Pre-Effective Amendment 3
As filed with the Securities and Exchange Commission on
April 16, 1997.
REGISTRATION NO. 333-16031
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 (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Identification No.)
Incorporation or Organization) Classification
Code Number)
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.
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.
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.
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box.
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of each Dollar Proposed Maximum Proposed Minimum Amount of
Class of Amount to Offering Price Aggregate Registration
Securities to be Per Unit Offering Fee
to be Registered
Registered
Common $100,000 $1.00 $50,000 $100
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
<PAGE>
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. INVESTORS
SHOULD EXPECT IMMEDIATE SUBSTANTIAL DILUTION. (SEE "THE
COMPANY - DILUTION") EVEN IF THE COMPANY SUCCEEDS IN
RAISING THE MAXIMUM AMOUNT IN THE OFFERING, 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. (SEE "RISK FACTORS," PAGE 5) 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 Minimum $50,000 $.00 $50,000
Total Maximum $100,000 $.00 $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 number 1882 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 effective date as set forth below, the
Offering will terminate (unless extended by the
Company for up to 30 additional days) and 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 April____, 1997.
AVAILABLE INFORMATION
<PAGE>
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.
The Company will not file a Form 8-A or other
Registration Statement under the Securities Exchange Act and
will only be subject to Section 15(d) following the
effective date, therefore the proxy rules, short-swing
profits regulations, beneficial ownership reporting
regulations and the bulk of the tender offer regulations
will not be applicable to the Company.
The Company intends to furnish its stockholders with
annual reports containing consolidated financial statements
audited and reported upon by its independent accounting firm
and such other periodic reports as the Company may determine
to be appropriate or as may be required by law.
The Company is an electronic filer. The Commission
maintains a Web site that contains reports, proxy and
information statements and other information regarding
issuers that file electronically with the Commission. The
Commission's Web site address is (http:/www.sec.gov).
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, Seven World Trade Center, 13th
Floor, New York, New York 10048; 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 EFFECTIVE 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.
<PAGE>
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.
<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.
To date, the Company has not received any revenues from
its intended operations nor has the Company otherwise
engaged in any business. Further, the Company does not
currently have any customers for its services.
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
<PAGE>
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.
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
December 31, 1996:
Total Assets $ 3,102
Total Liabilities $ 2,478
<PAGE>
Shareholder Equity $ 624
Net Tangible Book Value $ 624
Net Tangible Book Value per Share $ 0.000416
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/Doubts as to Going Concern.
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. However, the Company does not have
significant cash and has not had significant operations
since the inception of its development stage. As noted in
the Independent accountants opinion, there is substantial
doubt about the Company's ability to continue as a going
concern without the realization of additional adequate
financing.
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. Start-up costs include purchase of capital
equipment such as computers, office equipment, office
leasing, supplies and travel. If the minimum offering is
raised, the Company will recognize a net amount of $30,000.
The Company believes this amount will enable it to initiate
operations and conduct business in three locations for a
period of twelve months. If only the minimum is raised, the
Company will reduce expenses by limiting its advertising and
marketing costs. Following in depth research, the Company
believes it can obtain the necessary computing equipment and
office equipment for approximately $7,500 and lease office
space in three locations for one year at a cost of
approximately $10,000. Working capital of $5,000 should be
sufficient to cover operating costs of the three offices for
a period of one year. The Company plans on expending $7,500
for marketing and advertising the Company's services.
Should the Company raise the maximum offering, it will
recognize a net amount of $80,000. This would enable the
Company to operate from six locations for a period of one
year at an estimated cost of $20,000 for rents and allow the
Company to expend an additional $20,000 for capital
equipment and supplies. The Company would also increase its
marketing and advertising efforts and has estimated $25,000.
Finally, operating expenses and working capital for six
locations would increase to $15,000. Upon completion of the
Offering, even if the entire Offering amount is raised, the
amount of capital available to the Company will be extremely
<PAGE>
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. The Company has no
plans to obtain Key Man insurance for any of its officers
and directors. In view of the fact that the Company's
proprietary product is already fully developed and
operational, Key Man insurance is not required. The
Company's focus is on providing services utilizing its
proprietary product. It is the belief of the Company that
an experienced service provider would be able to carry on
the Company's business should any of the current officers or
directors resign or terminate their relationship with the
Company. 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, however, Nevada corporate law requires all
officers and directors of the Company to act according to
their fiduciary duties to the stockholders.
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 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.
<PAGE>
Risks Related to the Nature of the Proposed Business
6. Uncertain Market Acceptance. The Company's
proposed business is based on the Company's belief of the
need for a cost effective, accurate method of determining
the economic damages of an injured party during the pre-
trial settlement phase of litigation. Currently, attorneys
involved in litigation practice typically use their own
economic analysis of damages during the pre-trial settlement
phase of litigation and resort to hiring economists,
statisticians and other financial experts when it becomes
apparent settlement cannot be reached. Based on the cost of
hiring outside experts, the Company believes its business
may be a solution for litigation attorneys. 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. The Company's major
competition is attorneys who presently perform economic
damage analyses themselves for settlement. The Company
also faces competition from consulting firms who offer
economic damage analyses for litigation attorneys.
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, loss of time and income, disruption of
marketing and customer service as well as loss of customer
confidence 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. The Company
does not intend to copyright the PreVal(TM) system as it does
not intend to market the system but instead will market
services using the system in-house. By keeping the PreValTM
system in-house, the Company will be better able to protects
its proprietary system. However, by not obtaining a
copyright on the system, there are no barriers to others
substantially copying or using the PreVal(TM) system.
<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. PreValTM is a computer aided
service developed by one of the officers of the Company and
was created for analyzing economic damages. The PreValTM
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. Nevada law
requires all officers and directors of the Company to act
according to their fiduciary duties to the shareholders.
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/Shares not
Listed on Any Exchange or NASDAQ. 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. The Company will not list the securities
on any exchange or NASDAQ because it will not be able to
meet the financial criteria for any such listing.
Therefore, any investment in the shares will be very non-
liquid. However, the Company does intend to apply for
listing on the Over-the-Counter Bulletin Board (OTCBB). 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
<PAGE>
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 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. If the minimum offering is raised, the Company
believes it will have sufficient resources to commence and
continue limited operations for twelve months. With
proceeds from a minimum raise, the Company will limit its
initial operations to three offices rather than the six
offices anticipated should the maximum offering be raised.
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.
<PAGE>
20. Limited Reporting Requirements. Because the
Company is only subject to Section 15(d) of the Securities
Exchange Act, it will not be subject to the proxy rules,
short-swing profits regulations, beneficial ownership report
regulations and the bulk of the tender offer regulations.
Therefore, the Company may only be required to file periodic
reports for a limited period of time. The Company does
intend to provide its shareholders with annual reports
containing audited financial statements from their
independent accountants and other periodic reports as the
Company feels necessary. However, in view of the fact that
the Company may have limited reporting requirements, the
investor will have less information available with which to
assess the status of the Company.
21. 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
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."
22. 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.
23. 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
<PAGE>
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."
24. 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.
25. Cumulative Voting and Pre-emptive Rights. There
are no pre-emptive 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 $7,500 $20,000
and Equipment(1)
Marketing and Advertising(2) 7,500 25,000
Initial Operating Expenses 5,000 15,000
and Working Capital(3)
Office Rents for 12 Months
3 offices 10,000
6 offices 20,000
Total Use of Net Proceeds $30,000 $80,000
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 $624 or $ .000416 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
$30,624. Dividing the net worth of the Company by the
number of shares outstanding discloses a per share book
value of approximately $ .019 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 $ .018 per share.
______________________________
(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 intitial 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.
<PAGE>
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 $80,624. Dividing the total book value of
the Company by the number of shares outstanding discloses a
per share book value of approximately $ .050. 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 94.8% and the
present shareholders will receive and immediate book value
increase of $ .051 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 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 Percent Cash Percent Average
Owned Paid Price/share
Present
Shareholders 1,500,000 97(4)%/94(5)% $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)
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.
____________________
(4) If the Minimum Offering is sold.
(5) If the Maximum Offering is sold.
<PAGE>
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.
Name of Director Age Term Served Positions with the
as Director Company
/Officer
Cornelius A. 29 --- Chief Executive
Hofman II Officer, President
& Chairman
Edward B. Schow 29 --- Vice-president &
Director
Stacey A. Hofman 27 --- Secretary/Treasurer &
Director
Cornelius A. 64 --- Director
Hofman
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, on a part-time basis
of approximately 20 hours per week, 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 1993 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, during 1991
through 1993, Mr. Hofman worked as a Analyst on a full-time
and part-time basis for General Economic Consulting, Inc.
<PAGE>
Edward B. Schow will serve as Vice-President and a
Director of the Company on a full-time basis of at least 40
hours per week. 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. As a student,
Mr. Schow worked part-time as an inventory assistant for the
Idaho State University physical facilities from 1988 through
1993. Mr. Schow received his bachelor's degree in Finance
from Idaho State University.
Stacey A. Hofman will serve, on a part-time basis of
approximately 10 hours per week, 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
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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Name and Address Amount & Nature of % of After Offering
Beneficial Ownership(6) Class Minimum/Maximum
Cornelius A. Hofman II 1,000,000(7) 67% 64.6%/62.6%
227 South Ninth Avenue
Pocatello, Idaho 83201
Stacey A. Hofman 1,000,000(8) 67% 64.6%/62.6%
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 1,000,000 66.6% 64.5%/62.5%
as a group (3 persons)
TOTAL 1,500,000(9) 100.0% 96.8%/93.8%
______________________
(6) The term "beneficial owner" refers to both the power of
investment (the right to buy and sell) and rights of ownership
(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. Each is record owner of 500,000 shares, however, each is
considered to be the beneficial owner of 1,000,000 shares.
(8) See footnote 7 above.
(9) See footnote 7 above.
<PAGE>
DESCRIPTION OF THE SECURITIES
The following summary describes the material provisions
of the Company's Articles of Incorporation and Bylaws
relating to the securities, copies of which will be
furnished to an investor upon written request therefor.
Pursuant to Article XI of the Company's Articles of
Incorporation, 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 foregoing limitations do not affect the standards
to which directors must conform in discharging their duties
to stockholders or modify the availability of equitable
relief for breach of duty. Further, the foregoing
limitations do not affect the availability of relief under
causes of action based on Federal law, including the Federal
securities laws.
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 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
<PAGE>
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. No option
shares are being registered under this registration
statement.
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, 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
<PAGE>
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 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 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.
<PAGE>
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.
<PAGE>
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 22, 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
<PAGE>
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. Steps taken by the
Company to determine the need for economic damage consulting
included an in depth market analysis, using accepted
analytical approaches and methods, of attorneys who
currently perform personal injury litigation. Also, through
previous employment, Mr. Hofman identified the recurring
need and desire of attorneys to have access to a service
such as that the Company anticipates providing. Upon
identifying the need, the Company performed additional
market analyses to determined potential attorney interest
and profitability. The market for such a service already
exists and attorneys frequently employ litigation
economists. While the PreVal(TM) approach is new and unique,
for a lower cost and with a quicker response, the PreVal(TM)
system will provide information and services similar to
those already being purchased by attorneys. However, in
view of the fact PreVal(TM) services have not been available
in the past, there is no assurance attorneys currently using
traditional methods will consider using PreVal(TM) services.
Pursuant to its desire to enter into the economic
damage consulting industry, Landmark changed its name to
Litigation Economics, Inc., (the "Company") on August 22,
1996. The Company also entered into an Agreement and Plan
of Share Exchange dated August 22, 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.
Attorneys are compelled to expend substantial time and
effort in examining and proving economic damages.
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
<PAGE>
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(10). 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 substantiating economic losses; and
(3) the current litigation practice is to rely on the
services of economists as experts only at trial.
PreValTM 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(11), 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 along with the
attorney's own input on costs associated with experience
with juries, inherent emotional factors and other criteria.
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
______________________
(10) 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).
(11) The Company developed this estimate based on the 1995
"Statistical Abstract of the United States", Table 340 which
provides a summary of civil cases commencedin selected years
from 1980 to 1994. The percent of civil cases reaching trial
in 1994 was 3.4 percent. The average of the percent of civil
cases reaching trial from 1988 to 1994 (ie., all of the
consecutive years cited in the table) is 4 percent. Therefore,
less than 4 percent of cases make it to trial and the assumption
is that approximately 95% of all civil cases are settled. The
ultimate source for these tables is the Administrative Office of
the U.S. Courts, "Annual Report of the Director".
<PAGE>
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.
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
<PAGE>
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 software does not supply the attorney with a
signed independent economist's report. The Company will
dedicate its efforts solely on the business of economic
analyses whereas many competitors focus only a portion of
their efforts on economic analyses. 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 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
<PAGE>
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 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
PreValTM, 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.
To date, the Company has not entered into any lease
agreement, printed any marketing literature or accepted any
litigation consulting services contracts.
The Company does not intend to staff offices in each of
the markets it intends to exploit. The Company will instead
<PAGE>
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.
Start-up costs include purchase of capital equipment
such as computers, office equipment, office leasing,
supplies and travel. If the minimum offering is raised, the
Company will recognize a net amount of $30,000. The Company
believes this amount will enable it to initiate operations
and conduct business in three locations for a period of
twelve months. If only the minimum is raised, the Company
will reduce expenses by limiting its advertising and
marketing costs. Following in depth research, the Company
believes it can obtain the necessary computing equipment and
office equipment for approximately $7,500 and lease office
space in three locations for one year at a cost of
approximately $10,000. Working capital of $5,000 should be
sufficient to cover operating costs of the three offices for
a period of one year. The Company plans on expending $7,500
for marketing and advertising the Company's services.
Should the Company raise the maximum offering, it will
recognize a net amount of $80,000. This would enable the
Company to operate from six locations for a period of one
year at an estimated cost of $20,000 for rents and allow the
Company to expend an additional $20,000 for capital
equipment and supplies. The Company would also increase its
marketing and advertising efforts and has estimated $25,000.
Finally, operating expenses and working capital for six
locations would increase to $15,000.
Inasmuch as there is no assurance that the Offering
will be successful or that the Company will receive any net
proceeds therefrom, to date, 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.
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 &
<PAGE>
President, in Pocatello, Idaho as its principal executive
offices until the Company's business requires more extensive
administrative facilities. At such time the Company
generates profits sufficient to cover all its expenses, rent
will be paid for the use of Mr. Hofman's home office. At
such time the Company determines profits justify payment to
Mr. Hofman, the rent paid will be based on fair market rates
for comparable space.
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.
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.
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
CONSOLIDATED FINANCIAL STATEMENTS
December 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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Litigation Economics, Inc. and Subsidiary
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Pocatello, Idaho
We have audited the accompanying consolidated balance sheet
of Litigation Economics, Inc. (formerly Landmark Leasing,
Corp.) and Subsidiary (development stage companies) as of
December 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
December 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.
(formerly Landmark Leasing, Corp.) and Subsidiary
(development stage companies) as of December 31, 1996 and
the results of their operations and their cash flows from
inception of the development stage on July 31, 1996 through
December 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
March 19, 1997
Salt Lake City, Utah
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Consolidated Balance Sheet
ASSETS
December 31,
1996
CURRENT ASSETS
Cash $ 3,102
Total Current Assets 3,102
TOTAL ASSETS $ 3,102
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 2,478
Total Liabilities 2,478
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 4,141
Deficit accumulated during the development stage (5,017)
Total Stockholders' Equity 624
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,102
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Consolidated Statement of Operations
From Inception
on July 31,
1996 Through
December 31,
1996
REVENUE $ -
GENERAL AND ADMINISTRATIVE EXPENSES 5,769
INCOME (LOSS) FROM OPERATIONS (5,769)
OTHER INCOME
Gain on sale of asset 720
Interest income 32
Total Other Income 752
NET LOSS $ (5,017)
NET LOSS PER SHARE $ Nil
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 483,871
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
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 - -
Recapitalization of
G.E.C., Inc. 500,000 500 4,141 -
Net loss for the
period ended
December 31, 1996 - - - (5,017)
Balance, December 31,
1996 1,500,000 $ 1,500 $ 4,141 $ (5,017)
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Consolidated Statement of Cash Flows
From Inception
on July 31,
1996 Through
December 31,
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (5,017)
Adjustments to reconcile net income
to net cash used by operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 2,478
Net Cash (Used) by Operating Activities (2,539)
CASH FLOWS FROM INVESTING ACTIVITIES: -
Cash acquired in recapitalization of subsidiary 4,641
Net Cash Provided by Investing Activities 4,641
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 1,000
Net Cash Provided by Financing Activities 1,000
NET INCREASE (DECREASE) IN CASH 3,102
CASH AT BEGINNING OF PERIOD -
CASH AT END OF PERIOD $ 3,102
Cash Paid for:
Interest $ -
Income taxes $ -
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 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 discontinued pursuing any of these
activities and accordingly remains a development
stage company. The Company changed its name to
Litigation Economics, Inc. on December 22, 1996.
On December 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 valued at $.001 per share or $1,000
which represented the capital contributed to the
subsidiary. 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 will engage in the field
of economic advising and consulting and has not
commenced principal business operations.
Accordingly, the subsidiary is also considered a
development stage company.
Summary of Significant Accounting Policies
a. Accounting Method
The Company's financial statements are prepared
using the accrual method of accounting. The Company
has selected a December 31, year end.
b. Net Loss Per Share
The computation of loss per share of common stock is
based on the weighted average number of shares
outstanding at the date of the consolidated
financial statements.
c. Provision for Taxes
At December 31, 1996, the Company has net operating
loss carryforwards of approximately $5,000 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.
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 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.
g. Revenue Recognition
Revenue will be recognized upon the completion of
consulting and advising services.
h. Computer Software
Proprietary computer software is being developed by
the president of the Company to be used in the
Company's proposed economic advising and consulting
activities. The president of the Company has used
his personal computer and space in his home during
the development of this software. These facilities
and equipment are used primarily by the Company's
president for his personal affairs and the business
usage would be immaterial. In addition, the
president of the Company has not received any
compensation from any source for his time in
developing this computer software. He is employed
full-time elsewhere and presently devotes
approximately 10% of his time to the development of
the computer software and operations of the Company.
Accordingly, no costs associated with the
development of the computer software have been
reflected in the accompanying financial statements.
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996
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 is in the process of
obtaining debt and or equity financing, principally
through a proposed public offering. Once sufficient
financing is obtained, the Company plans to commence
business operations and begin recognizing revenue as
consulting and advising services are performed. To
date the Company has been able to cover operating
costs with existing financial resources. Officers
of the Company have committed to make capital
contributions or advances to the Company should
additional funds be needed to pay operating
expenses.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company sold a vehicle to a related party on
July 15, 1996 for a gain of $720.
NOTE 4 - COMMON STOCK OPTIONS
In October of 1996, the Board of Directors 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 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. As of December 31, 1996 no activity has
transpired with regard to the Plan.
<PAGE>
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 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 any person to whom it is unlawful to make such offer
or solicitation 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 4
RISK FACTORS 6
SHARES ELIGIBLE FOR FUTURE
SALE 12
USE OF PROCEEDS 12
DETERMINATION OF
OFFERING PRICE 13
DILUTION 13
COMPARATIVE DATA 14
PLAN OF DISTRIBUTION 14
MANAGEMENT 15
PRINCIPAL SHAREHOLDERS 17
DESCRIPTION OF SECURITIES 18
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS 21
LEGAL MATTERS 21
EXPERTS 22
DESCRIPTION OF BUSINESS 22
MANAGEMENT'S PLAN OF
OPERATION 27
FINANCIAL STATEMENTS F-1
LITIGATION ECONOMICS, INC.
50,000 Minimum / 100,000 Maximum
Shares of Common Stock
PROSPECTUS
Pre-Effective Amendment 3
April 16 1997
<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 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.
<PAGE>
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 a 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 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.
<PAGE>
(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 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.
On May 24, 1995, Mr. David Nemelka purchased 400,000
shares for $4,000 in conjunction with foundation of the
Company. On May 31, 1995, Mr. Joe Udall purchased 100,000
shares for $1,000 in conjunction with foundation of the
Company. On November 30, 1996, Mr. Nemelka purchased the
100,000 shares from Mr. Udall for $2,600. As of this date,
Mr. Nemelka owns 500,000 shares of restricted common stock
of the Company for which he paid a total of $6,600.
<PAGE>
ITEM 27. Exhibits Index
SEC
Reference Exhibit No. Document
3 3 Articles of Incorporation
3 3 By-Laws
4 4 Instruments defining the rights
of security holders, including
indentures
5 5 Opinion on Legality
21 21 Subsidiaries of the small business
issuer
23 23 Consents of Experts and Counsel
27 27 Financial Data Schedule
29 29 Litigation Economics, Inc.,
1996 Stock Option Plan.
29 29 Fund Impound Agreement
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 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 to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement.
<PAGE>
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and nay deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the
end of the offering.
<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 amendment to
Registration Statement to be signed on its behalf by the
undersigned, in the City of Pocatello, State of Idaho, on
April 16, 1997.
LITIGATION ECONOMICS, INC.
By:/s/ Cornelius A. Hofman, II
Cornelius A. Hofman, II
Chairman (Chief Executive Officer)
Director and President
<PAGE>
Pursuant to the requirements of the Securities Act of
1933, this amendment to Registration Statement has been
signed by the following persons in the capacities and on the
date indicated.
Signatures Title Date
/s/ Cornelius A. Hofman, II Chairman Apirl 16, 1997
Cornelius A. Hofman, II (Chief Executive Officer)
Director and President
/s/ Edward B. Schow Director April 16, 1997
Edward B. Schow Vice President
/s/ Stacey A. Hofman Director April 16, 1997
Stacey A. Hofman Vice President/
Treasurer Principal
Financial/
Accounting Officer
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.
-1-
<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.
-2-
<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
-3-
<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.
-4-
<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: ______________________
_____________________________
-5-
<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
-1-
<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.
-2-
<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.
-3-
<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.
-4-
<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 March 19, 1997, relating to the Consolidated Financial
Statements dated Decmember 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
April 2, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,102
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,102
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,102
<CURRENT-LIABILITIES> 2,478
<BONDS> 0
0
0
<COMMON> 1,500
<OTHER-SE> (876)
<TOTAL-LIABILITY-AND-EQUITY> 3,102
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,017)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
ADDITIONAL EXHIBITS
-----------------------------
(1) LITIGATION ECONMICS, INC.
1996 STOCK OPTION PLAN
--------------------------------------
(2) FUND IMPOUND AGREEMENT
<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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
FUND IMPOUND AGREEMENT
NAME OF ISSUER: Litigation Economics, Inc.
ESCROW NUMBER: 61 DATE FILED: 10/14/96
EXPIRATION DATE:--------- OTHER -----------
THE OFFICERS AND DIRECTORS OF Litigation Economics, Inc. HEREBY AGREE TO
DELIVER, BY NOON OF THE BUSINESS DAY AFTER RECEIPT, and with names and
addresses of investors at time deposit is made, funds to be applied
to an escrow account in the amount of:
TO: PROFESSIONAL ESCROW SERVICES, INC. $50,000
- ------------------------------------- ----------
Bank Name Amount
920 DEON DR. SUITE B, P.O. BOX 2466 POCATELLO, ID 83206
- ---------------------------------------------------------------
Address City & State Zip Code
As escrow agent, the papers, money, or property hereinafter described,
to be held and disposed of by said escrow agent in accordance with the
duties, instructions, and upon the terms and conditions hereinafter set
forth to which the undersigned hereby agree:
1. Above named bank (hereinafter called the "Bank") is not a party to,
or bound by any agreement which may be evidenced by or arises out of
the following instructions.
2. The Bank and its officers, agents, and employees, act hereunder as
a depository only, and are not responsible or liable in any manner
whatever for serving as escrow agent in this matter or for the
sufficiency, correctness, genuineness or validity of any instrument
deposited with it hereunder, or with respect to the form or execution
of the same, or the identity, authority, or rights of any person
executing or depositing the same.
3. The Bank shall not be required to take or be bound by notice of
any default by any person, or to take any action with respect to such
default involving any expense or liability, unless notified in writing
is given an officer of the Bank of such default by the undersigned or
any of them, and unless it is indemnified in a manner satisfactory to
it against any such expense or liability.
4. The Bank shall be protected in acting upon any notice, request,
waiver, consent, receipt or other paper or document believed by the
Bank to be genuine and to be signed by the proper party or parties.
5. The Bank shall not be liable for any error in judgment or for any
act done or step taken or omitted by it in good faith or for any mistake
or fact or law, or for anything which it may do or refrain from doing
in connection herewith, except its own willful misconduct.
<PAGE>
6. The Bank shall not be answerable for the default or misconduct of
any agent, attorney, or employee acting on behalf of the Issuer.
7. In the event of any disagreement between the undersigned(s) or any
of them, and/or the person or persons named in the foregoing
instructions, and/or any other person, resulting in adverse claims
and demands being made in connection with or for any papers, money or
property involved herein or affected hereby, the Bank shall be
entitled at its option to refuse to comply with any such claim or
demand, so long as such disagreement shall continue, and in so refusing
the Bank may make no delivery or other disposition of any money, papers
or property involved herein or affected hereby and in so doing the Bank shall
not be or become liable to the undersigned or any of them or to any
person named in the foregoing instructions for its failure or refusal
to comply with such conflicting or adverse demands; and the Bank shall
be entitled to continue so to refrain and refuse so to act until:
a. The rights of the adverse claimants have been finally adjudicated in
the court assuming and having jurisdiction of the parties and the money,
papers and property involved herein or affected hereby; an/or
b. All differences shall have been adjusted by agreement and the Bank
shall have been notified thereof in writing signed by all of the
interested parties.
8. The papers, documents, money or property subject to this escrow (if
other than already named) are as follows:
Including such items as may be described on attached schedules.
9. The other duties of the Bank under the terms of this agreement
are as follows:
10. The Bank will be named as depository only and has not passed in
any way upon the merits or qualifications of the security and makes no
recommendation with regard to its purchase. The Bank does not authorize
the use of its name by any person for the promotion or sale of the security.
11. Special requirements:
12. Fees for the usual services of the Bank under terms of this agreement
are set forth below. All such fees shall be computed on a fiscal or
calendar year period adjusted for any fractional part thereof except
that a fee for any period shall not be less than the minimum fee indicated.
a. In the event the fees charged and due the Bank remain unpaid for a
period of one year, the bank shall have the right, and is hereby
authorized in its role and absolute discretion to discontinue the escrow,
terminate all duties hereunder, close all accounting or other records,
and to destroy all documents, records and files or to retain such items
in a dormant account status subject to the escheat laws of the State
of Idaho.
b. All fees charged shall be paid as follows: -----------------------
c. The initial escrow fee shall be $70.00
d. The minimum escrow fee shall be $4.00 PER DEPOSIT
e. For fee for any check issued in refunding to subscribers see (13b).
f. In addition to the escrow fee paid or agreed upon at the inception of
this escrow, the parties agree to pay a reasonable compensation for any
extra services rendered or incurred by the Bank including a reasonable
attorney's fee if disputes arise or litigation is threatened or
commences which requires the Bank top refer such dispute to its attorneys.
13. If a minimum of $50,000 is not deposited with the Bank by the date
nine months after the effective date of the Offering or within an
additional period of sixty days if extended by the Company.
a. Issuer shall request termination of escrow and the Bank shall refund
to investors the full amount of investment.
b. Issuer agrees to pay a fee of $4.00 per check for this service if
returned to investors or $36.00 for one check made to litigation
economics, inc.
14. When 100% or more has been deposited with the escrow agent, and all
escrow requirements have been met, the issuer shall request a release
from the Bank setting forth how funds are to be released pursuant to the
terms of the Offering.
15. After release of escrow, the duties, responsibilities and liability
of every kind and character under the escrow agreement shall cease and
terminate.
Signed (Issuer) Litigation Economics, Inc.
By (Its Secretary-Treasurer) /s/ Stacey A. Hofman
Signed (Bank) /s/ Professional Escrow Services, Inc.
By (Officer) /s/ Ronald Bitton, President
<PAGE>
