Appreciation Right may
be granted either at or after the time of the grant of such Nonqualified
Stock Option. In the case of an Incentive Stock Option, a Stock
Appreciation Right may be granted only at the time of the grant of such
Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be
subject to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be
exercisable as determined by the Committee and set forth in the Agreement,
subject to the limitations, if any, imposed by the Code, with respect to
related Incentive Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate
and shall no longer be exercisable upon the termination or exercise of the
related Stock Option.
(c) Method of Exercise. Stock Appreciation Rights shall be
exercisable upon such terms and conditions as shall be determined by the
Committee and set forth in the Agreement and by surrendering the
applicable portion of the related Stock Option. Upon such exercise and
surrender, the Holder shall be entitled to receive a number of Option
Shares equal to the SAR Value divided by the exercise price of the Option.
(d) Shares Affected Upon Plan. The granting of a Stock
Appreciation Rights shall not affect the number of shares of Stock
available under for awards under the Plan. The number of shares available
for awards under the Plan will, however, be reduced by the number of
shares of Stock acquirable upon exercise of the Stock Option to which such
Stock Appreciation right relates.
Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be awarded, the number of shares to
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be awarded, the price (if any) to be paid by the Holder, the time or times
within which such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name
of the Holder to whom such Restricted Stock shall have been awarded.
During the Restriction Period, certificates representing the Restricted
Stock and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the Restricted
Stock (and such Retained Distributions), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the Agreement. Such certificates shall be
deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and
any securities constituting Retained Distributions that shall be forfeited
or that shall not become vested in accordance with the Plan and the
Agreement.
(b) Rights of Holder. Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all corporate purposes.
The Holder will have the right to vote such Restricted Stock, to receive
and retain all regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute on such Restricted Stock and to exercise all other rights,
powers and privileges of a holder of Common Stock with respect to such
Restricted Stock, with the exceptions that (i) the Holder will not be
entitled to delivery of the stock certificate or certificates representing
such Restricted Stock until the Restriction Period shall have expired and
unless all other vest requirements with respect thereto shall have been
fulfilled; (ii) the Company will retain custody of the stock certificate
or certificates representing the Restricted Stock during the Restriction
Period; (iii) other than regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute, the Company will retain custody of all distributions
("Retained Distributions") made or declared with respect to the Restricted
Stock (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the restricted
Stock) until such time, if ever, as the Restricted Stock with respect to
which such Retained Distributions shall have been made, paid or declared
shall have become vested and with respect to which the Restriction Period
shall have expired; (iv) a breach of any of the restrictions, terms or
conditions contained in this Plan or the Agreement or otherwise
established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock
and any Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the
Restriction Period with respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms and conditions
(i) all or part of such Restricted Stock shall become vested in accordance
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with the terms of the Agreement, subject to Section 11, below, and (ii)
any Retained Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related thereto
shall have become vested, subject to Section 11, below. Any such
Restricted Stock and Retained Distributions that do not vest shall be
forfeited to the Company and the Holder shall not thereafter have any
rights with respect to such Restricted Stock and Retained Distributions
that shall have been so forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the eligible persons to whom and the time or times at
which grants of Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any person, the duration of the period
(the "Deferral Period") during which, and the conditions under which,
receipt of the shares will be deferred, and all the other terms and
conditions of the awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period
(or the Additional Deferral Period referred to in Section 9.2 (d) below,
where applicable), shares certificates shall be issued and delivered to
the Holder, or his legal representative, representing the number equal to
the shares covered by the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred
stock shall not have any rights of a stockholder by virtue of such award
until the expiration of the applicable Deferral Period and the issuance
and delivery of the certificates representing such Stock. The shares of
Stock issuable upon expiration of the Deferral Period shall not be deemed
outstanding by the Company until the expiration of such Deferral period
and the issuance and delivery of such Stock to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of the
Deferral Period with respect to each award of Deferred Stock and the
satisfaction of any other applicable restrictions, terms and conditions
all or part of such Deferred Stock shall become vested in accordance with
the terms of the Agreement, subject to Section 11, below. Any such
Deferred Stock that does not vest shall be forfeited to the Company and
the Holder shall not thereafter have any rights with respect to such
Deferred Stock.
(d) Additional Deferral Period. A Holder may request to,
and the Committee may at any time, defer the receipt of an award (or an
installment of an award) for an additional specified period or until a
specified event (the "Additional Deferral Period"). Subject to any
exceptions adopted by the Committee, such request must generally be made
at least one year prior to expiration of the Deferral Period for such
Deferred Stock award (or such installment).
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Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or
payable, in value in whole or in part by reference to, or otherwise based
on, or related to, shares of Common Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without
limitation, purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, convertible or exchangeable
debentures, or other rights convertible into shares of Common Stock and
awards valued by reference to the value of securities of or the
performance of specified subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any other awards
under this Plan or any other plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of such other stock-based awards shall be made, the number of
shares of Common Stock to be awarded pursuant to such awards, and all
other terms and conditions of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee
and to Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
If (i) any person or entity other than the Company and/or any
stockholders of the Company as of the Effective Date acquire securities of
the Company (in one or more transactions) having 25% or more of the total
voting power of all the Company's securities then outstanding and (ii) the
Board of Directors of the Company does not authorize or otherwise approve
such acquisition, then, the vesting periods of any and all Options and
other awards granted and outstanding under the Plan shall be accelerated
and all such Options and awards will immediately and entirely vest, and
the respective holders thereof will have the immediate right to purchase
and/or receive any and all Stock subject to such Options and awards on the
terms set forth in this Plan and the respective agreements respecting such
Options and awards.
Section 12. Amendment and Termination.
Subject to Section 4 hereof, the Board may at any time, and from
time to time, amend alter, suspend or discontinue any of the provisions of
the Plan, but no amendment, alteration, suspension or discontinuance shall
be made which would impair the rights of a Holder under any Agreement
theretofore entered into hereunder, without the Holder's consent.
Section 13. Term of Plan.
13.1 Effective Date. The Plan shall be effective as of the date on
which the Company's stockholders approved the Plan ("Effective Date").
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13.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may
be granted and all awards granted under the Plan are no longer
outstanding. Notwithstanding the foregoing, grants of Incentive Stock
Options may only be made during the ten year period following the
Effective Date.
Section 14. General Provisions.
14.1 Written Agreements. Each award granted under the Plan shall
be confirmed by, and shall be subject to the terms of the Agreement
executed by the Company and the Holder. The Committee may terminate any
award made under the Plan if the Agreement relating thereto is not
executed and returned to the Company within 10 days after the Agreement
has been delivered to the Holder for his or her execution.
14.2 Unfunded Status of Plan. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. With respect
to any payments not yet made to a Holder by the Company, nothing contained
herein shall give any such Holder any rights that are greater than those
of a general creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In the event
aa Holder's employment with the Company or a Subsidiary is terminated for
any reason whatsoever, and within one year after the date thereof such
Holder accepts employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any
award which was realized or obtained by such Holder at any time during the
period beginning on that date which is six months prior to the date of
such Holder's termination of employment with the Company.
(b) Termination for Cause. The Committee may, in the event
a Holder's employment with the company or a Subsidiary is terminated for
cause, annul any award granted under this Plan to return to the Company
the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with
the Company.
(c) No Right of Employment. Nothing contained in the Plan
or in any award hereunder shall be deemed to confer upon any Holder who is
an employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in
any way with the right of the Company or any Subsidiary to terminate the
employment of any Holder who is an employee at any time.
14.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award
under the Plan to represent to and agree with the Company in writing that
the Holder is acquiring the shares for investment without a view to
distribution thereof.
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14.5 Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional
incentive arrangements as it may deem desirable, including, but not
limited to, the granting of Stock Options and the awarding of stock and
cash otherwise than under the Plan; and such arrangements may be either
generally applicable or applicable only in specific cases.
14.6 Withholding Taxes. Not later than the date as of which an
amount must first be included in the gross income of the Holder for
Federal income tax purposes with respect to any option or other award
under the Plan, the Holder shall pay to the Company, or made arrangements
satisfactory to the Committee regarding the payment of, any Federal, state
and local taxes of any kind required by law to be withheld or paid with
respect to such amount. If permitted by the Committee, tax withholding or
payment obligations may be settled with Common Stock, including Common
Stock that is part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditioned upon such payment or arrangements and the Company or the
Holder's employer (if not the Company) shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Holder from the Company or any Subsidiary.
14.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Nevada (without regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such other plan
to awards under this Plan).
14.9 Non-Transferability. Except as otherwise expressly provided
in the Plan, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
14.10 Applicable Laws. The obligations of the Company with respect
to all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
the Securities Act of 1933, as amended, and (ii) the rules and regulations
of any securities exchange on which the Stock may be listed.
14.11 Conflicts. If any of the terms or provisions of the Plan or
an Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions
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shall be deemed inoperative to the extent they so conflict with the
requirements of said Section 422 of the Code. Additionally, if this Plan
or any Agreement does not contain any provision required to be included
herein under Section 422 of the Code, such provision shall be deemed to be
incorporated herein and therein with the same force and effect as if such
provision had been set out at length herein and therein. If any of the
terms or provision of any Agreement conflict with any terms or provision
of the Plan, then such terms or provision shall be deemed inoperative to
the extent they so conflict with the requirements of the Plan.
Additionally, if any Agreement does not contain any provision required to
be included therein under the Plan, such provision shall be deemed to be
incorporated therein with the same force and effect as if such provision
had been set out at length therein.
14.12 Non-Registered Stock. The shares of Stock to be distributed
under this Plan have not been, as of the Effective Date, registered under
the Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to
register the Stock or to assist the Holder in obtaining an exemption from
the various registration requirements, or to list the Stock on a national
securities exchange.
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WRITTEN CONSENT OF SHAREHOLDERS
LITIGATION ECONOMICS, INC.
The undersigned, being the shareholders of Litigation Economics,
Inc., a Nevada corporation, hereby approve and consent in writing,
pursuant to provisions of Nevada corporate law which permit majority
shareholder approval of action by written consent without a meeting, to
the adoption of the Litigation Economics, Inc. 1996 Stock Option Plan, in
the form attached hereto.
Dated this ________ day of October, 1996
Name of Shareholder: Signature:
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
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