Pre-Effective Amendment 1
As filed with the Securities and Exchange Commission on February 18, 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 of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
227 South Ninth Avenue, Pocatello, Idaho 83201, (208) 233-8001
(Address and Telephone Number of Registrant's Principal Place of
Business)
Cornelius A. Hofman II, 227 South Ninth Avenue Pocatello, Idaho 83201,
(208) 233-8001
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Cletha A. Walstrand, Esq., Poulton & Yordan, 4 Triad Center, Suite 500-A
Salt Lake City, Utah 84180 (801) 355-1341
Approximate Date of Proposed Sale to the Public: As soon as practicable
from time to time after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ----
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. XX
----
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 Securities Amount to Offering Price Aggregate Offering Registration
to be Registered be Registered Per Unit Price Fee
- ------------- ------------ ------------- -------------- -----------
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 February ____, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the United States Securities and
Exchange Commission (the "Commission") a Registration Statement on Form
SB-2, under the Securities Act of 1933, as amended (the "Securities
Act), with respect to the securities offered hereby. As permitted by
the rules and regulations of the Commission, this Prospectus does not
contain all of the information contained in the Registration Statement.
For further information regarding both the Company and the Securities
offered hereby, reference is made to the Registration Statement,
including all exhibits and schedules thereto, which may be inspected
without charge at the public reference facilities of the Commission's
Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies may be obtained from the Washington, D.C. office upon request and
payment of the prescribed fee.
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.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information and consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its
entirety, and particularly the information set forth in "RISK FACTORS."
The Company
Litigation Economics, Inc. (the "Company") through its wholly
owned subsidiary, G.E.C., Inc., ("GEC") intends to engage in the
business of marketing and providing economic damage consulting services
to attorneys involved in litigation and to engage in and perform any and
all activities customary in connection therewith throughout the United
States. The Company intends to provide economic, financial,
statistical, and other types of analysis and services necessary to
litigation involving disputes regarding economic damages. The Company
intends to use the proceeds of this Offering to market and advertise the
Company's services, buy computer equipment and other assets and lease
properties so that the Company can begin marketing and providing
services by early 1997.
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 purposes of acquiring
supplies and equipment, marketing and advertising the
Company's services, covering the initial operating
expenses and providing the Company with working
capital.
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<PAGE>
Transfer Agent: Interwest Transfer Company, Inc., 1981 East
Murray-Holladay Road, Salt Lake City, Utah 84117,
Telephone (801) 272-9294, has agreed to serve as
transfer agent upon completion of this offering.
Securities
Outstanding: The Company presently has 1,500,000 shares
of Common Stock issued and outstanding.
Upon completion of this offering, at least
1,550,000 shares will be issued and
outstanding if the minimum offering is
achieved and 1,600,000 shares will be
issued and outstanding if the maximum
offering is achieved. In addition, the
Company has adopted a Stock Option Plan
pursuant to which up to 500,000 shares of
Common Stock may be issued upon the
exercise of options which the Board of
Directors has the authority to grant to
officers, directors and employees. See
"1996 Stock Option Plan." The Company is
also authorized to issue up to 5,000,000
shares of preferred stock, the rights and
preferences of which may be designated in
series by the Board of Directors. To the
extent of such authorization, such
designations may be made without
shareholder approval. The Board of
Directors has not designated any series or
issued any shares of preferred stock. The
designation and issuance of series of
preferred stock in the future would create
additional securities which would have
dividend and liquidation preferences over
the Common Stock offered hereby.
Risk Factors: The Company is a start up company with no
operating history; consequently, an investment
in the Company is highly speculative. Investors
will suffer substantial dilution in the book
value per share of the Common Stock compared to
the purchase price. In seeking to implement its
proposed business, the Company could incur
substantial losses during the development stage,
and require additional funding for which it has
no commitments. Management has other interest
which may conflict with the interests of the
Company. Until such time, if ever, that the
Company generates sufficient revenue to pay
management salaries, members of management will
not be employed full time and will only devote a
minimal amount of time to the affairs of the
Company. No person should invest in the Company
who cannot afford to risk loss of the entire
investment. See "Risk Factors."
Summary Selected
Financial Data: The Company is a development stage company and has no
revenues or earnings from operations. As of August
31, 1996:
Total Assets $ 5,492
Total Liabilities $ 2,188
Shareholder Equity $ 3,304
Net Tangible Book Value $ 3,304
Net Tangible Book Value per Share $ 0.022
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<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high
degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth
elsewhere in this Prospectus, including the Consolidated Financial
Statements and Notes, prior to making an investment in the Company.
Risks Inherent in a New Start Up Company
1. No Operating History/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 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.
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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.
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<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. PreValTM 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 PreValTM 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 PreValTM 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 PreValTM
system.
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<PAGE>
10. Potential for Indirect Government Regulation. Over the last
decade, state and federal legislatures have begun imposing legal
limitations on the recovery of certain types of non-economic damages,
this tort reform trend has picked up steam over the last several years.
To date, the changes to the legal system proposed as a part of the tort
reform movement have been limited to the recovery of nonpecuniary
damages (those not capable of monetary calculation). While the
Company's services do not fall under the limitations of the current tort
reform movement, there is no guarantee that the legislative structure of
tort reform will not change. If legislation were passed placing caps on
pecuniary damages, such legislation may materially adversely affect the
Company.
11. Potential for Conflict of Interest with General Economic
Consulting, Inc. General Economic Consulting, Inc. provides consulting
services similar to the Company's. The Company intends to subcontract
some consulting work to General Economic Consulting. The Company does
not intend to subcontract any PreValTM 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.
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<PAGE>
14. Arbitrary Offering Price. The offering price of the shares
was arbitrarily determined by the Company. There is no relationship
between the offering price of the shares and the Company's assets,
earnings, book value, net worth or other economic or recognized criteria
or future value of the Company's shares.
15. Volatility of Stock Price. If a public market develops for
the Shares, many factors will influence the market prices. The Shares
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.
-10-
<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
-11-
<PAGE>
authorized to issue up to 5,000,000 shares of preferred stock, the
rights and preferences of which may be designated in series by the Board
of Directors. To the extent of such authorization, such designations
may be made without shareholder approval. The Board of Directors has
not designated any series or issued any shares of preferred stock. The
designation and issuance of series of preferred stock in the future
would create additional securities which would have dividend and
liquidation preferences over the Common Stock offered hereby. See
"Description of Securities."
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 $3,304 or
$ .0022 per share.
The proceeds from the sale of shares will vary depending on the
total number of shares sold.
Assuming only a minimum of 50,000 shares offered are sold there
would be a total of 1,550,000 common shares issued and outstanding. If
only the minimum of 50,000 shares are sold, the net proceeds to the
Company after deducting offering costs of $20,000 would be $30,000.
Adding the net proceeds to the net tangible book value, the total net
tangible book value of the Company would be $33,304. Dividing the net
worth of the Company by the number of shares outstanding discloses a per
share book value of approximately $ .021 per share. Therefore, the
shareholders who purchased pursuant to the Offering will suffer an
immediate dilution in the book value of their shares of approximately $
.98 or approximately 98% and the present shareholders will receive an
immediate book value increase of approximately $ .019 per share.
- -----------------------------------
(1) This is the approximate amount of net proceeds of the Offering
which the Company estimates will be used to purchase the equipment
and supplies necessary to operate the Company.
(2) This represents the amount the company estimates it will expend
producing marketing literature, contacting potential clients,
including the placement of advertising materials in direct mail.
(3) The Company intends to use a significant portion of the net
proceeds to cover operating expenses and provide working capital
during the initial development phase of operations. The Company
Believes this amount is sufficient to provide the operating capital
necessary to operate the business for the first twelve months.
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<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 $83,304. Dividing the total book value of the Company by the
number of shares outstanding discloses a per share book value of
approximately $ .052. Therefore, the shareholders who purchased
pursuant to the Offering will suffer an immediate dilution in the book
value of their shares of approximately $.95 or approximately 95% and the
present shareholders will receive and immediate book value increase of $
.050 per share.
"Dilution" means the difference between the price of the Shares
purchased by purchasers in the offering from the pro forma net tangible
per share after giving effect to the offering.
"Net tangible book value" is obtained by subtracting the total
liabilities from the total tangible assets (total assets less intangible
assets and offering expenses). Net tangible book value per share is
determined by dividing the number of shares outstanding into the net
tangible book value of shares immediately after the offering.
COMPARATIVE DATA
The following chart illustrates the
pro forma proportionate
ownership in the Company, upon completion of the Offering, of present
stockholders and of investors in the Offering, compared to the relative
amounts paid and contributed to capital of the Company by present
stockholders and by investors in this Offering, assuming no changes in net
tangible book value other than those resulting from the Offering.
Shares Owned Percent Cash Paid Percent Average
Price/share
(4) (5)
Present Shareholders 1,500,000 97%/94% $6,000 11%/6% $0.004
New Investors 50,000 3 % $50,000 89% $1.00
(Minimum)
New Investors 100,000 6% $100,000 94% $1.00
(Maximum)
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.
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<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 as Positions with the Company
Director/Officer
Cornelius A. Hofman II 29 --- Chief Executive Officer,
President & Chairman
Edward B. Schow 29 --- Vice-president & Director
Stacey A. Hofman 27 --- Secretary/Treasurer & Director
Cornelius A. Hofman 64 --- Director
The above four individuals will serve as officers and/or directors
of the Company. Cornelius Hofman II and Stacey Hofman are husband and
wife, and Cornelius Hofman and Cornelius Hofman II are father and son. A
brief description of their positions, proposed duties and their background
and business experience follows:
Cornelius A. Hofman II will serve, 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.
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<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.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(6)
Name and Address Amount & Nature of % of After Offering
Beneficial Ownership 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 the rights of
ownership(the right to receive distributions from the
Company and proceeds from the sales of shares). Inasmuch
as these rights may be held or shared by more than one
person, each person who has a beneficial ownership interest
in shares is deemed to be the beneficial owners of the same
shares because there is shared powere 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.
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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 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.
-18-
<PAGE>
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 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).
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<PAGE>
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.
20
<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.
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.
-21-
<PAGE>
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
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.
-22-
<PAGE>
The market for such a service already exists and attorneys frequently
employ litigation economists. While the PreValTM approach is new and
unique, for a lower cost and with a quicker response, the PreValTM
system will provide information and services similar to those already
being purchased by attorneys. However, in view of the fact PreValTM
services have not been available in the past, there is no assurance
attorneys currently using traditional methods will consider using
PreValTM 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 . Mr. Hofman is the President and a director of GEC,
as well as the President and a director of the Company, he paid $1,000
and assigned the rights to PreValTM 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 PreValTM which it
intends to market to attorneys involved in litigation, particularly to
attorneys engaged in the pre-trial, settlement phase of litigation.
- ---------------------------------
(10) 500,000 shares of GEC Common Stock were issued to Cornelius A.
Hoffman 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 PreValTM.
-23-
<PAGE>
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 its PreValTM 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. PreValTM 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 PreValTM the Company
can provide an accurate estimate of the economic loss suffered by the
- ----------------------------------
(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 commenced in 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 (i.e. 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.
-24-
<PAGE>
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 PreValTM analysis typically
ranges from $400 to $600. The PreValTM 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 PreValTM 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 PreValTM work
to any network affiliated consultants. Once a client is referred to an
economist affiliated with a network, the Company's involvement with that
client's legal matter will generally be terminated and the Company will
charge no fee for the referral. The Company will likely receive no fee
or remuneration for referring clients to the network affiliated
economists.
Competition
Within the industry, the Company will face competition from
numerous competitors. The most common type of company providing
economic related services are sole practitioners who concentrate on
servicing small to mid-size law firms handling wrongful job termination,
wrongful death and/or personal injury related cases. These consulting
companies are frequently operated by college professors looking to
supplement their teaching income. Service and quality are not a major
focus, rather answering the phone when they are in the office and
fitting their consulting practice around their academic schedule is the
standard approach. There are also larger companies in the industry.
These larger companies usually have a dedicated litigation consulting
group and tend to focus on larger types of business litigation that
typically have voluminous documents. These larger cases often require
litigation support services related to the handling of documents and
usually require a larger staff of consultants. There is
cross-specialization among both types of consulting firms, and the larger
consulting firms are beginning to offer a larger variety of services to
attorneys in an effort to satisfy more of the attorney's litigation
support needs.
-25-
<PAGE>
The market for the Company's services is very competitive and
competition is based on many factors including price and quality of
service. The Company believes that it can compete in the industry
because it believes it offers high quality services at a fraction of the
cost of other providers of similar services. The Company will have to
compete with manufacturers of economic loss analysis software. This
software allows an attorney to make a rough estimate of the damages
suffered by the injured party, but this estimate may not be as accurate
as the estimate rendered by PreValTM, and the software does not supply
the attorney with a signed independent economist's report. The Company
is confident that it can provide better customer service and a better
quality product than the sole practitioners because the Company will
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 PreValTM 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 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
-26-
<PAGE>
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 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
-27-
<PAGE>
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 PreValTM 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 & 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.
-28-
<PAGE>
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.
-29-
<PAGE>
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1996
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . 3
Consolidated Balance Sheet . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity . . . . . 6
Consolidated Statement of Cash Flows . . . . . . . . . . 7
Notes to the Consolidated Financial Statements . . . . . 8
<PAGE>
JONES, JENSEN & COMPANY
50 South Main Street, Suite 1450
Salt Lake City, Utah 84144
(801) 328-4408
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 August 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows
from inception of the development stage on July 31, 1996 through August
31, 1996. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Litigation Economics, Inc. (formerly Landmark Leasing, Corp.) and
Subsidiary (Development Stage Companies) as of August 31, 1996 and the
results of their operations and their cash flows from inception of the
development stage on July 31, 1996 through August 31, 1996 in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company is a development stage
company with no significant operating results to date, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the
Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
September 12, 1996
Salt Lake City, Utah
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Consolidated Balance Sheets
ASSETS
August 31,
1996
CURRENT ASSETS
Cash $ 5,492
-----
Total Current Assets 5,492
-----
TOTAL ASSETS $ 5,492
-----
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 2,188
-----
Total Liabilities 2,188
-----
STOCKHOLDERS' EQUITY
Preferred stock authorized 5,000,000 shares
at $0.001 par value; no shares were
issued or outstanding -
Common stock authorized 50,000,000 shares
shares at $0.001 par value; 1,500,000
shares issued and outstanding 1,500
Additional paid-in capital 4,141
Deficit accumulated during the development stage (2,337)
-----
Total Stockholders' Equity 3,304
-----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,492
-----
The accompanying notes are an integral
part of these consolidated financial statements
-4-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Consolidated Statement of Operations
From Inception
on July 31,
1996 Through
August 31,
1996
-------------
REVENUE $ -
GENERAL AND ADMINISTRATIVE EXPENSES 2,343
------
INCOME (LOSS) FROM OPERATIONS (2,343)
------
OTHER INCOME
Interest income 6
------
Total Other Income 6
------
NET INCOME (LOSS) $ (2,337)
-------
NET LOSS PER SHARE $ Nil
------
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 483,871
-------
The accompanying notes are an integral
part of these consolidated financial statements
-5-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(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
August 31, 1996 - - - (2,337)
------- ------ ------ -------
Balance, August 31, 1996 1,500,000 $ 1,500 $ 4,141 $(2,337)
-------- ------ ------ -------
The accompanying notes are an integral
part of these consolidated financial statements
-6-
<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
August 31,
1996
-------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,337)
Adjustments to reconcile net income
to net cash used by operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 2,188
-------
Net Cash (Used) by Operating Activities (149)
-------
CASH FLOWS FROM INVESTING ACTIVITIES: -
-------
Net Cash Provided by Investing Activities -
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 1,000
Cash acquired in recapitalization of subsidiary 4,641
------
Net Cash Provided by Financing Activities 5,641
------
NET INCREASE (DECREASE) IN CASH 5,492
CASH AT BEGINNING OF PERIOD -
------
CASH AT END OF PERIOD $ 5,492
------
Cash Paid for:
Interest $ -
Income taxes $ -
The accompanying notes are an integral
part of these consolidated financial statements
-7-
<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
August 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operating History
The Company was incorporated in the State of Nevada on April 27, 1995,
under the name of Landmark Leasing, Corp.
The Company planned on operating as a leasing company of residential
property, commercial property, vehicles, and related activities. The
Company has not entered into any of these activities and accordingly
remains a development stage company. The Company changed its name to
Litigation Economics, Inc. on August 22, 1996.
On August 22, 1996, the Company acquired all of the outstanding stock
of G.E.C., Inc., (the Subsidiary) for 1,000,000 shares of the Company's
common stock. The acquisition of the Subsidiary was recorded as a
recapitalization of the Subsidiary, whereby the acquired company is
treated as the surviving entity for accounting purposes. The
Subsidiary was formed on July 31, 1996 in the State of Idaho. The
Subsidiary is engaged in the field of economic advising and consulting,
and is considered a development stage company per Statement of
Financial Accounting Standards #7.
Summary of Significant Accounting Policies
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
b. Net Earnings (Loss) Per Share
The computation of earnings (loss) per share of common stock is based
on the weighted average number of shares outstanding at the date of the
financial statements.
c. Provision for Taxes
At August 31, 1996, the Company has net operating loss carryforwards of
approximately $2,000 that may be offset against future taxable income
through 2011. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the
potential tax benefits of the loss carryforward are offset by a
valuation allowance of the same amount.
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<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
August 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers
all highly liquid investments with a maturity of three months or less
to be cash equivalents.
e. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
f. Principles of Consolidation
The consolidated financial statements include accounts of Litigation
Economics, Inc. and its wholly-owned subsidiary, G.E.C., Inc.
Intercompany transactions have been eliminated.
g. Revenue Recognition
Revenue will be recognized upon the completion of consulting and
advising services.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash and has not had significant operations since the
inception of its development stage. Without realization of additional
adequate financing it would be unlikely for the Company to pursue and
realize its objectives. The Company plans to begin recognizing revenue
in the twelve month period to follow August 31, 1996 as consulting and
advising services are performed. In the interim, officers of the
Company have committed to meeting its operating expenses.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company sold a vehicle to a related party on July 15, 1996 for a
gain of $720.
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<PAGE>
LITIGATION ECONOMICS, INC. AND SUBSIDIARY
(formerly Landmark Leasing, Corp.)
(Development Stage Companies)
Notes to the Consolidated Financial Statements
August 31, 1996
NOTE 4 - SUBSEQUENT EVENT
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 August 31, 1996 no activity has
transpired with regard to the Plan.
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<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 LITIGATION ECONOMICS, INC.
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 50,000 Minimum / 100,000 Maximum
of the securities covered hereby in any
jurisdiction or to any person to whom it is Shares of Common Stock
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.
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TABLE OF CONTENTS Page
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AVAILABLE INFORMATION 2 PROSPECTUS
PROSPECTUS SUMMARY 4
RISK FACTORS 6
SHARES ELIGIBLE FOR FUTURE
SALE 12 Pre-Effective Amendment I
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 17 February 18, 1997
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS 20
LEGAL MATTERS 21
EXPERTS 21
DESCRIPTION OF BUSINESS 22
MANAGEMENT'S PLAN OF
OPERATION 27 -----------------------------
FINANCIAL STATEMENTS 29
<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
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view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding refereed to
in subsections 1 and 2, or in defense of any claim, issue or
matter therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless
ordered by a court or advanced pursuant to subsection 5, must be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a
quorum consisting of directors who were not parties to the
act, suit or proceeding;
(c) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel, in a
written opinion; or
(d) If a quorum consisting of directors two were not
parties to the act, suit or proceeding cannot be obtained,
by independent legal counsel in a written opinion.
5. The certificate or articles of incorporation, the
bylaws or an agreement made by the corporation may provide that
the expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by 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:
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<PAGE>
(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.
(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.
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<PAGE>
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.
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.
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<PAGE>
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. 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized this
amendment to Registration Statement to be signed on its behalf by the
undersigned, in the City of Salt Lake, State of Utah, on January ______,
1997..
LITIGATION ECONOMICS, INC.
By:/s/ Cornelius A. Hofman, II
Cornelius A. Hofman, II
Chairman (Chief Executive Officer)
Director and President
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 January _____, 1997
Cornelius A. Hofman, II (Chief Executive Officer)
Director and President
/s/ Edward B. Schow Director January _____, 1997
Edward B. Schow Vice President
/s/ Stacey a. Hofman Director January _____, 1997
Stacey A. Hofman Vice President / Treasurer
Principal Financial / Accounting
Officer
/s/ Cornelius A. Hofman Director January _____, 1997
Cornelius A. Hofman
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________________________________
LITIGATION ECONOMICS, INC.
(Exact name of Issuer in its Charter)
227 South Ninth Avenue
Pocatello, Idaho 83201
(Address of Principal Executive Office)
_____________________________________________
EXHIBITS
<PAGE>
EXHIBIT INDEX
EXHIBIT #
(3) (i) Articles of Incorporation
(ii) By-laws
(4) Instruments defining the rights of security holders, incl.
indentures
Incorporated by reference to By-laws, Exhibit 3(ii)
(5) Opinion on Legality
(21) Subsidiaries of the small business issuer
(23) Consents of Experts and Counsel
(27) Financial Data Schedule
(29) Additional exhibits
(i) Stock Option Plan
(ii) Fund Impound Agreement
<PAGE>
EXHIBIT 3
ARTICLES OF INCORPORATION
BYLAWS
<PAGE>
Articles Of Incorporation
Of
LANDMARK LEASING
WE, THE UNDERSIGNED natural persons of the age of eighteen (18)
years or more, acting as incorporators of a corporation under the Nevada
Business Corporation Act, adopt the following Articles of Incorporation.
Article I
Name
The Name of the corporation is Landmark Leasing, INC.
Article II
Duration
The duration of the corporation is perpetual.
Article III
Purposes
The purpose or purposes for which this corporation is engaged are:
(a) To be a leasing company of residential property, commercial
property and vehicles etc.. Also, to acquire, develop, explore, and
otherwise deal in and with all kinds of real and personal property and all
related activities, and for any and all other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription,
or otherwise; and to hold, own, mortgage, pledge, hypothecate, sell,
assign, transfer, exchange, or otherwise dispose of or deal in or with its
own corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created
or issued by any person, firm, associate, or corporation, or
instrumentalities thereof; to make payment therefor in any lawful manner
or to issue in exchange therefor in any lawful manner or to issue in
exchange therefor its unreserved earned surplus for the purchase of its
own shares, and to exercise as owner or holder of any securities, any and
all rights, powers, and privileges in respect thereof.
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<PAGE>
(c) To do each and everything necessary, suitable, or proper for
the accomplishment of any of the purposes or the attainment of any one or
more of the subjects herein enumerated, or which may, at any time, appear
conducive to or expedient for the protection or benefit of this
corporation, and to do said acts as fully and to the same extent as
natural persons might, or could do in any part of the world as principals,
agents, partners, trustees, or otherwise, either alone or in conjunction
with any other person, association, or corporation.
(d) The foregoing clauses shall be construed both as purposes and
powers and shall not be held to limit or restrict in any manner the
general powers of the corporation, and the enjoyment and exercise thereof,
as conferred by the laws of the State of Nevada; and it is the intention
that the purposes and powers specified in each of the paragraphs of this
Article III shall be regarded as independent purposes and powers.
Articles IV
Stock
(a) Common Stock. The aggregate number of shares of Common Stock
which the Corporation shall have authority to issue is 50,000,000 shares
at a par value of $.001 per share. All stock when issued shall be fully
paid and non-assessable, shall be of the same class and have the same
rights and preferences.
No holder of shares of Common Stock of the Corporation shall be
entitled, as such, to any pre-emptive or preferential rights to subscribe
to any unissued stock or any other securities which the Corporation may
now or thereafter be authorized to issue.
Each share of Common Stock shall be entitled to one vote at a
stockholders meetings, either in person or by proxy. Cumulative voting in
elections of Directors and all other matters brought before stockholders
meeting, whether they be annual or special, shall not be permitted.
(b) Preferred Stock. The aggregate number of share of Preferred
Stock which the Corporation shall have authority to issue is 5,000,000
shares, par value $.001, which may be issued in series, with such
designations, preferences, stated values, rights, qualifications or
limitations as determined solely by the Board of Directors of the
Corporation.
Article V
Amendment
These Articles of Incorporation may be amended by the affirmative
Vote of "a majority" of the shares entitled to vote on each such
amendment.
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<PAGE>
Article VI
Shareholders Rights
The authorized and treasury stock of this corporation may be issued
at such time, upon such terms and conditions and for such consideration as
the Board of Directors shall determine. Shareholders shall not have
pre-emptive rights to acquire unissued shares of the stock of this
corporation.
Article VII
Initial Office and Agent
The registered office of the Corporation in the State of Nevada is
3230 E. Flamingo Road, Suite 156, Las Vegas, NV 89121. The registered
agent in charge thereof at such address is Gateway Enterprises, Inc.
Article VIII
Directors
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business corporation
act provides that the directors may act in certain instances where the
Articles of Incorporation authorize such action by the directors, the
directors are hereby given authority to act in such instances without
specifically numerating such potential action or instance herein.
The directors are specifically given the authority to mortgage or
pledge any or all assets of the business with stockholders' approval.
The number of directors constituting the initial Board of Directors
of this corporation is one (1). The names and addresses of persons who
are to serve as Directors until the first annual meeting of stockholders
or until their successors are elected and qualify are:
NAME ADDRESS
David N. Nemelka 899 south artistic circle
springville, ut 84663
Articles IX
Incorporators
The name and address of each incorporator is:
David N. Nemelka 899 South Artistic Circle
Springville, UT 84663
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Article X
Common Directors - Transactions between Corporations
No contract or other transaction between this corporation and any on
or more of its directors or any other corporation, firm, association, or
entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship
or interest, or because such director or directors are present at the
meeting of the Board of Directors, or a committee thereof, which authori-
zes, approves, or ratifies such contract or transaction, or because his or
their votes are counted for such purpose if: (a) the fact of such
relationship or interest is disclosed or known to the Board of Directors
or committee which authorizes, approves, or ratifies the contract or
transaction by vote or consent sufficient for the purpose without counting
the votes or consents of such interested director; or (b) the fact of such
relationship or interest is disclosed or known to the stockholders
entitled to vote and they authorize, approve, or ratify such contract or
transaction by vote or written consent, or (c) the contract or transaction
is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or committee
there of which authorizes, approves or ratifies such contract or
transaction.
Article XI
Liability of Directors and Officers
No director or officer shall be personally liable to the Corporation
or its stockholders for monetary damages for any breach of fiduciary duty
by such person as a director or officer. Notwithstanding the foregoing
sentence, a director or officer shall be liable to the extent provided by
applicable law, (I) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) for the payment
of dividends in violation of NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the
Corporation for or with respect to any acts or omissions of such person
occurring prior to such amendment.
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<PAGE>
Under penalties of perjury, I declare that these Articles of
Incorporation have been examined by me and are, to the best of my
knowledge and belief, true, correct and complete.
Dated this 10th day of April, 1995
__________
/S/DAVID N. NEMELKA
David N. Nemelka
STATE OF UTAH )
) ss.
COUNTY OF )
On the 10th day of April, 1995, personally appeared before
me, David N. Nemelka, who being by me first duly sworn, declared that he
was the person who signed the foregoing document as incorporator and that
the statements therein contained are true.
IN WITNESS THEREOF, I have hereunto set my hand and seal this
day of April, 1995.
___________________________
NOTARY PUBLIC
Residing at ______________________
My commission expires: ______________________
_____________________________
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
LANDMARK LEASING, CORP.
(After Issuance of Stock)
I, the undersigned David N. Nemelka, the President, Secretary and
Treasurer of Landmark Leasing, Corp., do hereby certify:
That the Board of Directors of Landmark Leasing, Corp., at a
meeting duly convened, held on August 22, 1996, adopted a resolution to
amend the articles of incorporation as follows:
Article I is hereby amended to read as follows:
ARTICLE I
NAME
The name of the corporation is Litigation Economics, Inc.
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 500,000 that the
said change(s) and amendment have been consented to and approved by a
majority vote of the stockholders holding at least a majority of each
class of stock outstanding and entitled to vote thereon.
________________________________________
David N. Nemelka, President and Secretary
State of Utah )
: ss.
County of Utah )
On August 2_, 1996, personally appeared before me, a Notary
Public, David N. Nemelka, who acknowledged that he executed the above
instrument.
_______________________________________
<PAGE>
BY-LAWS
of
Landmark Leasing, Corp.
A NEVADA CORPORATION
ARTICLE I
Offices
Section I. The principal office of the Corporation shall be
at 899 South Artistic Circle, located in Springville, Utah 84663. The
Corporation may have such other offices, either within or without the
State of Utah as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
The registered office of the Corporation required by the
Nevada Business Corporation Act to be maintained in the State of Nevada
may be, but need not be, identical with the principal offices in the State
of Nevada, and the address of the registered office may be changed, from
time to time, by the Board of Directors.
ARTICLE II
Stockholders
Section 1. ANNUAL MEETING. The annual meeting of
stockholders shall be held at the principal office of the Corporation, at
899 South Artistic Circle, Springville, UT 84663 or at such other places
on the third Friday of April, or at such other times as the Board of
Directors may, from time to time, determine. If the day so designated
falls upon a legal holiday then the meeting shall be held upon the first
business day thereafter. The Secretary shall serve personally or by mail
a written notice thereof, not less than ten (10) nor more than fifty (50)
days previous to such meeting, addressed to each stockholder at his
address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which all stockholders not present
have waived notice in writing, the giving of notice as above required may
be dispensed with.
Section 2. SPECIAL MEETINGS. Special meetings of
stockholders other than those regulated by statute, may be called at any
time by a majority of the Directors. Notice of such meeting stating the
place, day and hour and the purpose for which it is called shall be served
personally or by mail, not less than ten (10) days before the date set for
such meeting. If mailed, it shall be directed to a stockholder at his
address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which stockholders not present have
waived notice in writing, the giving of notice as above described may be
dispensed with. The Board of Directors shall also, in like manner, call
a special meeting of stockholders whenever so requested in writing by
stockholders representing not less than ten percent (10%) of the capital
stock of the Corporation entitled to vote at the meeting. The President
may in his discretion call a special meeting of stockholders upon ten (10)
days notice. No business other than that specified in the call for the
meeting shall be transacted at any special meeting of the stockholders,
except upon the unanimous consent of all the stockholders entitled to
notice thereof.
Section 3. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. For the purpose of determining stockholders entitled to receive
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any dividend; or
-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 August 31, 1996, relating to the Consolidated Financial
Statements dated August 31, 1996 of Litigation Economics, Inc., which
appears in such Prospectus. We also consent to the reference to us under
the heading "Experts".
/S/ JONES, JENSEN & COMPANY
Jones, Jensen & Company
Salt Lake City, Utah
November 8, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 5,492
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,492
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,492
<CURRENT-LIABILITIES> 2,188
<BONDS> 0
<COMMON> 1,500
0
0
<OTHER-SE> 1,804
<TOTAL-LIABILITY-AND-EQUITY> 5,492
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,337)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,337)
<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.
-1-
<PAGE>
(j) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder,
means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, the last sale price of the Common Stock in the
principal trading market for the Common Stock on the last trading day
preceding the date of grant of an award hereunder, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not
listed on a national securities exchange or quoted on the Nasdaq National
Market or Nasdaq SmallCap Market, but is traded in the over-the-counter
market, the closing bid price for the Common Stock on the last trading day
preceding the date of grant of an award hereunder for which such
quotations are reported by the OTC Bulletin Board or the National
Quotation Bureau, Incorporated or similar publisher of such quotations;
and (iii) if the fair market value of the Common Stock cannot be
determined pursuant to clause (i) or (ii) above, such price as the
Committee shall determine, in good faith.
(k) "Holder" means a person who has received an award under
the Plan.
(l) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(m) "Nonqualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section
10, below, that is valued in whole or in part be reference to, or is
otherwise based upon, Stock.
(p) "Parent" means any present or future parent corporation
of the Company, as such term is defined in Section 424(e) of the Code.
(q) "Plan" means Litigation Economics, Inc. 1996 Stock
Option Plan, as hereinafter amended from time to time.
(r) "Restricted Stock"means Stock, received under an award
made pursuant to Section 8, below, that is subject to restrictions under
said Section 8.
(s) "SAR Value" means the excess of the Fair Market Value
(on the exercise date) of the number of shares for which the Stock
Appreciation Right is exercised over the exercise price that the
participant would have otherwise had to pay to exercise the related Stock
Option and purchase the relevant shares.
(t) "Stock" means the Common Stock of the Company, par value
$.001 per share.
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(u) "Stock Appreciation Right" means the right to receive
from the Company, on surrender of all or part of the related Stock Option,
without a cash payment to the Company, a number of shares of Common Stock
equal to the SAR Value divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(w) "Stock Reload Option" means any option granted under
Section 6.3, below, as a result of the payment of the exercise price of a
Stock Option and/or the withholding tax related thereto in the form of
Stock owned by the Holder or the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of
the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such terms as the
Board may in each case determine, and shall be subject to removal at any
time by the Board.
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4, below, to award, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express provisions of
this Plan):
(a) to select the officers, key employees, directors,
consultants and sales representatives of the Company or any Subsidiary to
whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Reload Stock Options and/or Other Stock-Based Awards may from time
to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, number of shares, share price, any restrictions or
limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the
Committee shall determine);
(c) to determine any specified performance goals or such
other factors or criteria which need to be attained for the vesting of an
award granted hereunder;
(d) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash awards
made by the Company or any Subsidiary outside of this Plan;
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(e) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish,
including the crediting of interest on deferred amounts denominated is
cash and of dividend equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall
be deferred which may be either automatic or at the election of the
Holder; and
(g) to substitute (i) new Stock Options for previously
granted Stock Options, which previously granted Stock Options have higher
option exercise prices and/or contain other less favorable terms, and (ii)
new awards of any other type for previously granted awards of the same
type, which previously granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 4 and 12,
below, the Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as
it shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and to
determine the form and substance of all Agreements relating thereto), to
the otherwise supervise the administration of the Plan. Subject to
Section 12, below, all decisions made by the Committee pursuant to the
provisions of the Plan shall be made in the Committee's sole discretion
and shall be final and binding upon all persons, including the Company,
its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options (including but limited to Stock Reload Options or
Stock Appreciation rights granted in conjunction with an Incentive Stock
Option) or any Agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the Holder(s)
affected, to disqualify any Incentive Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of share of Common Stock
reserved and available for distribution under the Plan shall be 400,000
shares. Share of Stock under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares. If any shares of
Stock that have been granted pursuant to a Stock Option cease to be
subject to a Stock Option, or if any shares of Stock that are subject to
any Stock Appreciation Right, Restricted Stock, Deferred Stock award,
Reload Stock Option or Other Stock-Based Award granted hereunder are
forfeited or any such award otherwise terminates without a payment being
made to the Holder in the form of Stock, such shares shall again be
available for distribution in connection with future grants and awards
under the Plan. Only net shares issued upon a stock-for-stock exercise
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(including stock used for withholding taxes) shall be counted against the
number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event
of any merger, reorganization, consolidation, recapitalization, dividend
(other than a cash dividend), stock split, reverse stock split, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for
issuance under the Plan, in the number and exercise price of shares
subject to outstanding Options, in the number of shares and Stock
Appreciation Right price relating to Stock Appreciation Rights, and in the
number of shares and Stock Appreciation Right price relating to Stock
Appreciation Rights, and in the number of shares subject to, and in the
related terms of, other outstanding awards (including but not limited to
awards of Restricted Stock, Deferred Stock, Reload Stock Options and Other
Stock-Based Awards) granted under the Plan as may be determined to be
appropriate by the Committee in order to prevent dilution or enlargement
of rights, provided that the number of shares subject to any award shall
always be a whole number.
Section 4. Eligibility.
Awards may be made or granted to key employees, officers, directors,
consultants and sales representatives who are deemed to have rendered or
to be able to render significant services to the Company or its
Subsidiaries and who are deemed to have contributed or to have the
potential to contribute to the success of the Company. No Incentive Stock
Option shall be granted to any person who is not an employee of the
Company or a Subsidiary at the time of grant.
Section 5. Required Six-Month Holding Period.
Any equity security issued under this Plan may not be sold prior to
six months from the date of the grant of the related award without the
approval of the Company.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock
Options. Any Stock Option granted under the Plan shall contain such
terms, not inconsistent with this Plan, or with respect to Incentive Stock
Options, not inconsistent with the Code, as the Committee may from time to
time approve. The Committee shall have the authority to grant Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options
and which may be granted alone or in addition to other awards granted
under the Plan. To the extent that any Stock Option intended to qualify
as an Incentive Stock Option does not so qualify, it shall constitute a
separate Nonqualified Stock Option. An Incentive Stock Option may be
granted only within the ten-year period commencing from the Effective Date
and may only be exercised within ten years of the date of grant or five
years in the case of an Incentive Stock Option granted to an optionee
("10% Stockholder") who, at the time of grant, owns Stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.
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6.2 Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant and may not be less than 100% of the Fair Market Value
of the Stock as defined above; provided, however, that the exercise price
of an Incentive Stock Option granted to a 10% Stockholder shall not be
less than 110% of the Fair Market Value of the Stock.
(b) Option Term. Subject to the limitations in Section 6.1,
above, the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee and as set forth in Section 11, below. If the
Committee provides, in its discretion, that nay Stock Option is
exercisable only in installments, i.e., that it vests over time, the
Committee may waive such installment exercise provisions at any time at or
after the time of grant in whole or in part, based upon such factors as
the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular
case, Stock Options may be exercised in whole or in part at any time
during the term of the Option, by giving written notice of exercise to the
Company specifying the number of shares of Stock to be purchase. Such
notice shall be accompanied by payment in full of the purchase price,
which shall be in cash or , unless otherwise provided in the Agreement, in
shares of Stock (including Restricted Stock and other contingent awards
under this Plan) or, partly in cash and partly in such Stock, or such
other means which the Committee determines are consistent with the Plan's
purpose and applicable law. Cash payments shall be made by wire transfer,
certified or bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not be
required to deliver certificates for shares of Stock with respect to which
an Option is exercised until the Company has confirmed the receipt of good
and available funds in payment of the purchase price thereof. Payments in
the form of Stock shall be valued at the Fair Market Value of a share of
Stock on the date prior to the date of exercise. Such payments shall be
made by delivery of stock certificates in negotiable form which are
effective to transfer good and valid title thereto to the Company, free of
any liens or encumbrances. Subject to the terms of the Agreement, the
Committee may, in its sole discretion, at the request of the Holder,
deliver upon the exercise of a Nonqualified Stock Option a combination of
shares of Deferred Stock and Common Stock; provided that, notwithstanding
the provision of Section 9 of the Plan, such Deferred Stock shall be fully
vested and not subject to forfeiture. A Holder shall have none of the
rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of
the Option.
(e) Transferability. No Stock Option shall be transferable
by the Holder other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
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Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holders'
employment by the Company or a Subsidiary terminates by reason of death,
any Stock Option held by such Holder, unless otherwise determined by the
Committee at the time of grant and set forth in the Agreement, shall be
fully vested and may thereafter be exercised by the legal representative
of the estate or by the legatee of the Holder under the will of the
Holder, for a period of one year (or such other greater or lesser period
as the Committee may specify at grant) from the date of such death or
until the expiration of the stated term of such Stock Option, which ever
period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in the
Agreement, shall be fully vested and may thereafter be exercised by the
Holder for a period of one year (or such other greater or lesser period as
the Committee may specify at the time of grant) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Other Termination. Subject to the provisions of Section
14.3, below, and unless otherwise determined by the Committee at the time
of grant and set forth in the Agreement, if a Holder is an employee of the
Company or a Subsidiary at the time of grant and if such Holder's
employment by the Company or any Subsidiary terminates for any reason
other than death or Disability, the Stock Option shall thereupon
automatically terminate, except that if the Holder's employment is
terminated by the Company or a Subsidiary without cause or due to Normal
Retirement, then the portion of such Stock Option which has vested on the
date of termination of employment may be exercised for the lesser of three
months after termination of employment or the balance of such Stock
Option's term.
(i) Additional Incentive Stock Option Limitation. In the
case of an Incentive Stock Option, the aggregate Fair Market Value of
Stick (determined at the time of grant of the Option) with respect to
which Incentive Stock Options become exercisable by a Holder during any
calendar year (under all such plans of the Company and its Parent and
Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at
any time, in its sole discretion, offer to buy out a Stock Option
previously granted, based upon such terms and conditions as the Committee
shall establish and communicate to the Holder at the time that such offer
is made.
(k) Stock Option Agreement. Each grant of a Stock Option
shall be confirmed by and shall be subject to the terms of, the Agreement
executed by the Company and the Holder.
6.3 Stock Reload Option. The Committee may also grant to the
Holder (concurrently with the grant of an Incentive Stock Option and at or
after the time of grant in the case of a Nonqualified Stock Option) a
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Stock Reload Option up to the amount of shares of Stock held by the Holder
for at least six months and used to pay all or part of the exercise price
of an Option and, if any, withheld by the Company as payment for
withholding taxes. Such Stock Reload Option shall have an exercise price
equal to the Fair Market Value as of the date of the Stock Reload Option
grant. Unless the Committee determines otherwise, a Stock Reload Option
may be exercised commencing one year after it is granted and shall expire
on the date of expiration of the Option to which the Reload Option is
related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock
Appreciation Rights to participants who have been, or are being granted,
Options under the Plan as a means of allowing such participants to
exercise their Options without the need to pay the exercise price in cash.
In the case of a Nonqualified Stock Option, a Stock Appreciation Right may
be granted either at or after the time of the grant of such Nonqualified
Stock Option. In the case of an Incentive Stock Option, a Stock
Appreciation Right may be granted only at the time of the grant of such
Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be
subject to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be
exercisable as determined by the Committee and set forth in the Agreement,
subject to the limitations, if any, imposed by the Code, with respect to
related Incentive Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate
and shall no longer be exercisable upon the termination or exercise of the
related Stock Option.
(c) Method of Exercise. Stock Appreciation Rights shall be
exercisable upon such terms and conditions as shall be determined by the
Committee and set forth in the Agreement and by surrendering the
applicable portion of the related Stock Option. Upon such exercise and
surrender, the Holder shall be entitled to receive a number of Option
Shares equal to the SAR Value divided by the exercise price of the Option.
(d) Shares Affected Upon Plan. The granting of a Stock
Appreciation Rights shall not affect the number of shares of Stock
available under for awards under the Plan. The number of shares available
for awards under the Plan will, however, be reduced by the number of
shares of Stock acquirable upon exercise of the Stock Option to which such
Stock Appreciation right relates.
Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be awarded, the number of shares to
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be awarded, the price (if any) to be paid by the Holder, the time or times
within which such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name
of the Holder to whom such Restricted Stock shall have been awarded.
During the Restriction Period, certificates representing the Restricted
Stock and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the Restricted
Stock (and such Retained Distributions), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the Agreement. Such certificates shall be
deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and
any securities constituting Retained Distributions that shall be forfeited
or that shall not become vested in accordance with the Plan and the
Agreement.
(b) Rights of Holder. Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all corporate purposes.
The Holder will have the right to vote such Restricted Stock, to receive
and retain all regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute on such Restricted Stock and to exercise all other rights,
powers and privileges of a holder of Common Stock with respect to such
Restricted Stock, with the exceptions that (i) the Holder will not be
entitled to delivery of the stock certificate or certificates representing
such Restricted Stock until the Restriction Period shall have expired and
unless all other vest requirements with respect thereto shall have been
fulfilled; (ii) the Company will retain custody of the stock certificate
or certificates representing the Restricted Stock during the Restriction
Period; (iii) other than regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute, the Company will retain custody of all distributions
("Retained Distributions") made or declared with respect to the Restricted
Stock (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the restricted
Stock) until such time, if ever, as the Restricted Stock with respect to
which such Retained Distributions shall have been made, paid or declared
shall have become vested and with respect to which the Restriction Period
shall have expired; (iv) a breach of any of the restrictions, terms or
conditions contained in this Plan or the Agreement or otherwise
established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock
and any Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the
Restriction Period with respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms and conditions
(i) all or part of such Restricted Stock shall become vested in accordance
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with the terms of the Agreement, subject to Section 11, below, and (ii)
any Retained Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related thereto
shall have become vested, subject to Section 11, below. Any such
Restricted Stock and Retained Distributions that do not vest shall be
forfeited to the Company and the Holder shall not thereafter have any
rights with respect to such Restricted Stock and Retained Distributions
that shall have been so forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the eligible persons to whom and the time or times at
which grants of Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any person, the duration of the period
(the "Deferral Period") during which, and the conditions under which,
receipt of the shares will be deferred, and all the other terms and
conditions of the awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period
(or the Additional Deferral Period referred to in Section 9.2 (d) below,
where applicable), shares certificates shall be issued and delivered to
the Holder, or his legal representative, representing the number equal to
the shares covered by the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred
stock shall not have any rights of a stockholder by virtue of such award
until the expiration of the applicable Deferral Period and the issuance
and delivery of the certificates representing such Stock. The shares of
Stock issuable upon expiration of the Deferral Period shall not be deemed
outstanding by the Company until the expiration of such Deferral period
and the issuance and delivery of such Stock to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of the
Deferral Period with respect to each award of Deferred Stock and the
satisfaction of any other applicable restrictions, terms and conditions
all or part of such Deferred Stock shall become vested in accordance with
the terms of the Agreement, subject to Section 11, below. Any such
Deferred Stock that does not vest shall be forfeited to the Company and
the Holder shall not thereafter have any rights with respect to such
Deferred Stock.
(d) Additional Deferral Period. A Holder may request to,
and the Committee may at any time, defer the receipt of an award (or an
installment of an award) for an additional specified period or until a
specified event (the "Additional Deferral Period"). Subject to any
exceptions adopted by the Committee, such request must generally be made
at least one year prior to expiration of the Deferral Period for such
Deferred Stock award (or such installment).
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Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or
payable, in value in whole or in part by reference to, or otherwise based
on, or related to, shares of Common Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without
limitation, purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, convertible or exchangeable
debentures, or other rights convertible into shares of Common Stock and
awards valued by reference to the value of securities of or the
performance of specified subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any other awards
under this Plan or any other plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of such other stock-based awards shall be made, the number of
shares of Common Stock to be awarded pursuant to such awards, and all
other terms and conditions of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee
and to Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
If (i) any person or entity other than the Company and/or any
stockholders of the Company as of the Effective Date acquire securities of
the Company (in one or more transactions) having 25% or more of the total
voting power of all the Company's securities then outstanding and (ii) the
Board of Directors of the Company does not authorize or otherwise approve
such acquisition, then, the vesting periods of any and all Options and
other awards granted and outstanding under the Plan shall be accelerated
and all such Options and awards will immediately and entirely vest, and
the respective holders thereof will have the immediate right to purchase
and/or receive any and all Stock subject to such Options and awards on the
terms set forth in this Plan and the respective agreements respecting such
Options and awards.
Section 12. Amendment and Termination.
Subject to Section 4 hereof, the Board may at any time, and from
time to time, amend alter, suspend or discontinue any of the provisions of
the Plan, but no amendment, alteration, suspension or discontinuance shall
be made which would impair the rights of a Holder under any Agreement
theretofore entered into hereunder, without the Holder's consent.
Section 13. Term of Plan.
13.1 Effective Date. The Plan shall be effective as of the date on
which the Company's stockholders approved the Plan ("Effective Date").
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13.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may
be granted and all awards granted under the Plan are no longer
outstanding. Notwithstanding the foregoing, grants of Incentive Stock
Options may only be made during the ten year period following the
Effective Date.
Section 14. General Provisions.
14.1 Written Agreements. Each award granted under the Plan shall
be confirmed by, and shall be subject to the terms of the Agreement
executed by the Company and the Holder. The Committee may terminate any
award made under the Plan if the Agreement relating thereto is not
executed and returned to the Company within 10 days after the Agreement
has been delivered to the Holder for his or her execution.
14.2 Unfunded Status of Plan. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. With respect
to any payments not yet made to a Holder by the Company, nothing contained
herein shall give any such Holder any rights that are greater than those
of a general creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In the event
aa Holder's employment with the Company or a Subsidiary is terminated for
any reason whatsoever, and within one year after the date thereof such
Holder accepts employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any
award which was realized or obtained by such Holder at any time during the
period beginning on that date which is six months prior to the date of
such Holder's termination of employment with the Company.
(b) Termination for Cause. The Committee may, in the event
a Holder's employment with the company or a Subsidiary is terminated for
cause, annul any award granted under this Plan to return to the Company
the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with
the Company.
(c) No Right of Employment. Nothing contained in the Plan
or in any award hereunder shall be deemed to confer upon any Holder who is
an employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in
any way with the right of the Company or any Subsidiary to terminate the
employment of any Holder who is an employee at any time.
14.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award
under the Plan to represent to and agree with the Company in writing that
the Holder is acquiring the shares for investment without a view to
distribution thereof.
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14.5 Additional Incentive Arrangements. Nothing contained in the
Plan shall prevent the Board from adopting such other or additional
incentive arrangements as it may deem desirable, including, but not
limited to, the granting of Stock Options and the awarding of stock and
cash otherwise than under the Plan; and such arrangements may be either
generally applicable or applicable only in specific cases.
14.6 Withholding Taxes. Not later than the date as of which an
amount must first be included in the gross income of the Holder for
Federal income tax purposes with respect to any option or other award
under the Plan, the Holder shall pay to the Company, or made arrangements
satisfactory to the Committee regarding the payment of, any Federal, state
and local taxes of any kind required by law to be withheld or paid with
respect to such amount. If permitted by the Committee, tax withholding or
payment obligations may be settled with Common Stock, including Common
Stock that is part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditioned upon such payment or arrangements and the Company or the
Holder's employer (if not the Company) shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Holder from the Company or any Subsidiary.
14.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Nevada (without regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the Plan shall
not be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such other plan
to awards under this Plan).
14.9 Non-Transferability. Except as otherwise expressly provided
in the Plan, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
14.10 Applicable Laws. The obligations of the Company with respect
to all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
the Securities Act of 1933, as amended, and (ii) the rules and regulations
of any securities exchange on which the Stock may be listed.
14.11 Conflicts. If any of the terms or provisions of the Plan or
an Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions
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<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.
-14-
<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>
