U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
ECLIPSE ENTERTAINMENT GROUP, INC.
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(Name of Small Business Issuer in its charter)
Nevada 91-1766849
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(State or other jurisdiction (I.R.S. I.D. No.)
of incorporation or organization)
10900 NE 8th Street, Suite 900, Bellevue, WA 98004
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(Address of principal executive offices) (Zip code)
Issuer's telephone number (425) 990-5969
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
______None_________ ________Not applicable________
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Securities to be registered under Section 12(g) of the Act:
Common Stock par value $.001 and Preferred Stock par value $.001
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(Title of class)
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ECLIPSE ENTERTAINMENT GROUP, INC.
FORM 10-SB
Table of Contents Page
PART I
Item 1. Description of Business ........................................... 1
Item 2. Management's Discussion and Analysis
Of Financial Conditions and Results of Operation ......... 6
Item 3. Description of Property ........................................... 10
Item 4. Security Ownership of Certain Beneficial
Owners and Management .................................... 10
Item 5. Directors, Executive officers, Promoters
And Control Persons ...................................... 11
Item 6. Executive Compensation ............................................ 12
Item 7. Certain Relationships and Related Transactions .................... 12
Item 8. Description of Securities ......................................... 12
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and other Stockholder Matters .............. 13
Item 2. Legal Proceedings ................................................. 14
Item 3. Changes in and Disagreements with Accountants ..................... 14
Item 4. Recent Sales of Unregistered Securities ........................... 14
Item 5. Indemnification of Directors and Officers ......................... 15
PART III
Exhibit 1. Independent Auditors Report and Financial Statements.
Exhibit 2.
2.a Articles of Incorporation
2.b Bylaws of the Company
2.c Lease Agreement
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PART I
Item 1. Description of Business.
Eclipse Entertainment Group, Inc. is an entertainment company
specializing in the production and acquisition of feature films and television
programming for worldwide distribution.
Corporate Overview
Eclipse Entertainment Group, Inc. was incorporated on January 27, 1997
in Nevada with the objective of satisfying a worldwide demand for quality,
American entertainment that is developed under carefully managed budgets.
Eclipse will work to establish a network of foreign and domestic buyers to
produce or acquire programming that directly meets their needs in terms of
content and cost.
The Company's production team manages its feature film and television
production. Eclipse also has assembled an experienced sales and acquisitions
staff and attends all major film markets including MIFED, AFM and Cannes.
Eclipse has acquired the worldwide distribution rights to the
action/adventure films Beretta's Island and Double-Cross and the martial arts
feature film, The Process. Beretta's Island stars Franco Columbu (MR. OLYMPIA)
and Ken Kercheval with a special appearance by Arnold Schwarzenegger; Double
Cross stars Franco Columbu, William Smith (Conan), Frank Stallone and Barbara
Niven; and The Process stars and is directed by Ernie Reyes, Jr. (Red Sonja,
Ninja Turtles I & II), Corin Nemec (Drop Zone) and Ernie Reyes, Sr. (Surf
Ninjas).
Eclipse continually is working to expand its entertainment portfolio.
It currently is looking at several new projects and acquisitions including a
studio project in Italy, the formation or acquisition of a domestic video label
and acquisition of a music division.
The Industry
Current worldwide box office sales in the film industry are estimated
at more than $14.1 billion. By the year 2000, the world totals are expected to
exceed $26 billion, with the US accounting for approximately 29 percent of that
amount. There is also tremendous growth internationally where foreign box office
sales are consistently outgrossing domestic box office sales, particularly with
major action films and big event movies. The film industry is currently going
through a growth spurt that is expected to continue.
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The motion picture industry is a constantly changing and multifaceted
business. It consists of two principal activities: production and distribution.
Production involves the development, financing and making of motion pictures;
distribution involves the advertising, publicizing, licensing, promotion, and
physical reproduction, delivery and exhibition of completed motion pictures.
Motion Picture Production
Movie development begins with a story concept. This concept is expanded
into a screenplay. Development begins when the production company options or
purchases a literary property, develops a script and then makes revisions.
Commitments are sought from principal actors, a director is hired and production
financing is arranged.
The next step is pre-production during which commitments are sought for
unsigned talent, locations and equipment, a crew is hired and schedules are
completed. This phase usually takes four to eight weeks. The filming of a motion
picture is called principal photography which can take from three weeks to
several months.
During the subsequent post-production period, the film is edited and
synchronized with music and dialogue. Any special effects are added at this
time. The post-production period once required six to nine months, however, with
recent technological developments, this time has been cut drastically for some
films.
An independent or studio film goes through the same process from
development and pre-production through production and post-production. However,
in the independent scenario, development and pre-production may involve only a
few people and the entrepreneur, whether producer or director, maintains control
over the final product.
Domestic Theatrical Exhibition
Since the early 1990's, the importance of independent production
companies has increased with the rise of non-theatrical markets. The major
studios devote big budgets, earned from television syndication revenues, to
develop a blockbuster theatrical release. The independent producers approach the
market from a more conservative stance; each movie is undertaken as a
stand-alone business.
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For example, during 1993, the major studios produced 156 new motion
pictures and independent producers released 294. Final receipts for 1994
revealed that of the 430 films released in the United States, 29 films earned
more than $50 million at the box office and accounted for 53% of theatrical
dollars. At one time, independent producers accounted for only 10% of new
releases; they now supply 65%.
At the beginning of 1995, there were approximately 27,000 theater
screens in the U.S. This is an increase of approximately 23 percent since the
mid-eighties and more than 50 percent since the mid-seventies.
Foreign Exhibition
The foreign theatrical market continues to provide a significant source
of revenue for theatrical distribution. In 1995, foreign receipts accounted for
55% of the world total, up from 51% the year before. Major studios have their
own distribution offices in many countries and they also cooperate with local
distributors. As the foreign segment continues to grow, emerging markets in Asia
and Latin America are leading the way. In many cases, a film may see only
moderate success in the U.S. but do better abroad.
Non-Theatrical Exhibition
Movies also earn considerable revenue from non-theatrical sources
including domestic and foreign film rentals, the cable networks, home video,
pay-per-view and network television. The new interactive technologies such as
DVD are another source of revenue.
A film's total gross revenue currently derives approximately 10-15%
from theaters, 50% from television and 40% from the rental or purchase of home
videos. Although hundreds of films are released each year that make money, most
do not have much of an impact at the box office. Over the past 15 years, cable
TV and home video stimulated the demand for movie programming. Standard & Poor's
estimates that people in the U.S. spend twice as much on home videos as for
movie theater tickets -- roughly $9 billion on video rentals and $5 billion on
tape purchases in 1994. This $14 billion figure for videos is expected to reach
$21.5 billion by the year 2000.
The advent of strong cable networks in the late eighties and early
nineties turned the emphasis from video to cable. Many video companies have gone
out of business, and advances are not as common as they once were. Cable
pay-per-view channels receive films at about the same time as the video stores -
generally within 7-9 months of theatrical release, although films with
lackluster box office often appear sooner. Some cable channels are financing
their own feature-length films.
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The television market has turned around in the last 10 years. Until a
few years ago, the networks used to buy the rights to show films before they
were released to cable or video. Network television was the first window for
film release a decade ago. Now movies appear on network television after they
have gone to the other ancillary outlets and often a year or two after they
appear on cable. Films often are seen on airplanes at about the same time that
they appear on the networks.
Some of the other ancillary revenue sources are less certain. Even with
big-budget movies, the rights to the novelization of the screenplay or to the
creation of comic book versions yield only small amounts of revenue. The
soundtrack of a motion picture may be separately licensed to recording companies
to generate revenue.
Producers now are exploring the sales of rights to other technologies.
Multimedia software companies are beginning to make CD and DVD movies for
interactive platforms. They are now buying the rights to books, theatrical
films, and characters from comic books or cartoon movies to gain an advantage in
the new medium. Interactive platforms are expected to be a flourishing industry
within the next 5-10 years and the Company plans to explore entry into this
market.
Economics of Production
Historically, studios supported the production of high risk investments
from network and cable TV programming income. To maintain their production cash
flow, all major studios have, or are beginning, their own cable channels for
which they provide the programming.
A large portion of studio movie cost is not related to the quality of
the film. As a result, major studios economically do not supply movies that make
sense within the financial constraints of global market demand. Reasonable risk
is a function of the cost to produce a movie versus the sum of the potential
revenue sources to realize a profit. This is easier to achieve on lower
budgeted, quality stories. Independent filmmakers, producing quality movies at a
production cost of under $10 million, have the broadest opportunity for fiscally
sensitive distribution within the new structure.
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The increasing emphasis by the major studios on larger films with
larger marketing campaigns may lead to less risk-taking and cost efficiency on
the smaller niche films, expanding this window for independents. Burgeoning
foreign markets should also continue to provide growing sources of financing for
lower-budget product. Further, the opening of new foreign markets such as India,
China, Brazil, Korea and Vietnam, which will need cost-effective product in
great volume, could increase revenue sources for new films and existing
libraries.
The Process, Beretta's Island, and Double Cross are termed "independent
feature films". This means that the movies were produced without the initial
backing of a major studio. During the past decade independents enjoyed cash
support from major studios. With the resurgence of independent filmmaking,
production companies are gearing up again and independent distributors are
returning to the market.
Distribution
A film distributor markets a film by representation in terms of the
genre, placement of advertisements in various media, selection of a sales
approach for exhibitors and foreign buyers, and promotional events. All of these
factors are critical to a film's success.
Each major studio has its own distribution division. This division
sends out promotional and advertising materials, arranges screenings of films,
and makes deals with domestic and foreign distributors. The studios release
15-25 films a year each, and often acquire independent films to release.
Independent distributors often have expertise in promoting and
distributing films with smaller budgets and niche markets. Independent
distributors focus on fewer films and concentrate their marketing and
promotional efforts on a handful of primary markets.
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There are U.S.-based distributors who specialize in the foreign sales.
These companies deal with networks of subdistributors in various countries. A
distributor is granted the rights to a film for the foreign markets. In
comparison, a sales agent receives a percentage of the receipts in exchange for
obtaining distribution contracts in each territory or for various media
throughout the world while the producer retains ownership of the foreign rights.
There is no typical distribution contract. The distribution fee can
vary from 15% to 25% up to 50% to 65% of the revenues from the film. These
percentages apply only to the revenues generated by the distributor's deals; if
the distributor is only making foreign sales, then it takes a percentage of only
foreign revenues. The percentage a distribution company negotiates depends on
its participation in the entire film package. The greater the up-front expense
that the distributor must assume, the greater the percentage of incoming
revenues it will seek.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the results of operations and financial
condition should be read in conjunction with the audited financial statements
and related notes appearing subsequently in Part III under the caption
"Independent Auditor's Report and Financial Statements".
Management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses for a given
period in preparing its financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
Forward Looking Statements
This registration statement contains certain forward-looking statements
and information relating to Eclipse Entertainment Group, Inc. (the "Company")
that are based on the beliefs of its management as well as assumptions made by
and information currently available to its management. When used in this report,
the words "anticipate", "believe", "expect", "intend", "plan", and similar
expressions, as they relate to the Company's management, are intended to
identify forward-looking statements. These statements reflect management's
current view of the Company concerning future events, and are subject to certain
risks, uncertainties and assumptions, including among many others: a general
economic downturn; a downturn in the securities market, Securities and Exchange
Commission regulations which affect trading in the securities of "penny stocks"
and other risks and uncertainties.
Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected.
Overview
For the period from the Company's inception through June 30, 1999,
there were no revenues and operating activities related primarily to
establishing the management and operating infrastructure. The Company created
the ability to acquire and license worldwide or sell distribution rights to
independently produced feature films. The Company can obtain rights to motion
pictures at various stages of completion (either completed, in production or in
development) and licenses distribution rights (including video, pay television,
free television, satellite and other ancillary rights) of motion pictures to
various sub-distributors in the United States and in foreign markets.
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The Company has a limited operating history. Eclipse must establish and
maintain distribution on current rights to motion pictures, implement and
successfully execute its business and marketing strategy, provide superior
distribution of motion pictures, anticipate and respond to competitive
developments and attract and retain qualified personnel. There is no assurance
that the Company will be successful in addressing these needs.
General
Film costs represent a major component of the Company's assets. Film
costs represent those costs incurred in the acquisition and distribution of
motion pictures or in the acquisition of distribution rights to motion pictures.
This includes minimum guarantees paid to producers or other owners of film
rights, recoupable distribution and production costs, and capitalized interest
and overhead. The Company will amortize film costs using the individual film
forecast method under which film costs are amortized for each film in the ratio
that revenue earned in the current period for such film bears to management's
estimate of the total revenue to be realized from all media and markets for such
film. The Company currently has not generated revenues from such film costs,
however, management believes that distribution will commence in the early part
of the year 2000. Net income in future years is in part dependent upon the
Company's amortization of its film costs and may be significantly affected by
periodic adjustments in such amortization.
The Company typically acquires distribution rights in a motion picture
for a specified term in one or more territories and media. In some
circumstances, the Company also acquires the copyright to the motion picture.
The arrangements the Company enters into to acquire rights may include the
Company agreeing to pay an advance or minimum guarantee for the rights acquired
and/or agreeing to advance print and advertising costs, obligations which are
independent of the actual financial performance of the motion picture being
distributed. The risks incurred by the Company dramatically increase to the
extent the Company takes such actions.
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The Company also incurs significant risk to the extent it engages in
development or production activities itself. The Company may, in certain
circumstances, reduce some of the foregoing risks by sub-licensing certain
distribution rights in exchange for minimum guarantees from sub-licensees such
as foreign sub-distributors. The investment by the Company in a motion picture
includes the cost of acquisition of the distribution rights (including any
advance or minimum guarantee paid to the producer), the amount of the production
financed, and the marketing and distribution costs borne.
Operating Expenses
General and administrative expenses consist of related general
corporate functions, including marketing expenses, professional service expenses
and travel. The Company expects general and administrative expenses to increase
as it commences to promote and market its motion picture distribution rights.
Any comparison of the Company's results of operations to any previous
period is not meaningful because the Company had not fully commenced operations
as of June 30, 1999.
Capital and Liquidity
Since inception, the Company has financed operations primarily through
private placements of Common Stock. The Company has significant ongoing
liquidity needs to support its existing business and continued growth. The
Company may seek additional funding through public or private financing or other
arrangements prior to such time. Adequate funds may not be available when needed
or may not be available on favorable terms. If funding is insufficient at any
time in the future, the Company may be unable to develop or enhance its service
offering, take advantage of business opportunities or respond to competitive
pressures, any of which could have a negative impact on the business, operating
results and financial condition.
Net cash used in operating activities for the six months ended June 30,
1999 was approximately $115,000. The net cash used in operating activities can
be substantially attributed to the net loss incurred to date. Net cash provided
was approximately $115,000 in the six months ended June 30, 1999 resulting from
the issuance of Common Stock through private placement.
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Over the next 12 months Eclipse will continue to attend all major sales
markets to sell its film products.
Need for Additional Financing
The Company's existing capital will not be sufficient to meet the
Company's cash needs, including costs of its registration and complying with its
continuing reporting obligations under the Securities Act of 1934. Accordingly,
additional capital will be required.
Eclipse will attempt to raise approximately $1.5 million in additional
funds over the next 12 months through a private placement for production of its
next feature film. However, there can be no assurance that the Company will be
successful in raising such additional funds.
Regardless of whether the Company's cash assets prove to be inadequate
to meet the Company's operational needs, the Company might seek to compensate
providers of services by issuance of stock in lieu of cash.
Year 2000 Readiness
The Company is conducting a comprehensive Year 2000 initiative with
respect to its internal business-critical systems. This initiative encompasses
information technology systems and applications, as well as non-information
technology systems and equipment with embedded technology, such as fax machines
and telephone systems, that may be impacted by the Year 2000 problem. Based upon
a review and testing done to date, the Company does not anticipate any material
difficulties in achieving Year 2000 readiness with respect to its internal
business-critical systems. The Company anticipates that Year 2000 compliance
with respect to virtually all its internal business-critical systems will be
achieved by latter-part of 1999. The Company estimates that it has incurred
minimal costs of less than $10,000 related to its Year 2000 initiative.
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Item 3. Description of Property
The Company maintains executive offices at 10900 NE 8th Street, Suite
900, Bellevue, Washington, 98004 on a monthly basis at a rate of $620 per month.
Item 4. Security Ownership of Certain Beneficial Owners and Management
As of November 17, 1999, Eclipse had 12,016,141 shares (post split) of
Common Stock issued and outstanding. The following table sets forth, as of
November 17, 1999, certain information regarding beneficial ownership of the
Common Stock by (i) those persons beneficially holding more than five percent of
the Company's Common Stock, (ii) the Company's directors who beneficially own
shares of the Common Stock, (iii) the officers named in the Compensation table
below, and (iv) all of the Company's directors and officers as a group.
Name and Address Amount of Shares Percent
Of Beneficial Owner(1) of Beneficial Owner of Class
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Arthur Birzneck(2) ................ 424,500 3.53%
16766 16th Ave
Surrey, B.C. Canada
V4P 2P7
Francesco Columbu ................. 68,750 *
1732 S. Sepulveda Blvd
Los Angeles, CA 90025
Northwest Capital Partners(3) ..... 2,605,520 21.7
10900 NE 8th St.
Bellevue, WA 98004
Brent Nelson(2)(3) ................ 165,750 1.4
10900 NE 8th St
Bellevue, WA 98004
All officers and directors......... 659,000 5.5
As a group (3 persons)
*Less than one (1%)
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(1) For purposes of this table, a person is considered to "beneficially own" any
shares with respect to which he/she directly or indirectly has or shares voting
or investment power or of which he or she has the right to acquire the
beneficial ownership within 60 days. Unless otherwise indicated and subject to
applicable community property law, voting power any investment power are
exercised solely by the person named above or shared with members of his or her
household. (2) Arthur Birzneck and Brent Nelson are cousins. (3) Brent Nelson is
the founder and Managing Director of Northwest Capital Partners, LLC.
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Item 5. Directors, Executive Officer, Promoters and Control Persons
The directors and executive officers of the Company and their ages as
of the date of this document are as follows:
Name Age Position
- -------------------- --- -------------------
David Gideon Thomson 62 Chairman, Director
Franco Columbu 57 CEO, Director
Arthur Birzneck 31 President, Director
Brent Nelson 38 Director
John G. Smith 63 Director
The Directors named above will serve until the next annual meeting of
the Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for a one-year term at the annual
stockholders' meeting. Officers will hold their positions at the will of the
board of directors, absent any employment agreement, of which none currently
exist or are contemplated. There are no arrangements, agreements or
understandings between non-management shareholders and management under which
non-management shareholders may directly or indirectly participate in or
influence the management of the Company's affairs.
Biographical Information
David Gideon Thomson - Mr. Gideon Thomson is a British entertainment consultant,
executive and producer. He has been semi-retired for the last five years. Prior
to that, he held top management positions including Managing Director of Polytel
(Polygram's film and TV division), Deputy Chairman of the Robert Stigwood
Organization and Chairman of Charisma Records and Films. During his tenure at
Polytel and Robert Stigwood, Mr. Gideon Thomson was involved with many
award-winning films and television programs, including such films as Saturday
Night Fever and Grease; the stage production of Evita; McVicar; and the
acclaimed film, Too Far To Go for NBC New York. He was also the executive
producer of the feature film Quadrophenia. He has been an advisor to many US, UK
and other European film and TV production and distribution companies.
Franco Columbu - Dr. Columbu oversees all film and television activities of
Eclipse. Dr. Columbu's extensive career in bodybuilding and powerlifting has
earned him every major title including the prestigious Mr. Olympia, Mr. World
and Mr. Universe titles. His connections in the film industry are extensive,
having appeared in film such as Pumping Iron, Stay Hungry, Conan the Barbarian,
Running Man, and Terminator. He has produced two feature films, Beretta's Island
and Doublecross, through his production company Franco Columbu Productions, Inc.
He also has been featured in several national commercials and been a guest on
numerous talk shows. In addition to his industry experience, Dr. Columbu
maintains an active chiropractic practice and consults with private individuals
on health concerns for over five years.
Arthur Birzneck - Mr. Birzneck has been with Eclipse since inception and is
responsible for overseeing all operating activities and the development of its
domestic and international ventures. He is an executive producer of Westar's
current feature film, The Process. Prior to Eclipse, Mr. Birzneck spent three
years as president of Bask Entertainment Inc., a Vancouver, Canada based
production company. He has participated financially in several film projects,
most recently as an investor in Canadian-based HPP Production's Hero of the
Planet. Mr. Birzneck also has been involved in promoting numerous Hip-Hop music
groups. As a principal of MB Productions, his clients included Hip Hop artists
Candy Man, Lighter Shade of Brown and the Rascalz.
Brent Nelson - Mr. Nelson has more than 15 years experience in corporate and
project financing and serves on the boards of several companies in the United
States and abroad: Palmworks, Inc., CybeRecord, Inc., Eclipse Entertainment
Group, Inc., Interactive Objects, Inc., International Digital Technology, Inc.,
Mobile PET Systems, Inc. and Polar Cargo Systems, Inc. He has participated
financially in several film and music industry projects, including MB
Productions and the Canadian Hip Hop label Masiv Music. Approximately 5 years
ago, Mr. Nelson founded and became Managing Director of Northwest Capital
Partners, L.L.C. a Bellevue, Washington based venture capital company. Northwest
Capital is very active in both private and public financing on an international
basis. Mr. Nelson also is executive producer of Eclipse's current feature film
The Process.
John G. Smith - Mr. Smith is a Cambridge, England-educated lawyer, who has
practiced corporate and commercial law in Western Canada for more than 30 years,
with a specialization in entertainment and communications law. He is a
principal, co-owner, and corporate counsel of The Beacon Group of Companies that
manages the production, marketing, distribution and financing of motion
pictures, studio projects and entertainment software. He is a member of the
Canadian Bar Association and the Law Society of British Columbia; and was
previously a governor of the Canadian Tax Foundation and a director of the BC
Motion Picture Foundation, as well as a variety of performing arts
organizations.
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Item 6. Executive Compensation
The current officers and directors have not received any compensation to date.
They will not be remunerated until the company turns profitable.
Item 7. Certain Relationships and Related Transactions
There was a promissory note for $442,285 payable to Northwest Capital
Partners, LLC controlled by Brent Nelson an officer and shareholder of the
Company. The note was unsecured and payable on demand. In October 1999 the
Company issued 2,305,520 shares of Common Stock pursuant to Rule 504 Regulation
D of the Securities Act of 1933 in satisfaction of that note.
There is an unsecured promissory note to Alec Rossa, a shareholder, for
$115,000. The note bears interest at 8% per annum and is due on demand.
Item 8. Description of Securities
Common and Preferred Stock
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $.001 per share and 10,000,000 shares of
Preferred Stock, par value $.001. No Preferred Stock has been issued, to date.
The holders of both the Common and Preferred Stock currently (i) have equal
rights to dividends from funds legally available therefor, when as and if
declared by the Board of Directors of the Company; (ii) are entitled to share
ratably in all of the assets of the Company available for distribution to
holders of Common Stock upon liquidation, dissolution or winding up of the
affairs of the Company; (iii) do not have preemptive, subscription or conversion
rights and there are no redemption or sinking fund provisions or rights
applicable thereto; and (iv) are entitled to one non-cumulative vote per share
on all matters on which stockholders may vote. The Board of Directors of the
Company may, however, establish certain preferences for Preferred Stock, as and
when issued. All shares of Common Stock now outstanding are fully paid for and
non-assessable and all shares of Common Stock, when issued, will be fully paid
for and non-assessable. To the extent that additional shares of the Company's
Common Stock are issued, the relative interests of the then existing
shareholders may be diluted. Reference is made to the Company's Articles of
Incorporation By-Laws presented in Exhibits 1 and 2, respectively, and the
applicable statutes of the State of Nevada for a more complete description of
the rights and liabilities of holders of the Company's securities.
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Market Information
The Company's Common Stock currently is listed in the OTC Pink Sheets.
Previously, the Company's Common Stock ($.001 par value) has traded on
the OTC Bulletin Board under the symbol "ECLE." The following table sets forth,
for the fiscal period indicated, the closing bid prices as reported on the OTC
Bulletin Board. The quotations for the Common Stock traded on the Bulletin Board
may reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
Date High Low
- ---- ----- -----
Sep-30-99 0.5 0.5
Jun-30-99 0.875 0.75
Mar-31-99 0.375 0.25
Dec-31-98 0.5 0.5
Sep-30-98 0.6875 0.5
Jun-30-98 1.25 1.0937
Mar-31-98 0.75 0.6875
Dec-31-97 0.5625 0.4375
Sep-26-97 1.25 1.0625
Holders
The approximate number of record holders of the Company's Common Stock
as of November 17, 1999 was 60, inclusive of those brokerage firms and/or
clearing houses holding the Company's common shares for their clientele (with
each brokerage house and/or clearing house being considered as one holder). The
aggregate number of shares of Common Stock outstanding as of November 16, 1999
was 12,016,141. There were no shares of Preferred Stock outstanding as of
November 17, 1999.
Dividends
As of this date, the Company has not paid any cash dividends to
stockholders. The declaration of any future cash dividend will be at the
discretion of the Board of Directors and will depend upon the earnings, if any,
capital requirements and financial position of the Company, general economic
conditions, and other pertinent conditions. It is the present intention of the
Company not to pay any cash dividends in the foreseeable future, but rather to
reinvest earnings, if any, in the Company's business.
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Item 2. Legal Proceedings
The Company is not presently a party to any material litigation, nor is
any such litigation threatened to the Company's knowledge.
Item 3. Changes in and Disagreements with Accountants
The Company has had no changes in or disagreements with accountants on
accounting or financial disclosure.
Item 4. Recent Sales of Unregistered Securities
On January 28, 1997, the Company issued 8,000,000 shares of restricted
common stock to 15 investors for an aggregate consideration of $80,000. Said
shares were exempt from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Act").
On July 7, 1998, the Company issued 500,000 shares of its common stock
to 2 non-affiliates, pursuant to an exemption from registration under Regulation
D, Rule 504 of the Act, for an aggregate consideration of $375,000.
On January 1, 1999, the Company issued 96,500 shares of its common
stock to 4 non-affiliates pursuant to an exemption from Registration under
Regulation D, Rule 504 of the Act, for an aggregate consideration of $24,125.
On January 11, 1999, the Company issued 600,000 shares of its common
stock to 2 non-affiliates for an aggregate of $130,000 pursuant to an exemption
from registration under Regulation D, Rule 504 of the Act, and issued 60,000
shares of its common stock to a non-affiliate pursuant to an exemption from
registration under Regulation D, Rule 504 of the Act, in consideration of
$15,000 for legal services rendered.
On January 18, 1999, the Company issued 35,980 shares of its common
stock to a non-affiliate pursuant to an exemption from registration under
Regulation D, Rule 504 of the Act in consideration of $8,995 for legal services
rendered.
On April 5, 1999, The Company issued 6,000,000 shares of its common
stock to 10 non-affiliates for $60,000 pursuant to an exemption from
registration under Regulation D, Rule 504 of the Act, and issued 40,000 shares
of its common stock to 2 non-affiliates, pursuant to an exemption from
registration under Regulation D, Rule 504 of the Act, in consideration of legal
services rendered.
On April 6, 1999, the Company issued 30,000 shares of its common stock
to a non-affiliate pursuant to an exemption from registration under Regulation
D, Rule 504 of the Act, in consideration for legal services rendered.
On October 27, 1999, the Company issued 2,305,520 shares of restricted
common stock to an affiliate, pursuant to an exemption from registration under
Section 4(2) of the Act, in consideration of cancellation of a promissory note
in the amount of $442,285.
14
<PAGE>
Item 5. Indemnification of Directors and Officers
The Certificate of Incorporation and Bylaws of the Company contain
certain provisions limiting or eliminating the liability of directors of the
Company to the Company or its stockholders to the fullest extent permitted by
the General Corporation Law of Delaware. Likewise officers and directors of the
Company are indemnified pursuant to the Certificate of Incorporation and Bylaws
of the Company to the fullest extent permitted by the Nevada General Corporation
Law. Insofar as indemnification for liabilities arising under the 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 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
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 registered, 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 Act, and will
be governed by the final adjudication of such issue.
PART III
Exhibit 1. Independent Auditors Report and Financial Statements
Exhibit 2
2.a Articles of Incorporation
2.b Bylaws of the Company
2.c Lease Agreement
15
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
ECLIPSE ENTERTAINMENT GROUP, INC.
Date: December 23, 1999 By: /s/Arthur Birzneck
--------------------------
Arthur Birzneck, President
16
ECLIPSE ENTERTAINMENT GROUP, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999
(Unaudited)
ASSETS
Cash $ --
Film costs 1,074,635
Fixed assets, net 740
Other assets 685
-----------
Total assets $ 1,076,060
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities $ 78,910
Due to related parties 562,635
----------
Total liabilities 641,545
Stockholders' equity
Preferred stock - $.001 par value, 10,000,000
shares authorized, no shares issued --
Common stock - $.001 par value, 50,000,000
shares authorized, 9,710,620 and 3,465,000
shares issued and outstanding, respectively 9,711
Additional paid in capital 880,151
Accumulated deficit (455,347)
Total stockholders' equity -----------
434,515
-----------
Total liabilities and stockholders' equity $ 1,076,060
===========
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three For the Six
Months Ended Months Ended
September 30, September 30,
1999 1999
---------------- --------------
Revenues $ -- $ --
General and administrative expenses 13,859 116,499
------ -------
Loss from operations (13,859) (116,499)
Provision for income taxes
-- --
Net loss $ (13,859) $ (116,499)
========== ==========
Basic and diluted loss per
common share $ (0.00) $ (0.00)
========== ==========
Weighted average number of common
shares used in per share calculation
9,710,620 9,710,620
========== ==========
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Total
Number Paid-in Accumulated Stockholders'
Of Shares Amount Capital Deficit Equity
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 3,465,000 $ 3,465 $ 729,470 $(338,848) $ 394,087
Issuance of common stock, $0.02
weighted average price per share 6,205,620 6,206 109,219 -- 115,425
Issuance of common stock for
past services, $1.04 40,000 40 41,462 -- 41,502
Net loss for the period -- -- -- (116,499) (116,499)
----------- -------- --------- --------- ---------
Balance at September 30, 1999 9,710,620 $ 9,711 $880,151 $(455,347) $ 434,515
=========== ======== ======== ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1999
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (13,859) $ (116,499)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 105 314
Services paid with common stock -- 41,502
Changes in operating assets and liabilities:
Increase in film costs (1,150) (98,160)
Increase in accounts payable
and accrued liabilities 9,554 6,433
Increase in due to related parties
---------- -----------
5,350 50,985
---------- -----------
Net cash used by operating activities
-- (115,425)
---------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 115,425
---------- -----------
Net cash provided by financing activities -- 115,425
---------- -----------
Net increase (decrease) in cash -- --
Beginning balance -- --
---------- -----------
Ending balance $ -- $ --
========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
1. Organization and summary of significant accounting policies
Organization - Eclipse Entertainment Group, Inc. (hereinafter referred to
as the "Company") was incorporated in the state of Nevada in January 1997
to engage in the business of developing, producing and marketing films,
television shows, interactive media and game products and videos for
worldwide distribution.
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.
Film costs and amortization - Film costs represent costs incurred in the
acquisition of distribution rights to motion pictures which include
advances, minimum guarantees paid to producers, recoupable distribution and
production costs, legal expenses, interest and overhead costs. These costs
have been capitalized in accordance with Statement of Financial Accounting
Standards No. 53 (SFAS 53). Film costs are amortized using the individual
film forecast method whereby expense is recognized in proportion to current
year revenues based upon management's estimate of future revenues. Film
costs are valued at the lower of unamortized cost or estimated net
realizable value. Revenue and cost forecasts for films are regularly
reviewed by management and revised when warranted by changing conditions.
When estimates of total revenues and costs indicate that a film will result
in an overall loss, additional amortization will be provided to fully
recognize such loss.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line
method over the estimated useful lives of the assets, which are generally 5
to 7 years. The cost of repairs and maintenance is charged to expense as
incurred. Expenditures for property betterments and renewals are
capitalized. Upon sale or other disposition of a depreciable asset, cost
and accumulated depreciation are removed from the accounts and any gain or
loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful lives of fixed
assets or whether the remaining balance of fixed assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed assets in
measuring their recoverability.
Comprehensive income - The Company has no components of other comprehensive
income. Accordingly, net income equals comprehensive income for all
periods.
Advertising costs - Advertising costs incurred in the normal course of
operations are expensed accordingly.
Income taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
<PAGE>
1. Organization and summary of significant accounting policies (continued)
Year 2000 issue - The Company has assessed the exposure to date sensitive
computer software programs that may not be operative subsequent to 1999 and
has implemented a requisite course of action to minimize Year 2000 risk and
ensure that neither significant costs nor disruptions of normal business
operations are encountered. However, because there is no guarantee that all
systems of outside vendors or other entities affecting the Company's
operations will be 2000 compliant, the Company remains susceptible to
consequences of the Year 2000 issue.
2. Film costs
As of September 30, 1999, amortization expenses have not been recorded
since revenues have been not recognized for these periods. Management
believes that these capitalized film costs will provide future revenue
benefits. Accordingly, these costs will be amortized in the related periods
when such revenues are generated in accordance with SFAS 53 as discussed in
Note 1.
3. Fixed assets
Fixed assets consist primarily of office equipment with a historical cost
of $2,196 and accumulated depreciation of $1,456 at September 30, 1999.
4. Related party transactions
Due to related parties consists of the following:
September 30,
1999
-------------
Promissory note payable to an entity controlled by
an officer and shareholder of the Company,
unsecured, bearing no interest, and due on demand $ 447,635
Promissory note payable to a shareholder, unsecured,
bearing interest at 8%, and due on demand 115,000
----------
Total due to related parties $ 562,635
==========
5. Common stock
In April 1999, the Company's Board of Directors adopted a resolution
whereby it approved a 1-for-4 reverse stock split of the issued and
outstanding shares of common stock. Accordingly, the accompanying financial
statements have been retroactively restated to reflect the 1-for-4 reverse
stock split as if such reverse stock split occurred as of the Company's
date of inception.
6. Income taxes
The Company did not record any current or deferred income tax provision or
benefit for any of the periods presented due to continuing net losses and
nominal differences.
<PAGE>
7. Fair value of financial instruments
The carrying amounts of cash, accounts payable, and accrued liabilities,
approximate fair value because of the short-term maturity of these
instruments.
8. Subsequent event
In October 27, 1999, the company issued 2,305,520 shares of common stock in
satisfaction of a $447,635 promissory note due to an entity controlled by
an officer and shareholder of the Company as discussed in Note 4.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Eclipse Entertainment Group, Inc.
Bellevue, Washington
We have audited the accompanying balance sheets of Eclipse Entertainment Group,
Inc. as of June 30, 1999, and December 31, 1998, and the related statements of
operations, stockholder's equity and cash flows for the six months ended June
30, 1999, for the year ended December 31, 1998 and for the period from January
27, 1997 (Date of Inception) through December 31, 1997, respectively. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eclipse Entertainment Group,
Inc. as of June 30, 1999 and December 31, 1998, and the results of its
activities and cash flows for the six months ended June 30, 1999, for the year
ended December 31, 1998 and for the period from January 27, 1997 (Date of
Inception) through December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ L.L. BRADFORD & COMPANY
October 29, 1999
Las Vegas, Nevada
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash ..................................................... $ 608 $ --
Film costs ............................................... 1,073,485 976,475
Fixed assets, net ........................................ 845 1,054
Other assets ............................................. 685 685
----------- -----------
Total assets ........................................ $ 1,075,623 $ 978,214
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities .............. $ 69,964 $ 72,477
Due to related parties................................. 557,285 511,650
----------- -----------
Total liabilities ................................... 627,249 584,127
Stockholders' equity
Preferred stock - $.001 par value, 10,000,000
Shares authorized, no shares issued ................ -- --
Common stock - $.001 par value, 50,000,000
Shares authorized, 9,710,620 and 3,465,000
Shares issued and outstanding, respectively ........ 9,711 3,465
Additional paid in capital ............................ 880,151 729,470
Accumulated deficit ................................... (441,488) (338,848)
----------- -----------
Total stockholders' equity........................... 448,374 394,087
----------- -----------
Total liabilities and stockholders' equity ............... $ 1,075,623 $ 978,214
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
from January
27, 1997 (Date
For the Six For the Year of Inception)
Months Ended Ended Through
June 30, December 31, December 31,
1999 1998 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Revenues .............................. $ -- $ -- $ --
General and administrative expenses.... 102,640 268,786 70,062
----------- ----------- -----------
Loss from operations .................. (102,640) (268,786) (70,062)
Provision for income taxes............. -- -- --
----------- ----------- -----------
Net loss .............................. $ (102,640) $ (268,786) $ (70,062)
=========== =========== ===========
Basic and diluted loss per
common share ....................... $ (0.01) $ (0.08) $ (0.02)
=========== =========== ===========
Weighted average number of common
shares used in per share calculation 9,710,620 3,465,000 3,250,000
=========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Total
Number Paid-in Accumulated Stockholders'
Of Shares Amount Capital Deficit Equity
--------- --------- --------- ---------- ---------
Balance at January 27, 1997 (Date
<S> <C> <C> <C> <C> <C>
of inception) .................. -- $ -- $ -- $ -- $ --
Issuance of common stock, $0.04 ... 2,000,000 2,000 78,000 -- 80,000
Issuance of common stock for
past services, $1.00 ........... 16,000 16 15,984 -- 16,000
Issuance of common stock, $.025
weighted average price per share 1,234,000 1,234 310,079 -- 311,313
Net loss .......................... -- -- -- (70,062) (70,062)
--------- --------- --------- --------- ---------
Balance at December 31, 1997 ...... 3,250,000 3,250 404,063 (70,062) 337,251
Issuance of common stock, $1.51
weighted average price per share 215,000 215 325,407 -- 325,622
Net loss .......................... -- -- -- (268,786) (268,786)
--------- --------- --------- --------- ---------
Balance at December 31, 1998 ...... 3,465,000 3,465 729,470 (338,848) 394,087
Issuance of common stock, $0.02
weighted average price per share 6,205,620 6,206 109,219 -- 115,425
Issuance of common stock for
past services, $1.04 ........... 40,000 40 41,462 -- 41,502
Net loss for the period ........... -- -- -- (102,640) (102,640)
--------- --------- --------- --------- ---------
Balance at June 30, 1999 .......... 9,710,620 $ 9,711 $ 880,151 $(441,488) $ 448,374
========= ========= ========= ========= ==========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Period
From January
27, 1997 (Date
For the Six For the Year of Inception)
Months Ended Ended Through
June 30, December 31, December 31,
1999 1998 1997
--------------- ------------- --------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss ................................... $(102,640) $(268,786) $ (70,062)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation ........................... 209 703 439
Services paid with common stock ........ 41,502 -- 16,000
Changes in operating assets and liabilities:
Increase on other assets ............... -- -- (685)
Increase in film costs ................. (97,010) (561,625) (414,850)
Increase (decrease) in accounts payable
and accrued liabilities ............. (2,513) 56,527 15,950
Increase in due to related parties...... 45,635 447,500 64,150
--------- --------- ---------
Net cash used by operating activities (114,817) (325,681) (389,058)
--------- --------- ---------
Cash flows from investing activities:
Purchase of fixed assets.................... -- -- (2,196)
--------- --------- ---------
Net cash used by investing activities -- -- (2,196)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock...... 115,425 325,622 391,313
--------- --------- ---------
Net cash provided by financing activities 115,425 325,622 391,313
--------- --------- ---------
Net increase (decrease) in cash ............... 608 (59) 59
Beginning balance.............................. -- 59 --
--------- --------- ---------
Ending balance ................................ $ 608 $ -- $ 59
========= ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
ECLIPSE ENTERTAINMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
1. Organization and summary of significant accounting policies
Organization - Eclipse Entertainment Group, Inc. (hereinafter referred to
as the "Company") was incorporated in the state of Nevada in January 1997
to engage in the business of developing, producing and marketing films,
television shows, interactive media and game products and videos for
worldwide distribution.
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.
Film costs and amortization - Film costs represent costs incurred in the
acquisition of distribution rights to motion pictures which include
advances, minimum guarantees paid to producers, recoupable distribution and
production costs, legal expenses, interest and overhead costs. These costs
have been capitalized in accordance with Statement of Financial Accounting
Standards No. 53 (SFAS 53). Film costs are amortized using the individual
film forecast method whereby expense is recognized in proportion to current
year revenues based upon management's estimate of future revenues. Film
costs are valued at the lower of unamortized cost or estimated net
realizable value. Revenue and cost forecasts for films are regularly
reviewed by management and revised when warranted by changing conditions.
When estimates of total revenues and costs indicate that a film will result
in an overall loss, additional amortization will be provided to fully
recognize such loss.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line
method over the estimated useful lives of the assets, which are generally 5
to 7 years. The cost of repairs and maintenance is charged to expense as
incurred. Expenditures for property betterments and renewals are
capitalized. Upon sale or other disposition of a depreciable asset, cost
and accumulated depreciation are removed from the accounts and any gain or
loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful lives of fixed
assets or whether the remaining balance of fixed assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed assets in
measuring their recoverability.
Comprehensive income - The Company has no components of other comprehensive
income. Accordingly, net income equals comprehensive income for all
periods.
Advertising costs - Advertising costs incurred in the normal course of
operations are expensed accordingly.
Income taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
<PAGE>
1. Organization and summary of significant accounting policies (continued)
Year 2000 issue - The Company has assessed the exposure to date sensitive
computer software programs that may not be operative subsequent to 1999 and
has implemented a requisite course of action to minimize Year 2000 risk and
ensure that neither significant costs nor disruptions of normal business
operations are encountered. However, because there is no guarantee that all
systems of outside vendors or other entities affecting the Company's
operations will be 2000 compliant, the Company remains susceptible to
consequences of the Year 2000 issue.
2. Film costs
As of June 30, 1999 and December 31, 1998, amortization expenses have not
been recorded since revenues have been not recognized for these periods.
Management believes that these capitalized film costs will provide future
revenue benefits. Accordingly, these costs will be amortized in the related
periods when such revenues are generated in accordance with SFAS 53 as
discussed in Note 1.
3. Fixed assets
Fixed assets consist primarily of office equipment with a historical cost
of $2,196 and accumulated depreciation of $1,351 and $1,142 at June 30,
1999, and December 31, 1998, respectively.
4. Related party transactions
Due to related parties consists of the following:
<TABLE>
June 30, December 31,
1999 1998
----------------- ------------------
Promissory note payable to an entity controlled by
an officer and shareholder of the Company,
<S> <C> <C>
unsecured, bearing no interest, and due on demand $ 442,285 $ 396,650
Promissory note payable to a shareholder, unsecured,
bearing interest at 8%, and due on demand 115,000 115,000
----------------- ------------------
Total due to related parties $ 557,285 $ 511,650
================= ==================
</TABLE>
5. Common stock
In April 1999, the Company's Board of Directors adopted a resolution
whereby it approved a 1-for-4 reverse stock split of the issued and
outstanding shares of common stock. Accordingly, the accompanying financial
statements have been retroactively restated to reflect the 1-for-4 reverse
stock split as if such reverse stock split occurred as of the Company's
date of inception.
6. Income taxes
The Company did not record any current or deferred income tax provision or
benefit for any of the periods presented due to continuing net losses and
nominal differences.
See Accompanying Report of Independent Certified Public Accountants
<PAGE>
7. Fair value of financial instruments
The carrying amounts of cash, accounts payable, and accrued liabilities,
approximate fair value because of the short-term maturity of these
instruments.
8. Subsequent event
In October 27, 1999, the company issued 2,305,520 shares of common stock in
satisfaction of a $442,285 promissory note due to an entity controlled by
an officer and shareholder of the Company as discussed in Note 4.
ARTICLES OF INCORPORATION
OF
ECLIPSE ENTERTAINMENT GROUP. INC.
The undersigned, to form a Nevada corporation, CERTIFIES THAT:
I. NAME: The name of the corporation is: ECLIPSE ENTERTAINMENT GROUP, INC.
II. REGISTERED OFFICE; RESIDENT AGENT: The location of the registered
office of this corporation within the State of Nevada is 1025 Ridgeview Drive,
Suite 400, Reno, Nevada 89509; this corporation may maintain an office or
offices in such other place within or without the State of Nevada as may be from
time to time designated by the Board of Directors or by the By-Laws of the
corporation; and this corporation may conduct all corporation business of ~very
kind or nature, including the holding of any meetings of directors or
shareholders, inside or outside the State of Nevada, as well as without the
State of Nevada.
The Resident Agent for the corporation shall be Michael J. Morrison, Esq.,
1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509.
III. PURPOSE: The purpose for which this corporation is formed is: To
engage in any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK: The amount of the total authorized
capital stock of the corporation shall be SIXTY THOUSAND Dollars ($60,000.00),
consisting of FIFTY MILLION (50,000,000) shares of Common Stock, par value $.001
per share and TEN MILLION (10,000,000) shares of Preferred Stock, par value
$.001 per share.
V. INCORPORATOR: The name and post office address of the Incorporator
signing these Articles of Incorporation is as follows:
1
<PAGE>
NAME POST OFFICE ADDRESS
--------------- -------------------------
Rita S. Dickson 1025 Ridgeview Drive #400
Reno, Nevada 89509
VI. DIRECTORS: The governing board of this corporation shall be known as
directors, and the first Board shall consist of two (2) directors.
So long as all of the shares of this corporation are owned
beneficially and of record by either one or two shareholders, the number of
Directors may be fewer than three, but not fewer than the number of
shareholders.
The number of directors may, pursuant to the By-Laws, be increased or
decreased by the Board of Directors, provided there shall be no less than one
(1) nor more than nine (9) Directors.
The name and post office address of the director constituting the first
Board of Directors is as follows:
NAME POST OFFICE ADDRESS
--------------- ---------------------------------
ARTHUR BIRZNECK 10900 N.E. 8th Street - Ste. #900
Bellevue, WA 98004
BRENT NELSON 10900 N.E. 8th Street - Ste. #900
Bellevue, WA 98004
VII. STOCK NON-ASSESSABLE: The capital stock, or the holders thereof, after
the amount of the subscription price has been paid in, shall not be subject to
any assessment whatsoever to pay the debts of the corporation.
VIII. TERM OF EXISTENCE: This corporation shall have perpetual existence.
IX. CUMULATIVE VOTING: No cumulative voting shall be permitted in the
election of directors.
2
<PAGE>
X. PREEMPTIVE RIGHTS: Shareholders shall not be entitled to preemptive
rights.
XI. LIMITED LIABILITY: No officer or director of the Corporation ~hall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as an officer or director, except for liability (i)
for any breach of the officer or director's duty of loyalty to the Corporation
or its Stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which the officer or director derived any improper personal
benefit. If the Nevada General Corporation Law is amended after the date of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of officers or directors, then the liability of an officer or
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Nevada General Corporation Law, or amendments thereto. No
repeal or modification of this paragraph shall adversely affect any right or
protection of an officer or director of the Corporation existing at the time of
such repeal or modification.
XII. INDEMNIFICATION: Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was an officer or director
of the Corporation or is or was serving at the request of the Corporation as an
officer or director of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans whether the basis of such proceeding is alleged action in an official
capacity as an officer or director or in any other capacity while serving as an
officer or director shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Nevada General Corporation Law, as the same
exists or may hereafter be amended, (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes or penalties and
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amounts to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be an officer or director and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that except
as provided herein with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this Section shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided however, that, if the Nevada General
Corporation Law requires the payment of such expenses incurred by an officer or
director in his or her capacity as an officer or director (and not in any other
capacity in which service was or is rendered by such person while an officer or
director, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, payment shall be made only
upon delivery to the Corporation of an undertaking, by or on behalf of such
officer or director, to repay all amounts so advanced if it shall ultimately be
determined that such officer or director is not entitled to be indemnified under
this Section or otherwise.
If a claim hereunder is not paid in full by the Corporation within ninety
days after a written claim has been received by the Corporation, the claimant
may, at any time thereafter, bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful, in whole or in part, the claimant
shall be entitled to be paid the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Nevada General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
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stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Nevada General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of Stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself
and any officer, director, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Nevada General Corporation Law.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification to any employee or agent of
the Corporation to the fullest extent of the provisions of this section with
respect to the indemnification and advancement of expenses of officers and
directors of the Corporation or individuals serving at the request of the
Corporation as an officer, director, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise.
THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Nevada, does make and file these Articles of Incorporation, hereby declaring and
certifying the facts
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herein stated are true, and, accordingly, has hereunto set her hand this 21st
day of January, 1997.
/s/Rita S. Dickson
------------------
Rita S. Dickson
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE)
On this 21st day of January, 1997, before me, a Notary Public, personally
appeared Rita S. Dickson, who acknowledged to me that she executed the above
instrument.
[SEAL] /s/ WILLETT Y. SMITH
--------------------
WILLETT Y. SMITH
Notary Public State of Nevada
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of ECLIPSE ENTERTAINMENT GROUP, INC., I, Michael J. Morrison,
with address at 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509, hereby
accept the appointment as Resident Agent of the above-entitled corporation in
accordance with NRS 78.090.
Furthermore, that the mailing address for the above registered office is
1025 Ridgeview Drive, Suite 400, Reno; Nevada 89509.
IN WITNESS WHEREOF, I hereunto set my hand this 21st day of January, 1997.
/s/ Michael J. Morrison
------------------------
Michael J. Morrison,
Resident Agent
6
BYLAWS
OF
ECLIPSE ENTERTAINMENT GROUP, INC.
ARTICLE 1.
OFFICES
1.1 Business Office
The principal business office ("principal office") of the corporation shall
be located at any place either within or without the State of Nevada as
designated in the corporation's most current Annual Report filed with the Nevada
Secretary of State. The corporation may have such other offices, either within
or without the State of Nevada, as the Board of Directors may designate or as
the business of the corporation may require from time to time. The corporation
shall maintain at its principal office a copy of certain records, as specified
in Section 2.14 of Article 2. 1.2 Registered Office
The registered office of the corporation shall be located within Nevada and
may be, but need not be, identical with the principal office, provided the
principal office is located within Nevada. The address of the registered office
may be changed from time to time by the Board of Directors.
ARTICLE 2.
SHAREHOLDERS
2.1 Annual Shareholder Meeting
The annual meeting of the shareholders shall be held on the 30th day of
January, each year, beginning with the year 1998, at the hour of 10:00 o'clock
a.m., or at such other time on such other day within such month as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday in the State of
Nevada, such meeting shall be held on the next succeeding business day.
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If the election of directors shall not be held on the day designated herein
for any annual meeting of the shareholders, or at any subsequent continuation
after adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as convenient.
2.2 Special Shareholder Meetings.
Special meetings of the shareholders, for any purpose or purposes described
in the notice of meeting, may be called by the president, or by the Board of
Directors, and shall be called by the president at the request of the holders of
not less than one-tenth of all outstanding shares of the corporation entitled to
vote on any issue at the meeting.
2.3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or without
the State of Nevada, as the place for any annual or any special meeting of the
shareholders, unless by written consent, which may be in the form of waivers of
notice or otherwise, all shareholders entitled to vote at the meeting designate
a different place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made by either the Board
of Directors or unanimous action of the voting shareholders, the place of
meeting shall be the principal office of the corporation in the State of Nevada.
2.4 Notice of Shareholder Meeting
(a) Required Notice. Written notice stating the place, day and hour of any
annual or special shareholder meeting shall be delivered not less than
10 nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the president, the
Board of Directors, or other persons calling the meeting, to each
shareholder of record entitled to vote at such meeting and to any
other shareholder entitled by the laws of the State of Nevada
governing corporations (the "Act~) or the Articles of Incorporation to
receive notice of the meeting. Notice shall be deemed to be effective
at the earlier of: (1) when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid;
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(2) on the date shown on the return receipt if sent by registered or
certified mail, return receipt requested, and the receipt is signed by
or on behalf of the addressee; (3) when received; or (4) 5 days after
deposit in the United States mail, if mailed postpaid and correctly
addressed to an address, provided in writing by the shareholder, which
is different from that shown in the corporation's current record of
shareholders.
(b) Adjourned Meeting. If any shareholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new
date, time, and place if the new date, time, and place is announced at
the meeting before adjournment. But if a new record date for the
adjourned meeting is, or must be fixed (see Section 2.5 of this
Article 2) then notice must be given pursuant to the requirements of
paragraph (a) of this Section 2.4, to those persons who are
shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice of the meeting (or
any notice required by the Act, Articles of Incorporation, or Bylaws),
by a writing signed by the shareholder entitled to the notice, which
is delivered to the corporation (either before or after the date and
time stated in the notice) for inclusion in the minutes of filing with
the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the
meeting unless the shareholder, at the beginning of the
meeting, objects to holding the meeting or transacting
business at the meeting; and
(2) waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder
objects to consideration of the matter when it is presented.
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(d) Contents of Notice. The notice of each. special shareholder
meeting shall include a description of the purpose or purposes
for which the meeting is called. Except as provided in this
Section 2.4(d), or as provided in the corporation's articles,
or otherwise in the Act, the notice of an annual shareholder
meeting need not include a description of the purpose or
purposes for which the meeting is called.
If a purpose of any shareholder meeting is to consider either: (1) a
proposed amendment to the Articles of Incorporation (including any restated
articles requiring shareholder approval); (2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
corporation; or (5) the removal of a director, the notice must so state and be
accompanied by, respectively, a copy or summary of the: (a) articles of
amendment; (b) plan of merger or share exchange; and (c) transaction for
disposition of all, or substantially all, of the corporation's property. If the
proposed corporate action creates dissenters' rights, as provided in the Act,
the notice must state that shareholders are, or may be entitled to assert
dissenters' rights, and must be accompanied by a copy of relevant provisions of
the Act. If the corporation issues, or authorizes the issuance of shares for
promissory notes or for promises to render services in the future, the
corporation shall report in writing to all the shareholders the number of shares
authorized or issued, and the consideration received with or before the notice
of the next shareholder meeting. Likewise, if the corporation indemnifies or
advances expenses to an officer or a director, this shall be reported to all the
shareholders with or before notice of the next shareholder meeting.
2.5 Fixing of Record Date
For the purpose of determining shareholders of any voting group entitled to
notice of or to vote at any meeting of shareholders, or shareholders entitled to
receive payment of any distribution or dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. Such record date shall
not be more than 70 days prior to the date on which the particular action
requiring such determination of shareholders entitled to notice of, or to vote
at a meeting of shareholders, or shareholders entitled to receive a share
dividend or distribution. The record date for determination of such shareholders
shall be at the close of business on:
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(a) With respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any person
specifically authorized by the Board of Directors or these Bylaws to call a
meeting, the day before the first notice is given to shareholders;
(b) With respect to a special shareholder meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the Board of
Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting (pursuant to
Article 2, Section 2.12), the first date any shareholder signs a consent;
and
(e) With respect to a distribution to shareholders, (other than one
involving a repurchase or reacquisition of shares), the date the Board of
Directors authorizes the distribution
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
If no record date has been fixed, the record date shall be the date the
written notice of the meeting is given to shareholders.
2.6 Shareholder List
The officer or agent having charge of the stock transfer books for shares
of the corporation shall, at least ten (10) days before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
each meeting of shareholders, arranged in alphabetical order, with the address
of and the number of shares held by each. The list must be arranged by class or
series of shares. The shareholder list must be available for inspection by any
shareholder, beginning two business days after notice of the meeting is given
for which the list was prepared and continuing through the meeting. The list
shall be available at the corporation's principal office or at a place in the
city where the meeting is to be held, as set forth in the
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notice of meeting. A shareholder, his agent, or attorney is entitled, on written
demand, to inspect and, subject to the requirements of Section 2.14 of this
Article 2, to copy the list during regular business hours and at his expense,
during the period it is available for inspection. The corporation shall maintain
the shareholder list in written form or in another form capable of conversion
into written form within a reasonable time.
2.7 Shareholder Quorum and Voting Requirements
A majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting.
If a quorum exists, a majority vote of those shares present and voting at a
duly organized meeting shall suffice to defeat or enact any proposal unless the
Statutes of the State of Nevada, the Articles of Incorporation or these Bylaws
require a greater-than-majority vote, in which event the higher vote shall be
required for the action to constitute the action of the corporation.
2.8 Increasing Either Quorum or Voting Requirements
For purposes of this Section 2.8, a "supermajority" quorum is a requirement
that more than a majority of the votes of the voting group be present to
constitute a quorum; and a supermajority voting requirement is any requirement
that requires the vote of more than a majority of the affirmative votes of a
voting group at a meeting.
The shareholders, but only if specifically authorized to do so by the
Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a
"supermajority" quorum or "supermajority" voting requirement.
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The adoption or amendment of a Bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet the same
quorum requirement and be adopted by the same vote required to take action under
the quorum and voting requirement then if effect or proposed to be adopted,
whichever is greater.
A Bylaw that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the Board of Directors
2.9 Proxies
At all meetings of shareholders, a shareholder may vote in person, or vote
by written proxy executed in writing by the shareholder or executed by his duly
authorized attorney-in fact. Such proxy shall be filed with the secretary of the
corporation or other person authorized to tabulate votes before or at the time
of the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution unless otherwise specifically provided in the proxy or coupled
with an interest.
2.10 Voting of Shares
Unless otherwise provided in the articles, each outstanding share entitled
to vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without the 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 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 to do so is
contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares are transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
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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.
Redeemable shares are not entitled to vote after notice of redemption is
mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
2.11 Corporation's Acceptance of Votes
(a) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting
in good faith, is entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation,
if acting in good faith, is nevertheless entitled to accept the vote,
consent, waiver, or proxy appointment and give it effect as the act of
the shareholder if:
(1) the shareholder is an entity, as defined in the Act, and the name
signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status
acceptable to the corporation has been presented with respect to
the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in
bankruptcy of theshareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been
presented with respect to the vote, consent, waiver or proxy
appointment;
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(4) the name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of
the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver, or proxy
appointment; or
(5) the shares are held in the name of two or more persons as
co-tenants or fiduciaries and the name signed purports to be the
name of at least one of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
(d) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in
accordance with the standards of this Section 2.11 are not liable in
damages to the shareholder for the consequences of the acceptance or
rejection.
(e) Corporation action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid
unless a court of competent jurisdiction determines otherwise.
2.12 Informal Action by Shareholders
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or more written consents,
setting forth the action so taken, shall be signed by shareholders holding a
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majority of the shares entitled to vote with respect to the subject matter
thereof, unless a "supermajority" vote is required by these Bylaws, in which
case a "supermajority" vote will be required. Such consent shall be delivered to
the corporation secretary for inclusion in the minute book. A consent signed
under this Section has the effect of a vote at a meeting and may be described as
such in any document.
2.13 Voting for Directors
Unless otherwise provided in the Articles of Incorporation, directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present.
2.14 Shareholders' Rights to Inspect Corporate Records
Shareholders shall have the following rights regarding inspection of
corporate records:
(a) Minutes and Accounting Records - The corporation shall keep, as
permanent records, minutes of all meetings of its shareholders and
Board of Directors, a record of all actions taken by the shareholders
or Board of Directors without a meeting, and a record of all actions
taken by a committee of the Board of Directors in place of the Board
of Directors on behalf of the corporation. The corporation shall
maintain appropriate accounting records.
(b) Absolute Inspection Rights of Records Required at Principal Office -
If a shareholder gives the corporation written notice of his demand at
least five business days before the date on which he wishes to inspect
and copy, he, or his agent or attorney, has the right to inspect and
copy, during regular business hours, any of the following records, all
of which the corporation is required to keep at its principal office:
(1) its Articles or restated Articles of Incorporation and all
amendments to them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them
currently in effect;
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(3) resolutions adopted by its Board of Directors creating one or
more classes or series of shares, and fixing their relative
rights, preferences and limitations, if shares issued pursuant to
those resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of all
action taken by shareholders without a meeting, for the past
three years;
(5) all written communications to shareholders within the past three
years, including the financial statements furnished for the past
three years to the shareholders;
(6) a list of the names and business addresses of its current
directors and officers; and
(7) its most recent annual report delivered to the Nevada Secretary
of State.
(c) Conditional Inspection Right - In addition, if a shareholder gives the
corporation a written demand, made in (gamma)ood faith and for a
proper purpose, at least five business days before the date on which
he wishes to inspect and copy, describes with reasonable particularity
his purpose and the records he desires to inspect, and the records are
directly connected to his purpose, a shareholder of a corporation, or
his duly authorized agent or attorney, is entitled to inspect and
copy, during regular business hours at a reasonable location specified
by the corporation, any of the following records of the corporation:
(1) excerpts from minutes of any meeting of the Board of Directors;
records of any action of a committee of the Board of Directors on
behalf of the corporation; minutes of any meeting of the
shareholders; and records of action taken by the shareholders or
Board of Directors without a meeting, to the extent not subject
to inspection under paragraph (a) of this Section 2.14;
(2) accounting records of the corporation; and
11
(3) the record of shareholders (compiled no earlier than the date of
the shareholder's demand)
(d) Copy Costs - The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other
means. The corporation may impose a reasonable charge, to be paid by
the shareholder on terms set by the corporation, covering the costs of
labor and material incurred in making copies of any documents provided
to the shareholder.
(e) "Shareholder" Includes Beneficial Owner - For purposes of this Section
2.14, the term shareholder shall include a beneficial owner whose
shares are held in a voting trust or by a nominee on his behalf.
2.15 Financial Statements Shall Be Furnished to the Shareholders.
(a) Tile corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of the corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of changes in shareholders' equity for the year, unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the corporation on the basis of generally accepted
accounting principles, the annual financial statements for the shareholders must
also be prepared on that basis.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(1) stating his reasonable belief that the statements were prepared
on the basis of generally accepted accounting principles and, if
not, describing the basis of preparation; and
(2) describing any respects in which the statements were not prepared
on a basis of accounting consistent with the statements prepared
for the preceding year.
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(c) A corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year..
Thereafter, on written request from a shareholder who was not
mailed the statements, the corporation shall mail him the latest
financial statements.
2.16 Dissenters' Rights.
Each shareholder shall have the right to dissent from and obtain payment
for his shares when so authorized by the Act, Articles of Incorporation, these
Bylaws, or a resolution of the Board of Directors.
2.17 Order of Business.
The following order of business shall be observed at all meetings of the
shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and determining
shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous meeting;
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE 3.
BOARD OF DIRECTORS
3.1 General Powers.
Unless the Articles of Incorporation have dispensed with or limited the
authority of the Board of Directors by describing who will perform some or all
of the duties of a Board of Directors, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of the Board of Directors.
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3.2 Number, Tenure and Qualification of Directors.
Unless otherwise provided in the Articles of Incorporation, the authorized
number of directors shall be not less than 1 (minimum number) nor more than 9
(maximum number) . The initial number of directors was established in the
original Articles of Incorporation. The number of directors shall always be
within the limits specified above, and as determined by resolution adopted by
the Board of Directors. After any shares of this corporation are issued, neither
the maximum nor minimum number of directors can be changed, nor can a fixed
number be substituted for the maximum and minimum numbers, except by a duly
adopted amendment to the Articles of Incorporation duly approved by a majority
of the outstanding shares entitled to vote. Each director shall hold office
until the next annual meeting of shareholders or until removed. However, if his
term expires, he shall continue to serve until his successor shall have been
elected and qualified, or until there is a decrease in the number of directors.
Unless required by the Articles of Incorporation, directors do not need to be
residents of Nevada or shareholders of the corporation.
3.3 Regular Meetings of the Board of Directors.
A regular meeting of the Board of Directors shall be held without other
notice than this Bylaw immediately after, and at the same place as, the annual
meeting of shareholders. The Board of Directors may provide, by resolution, the
time and place for the holding of additional regular meetings without other
notice than such resolution. (If permitted by Section 3.7, any regular meeting
may be held by telephone).
3.4 Special Meeting of the Board of Directors.
Special meetings of the Board of Directors may be called by or at the
request of the president or any one director. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Nevada, as the place for holding any special
meeting of the Board of Directors or, if permitted by Section 3.7, any special
meeting may be held by telephone.
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3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of
Directors.
Unless the Articles of Incorporation provide for a longer or shorter
period, notice of any special meeting of the Board of Directors shall be given
at least two days prior thereto, either orally or in writing. If mailed, notice
of any director meeting shall be deemed to be effective at the earlier of: (1)
when received; (2) five days after deposited in the United States mail,
addressed to the director's business office, with postage thereon prepaid; or
(3) the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
director. Notice may also be given by facsimile and, in such event, notice shall
be deemed effective upon transmittal thereof to a facsimile number of a
compatible facsimile machine at the director's business office. Any director may
waive notice of any meeting. Except as otherwise provided herein, the waiver
must be in writing, signed by the director entitled to the notice, and filed
with the minutes or corporate records. 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 and at the beginning of the meeting, or promptly upon his arrival,
objects to holding the meeting or transacting business at the meeting, and does
not thereafter vote for or assent to action taken at the meeting. Unless
required by the Articles of Incorporation or the Act, neither the business to be
transacted at, nor the purpose of, any special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
3.6 Director Quorum.
A majority of the number of directors fixed, pursuant to Section 3.2 of
this Article 3, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, unless the Articles of Incorporation or the
Act require a greater number for a quorum.
Any amendment to this quorum requirement is subject to the provisions of
Section 3.8 of this Article 3.
Once a quorum has been established at a duly organized meeting, the Board
of Directors may continue to transact corporate business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
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3.7 Actions By Directors.
The act of the majority of the directors present at a meeting at which a
quorum is present when the vote is taken shall be the act of the Board of
Directors, unless the Articles of Incorporation or the Act require a greater
percentage. Any amendment which changes the number of directors needed to take
action is subject to the provisions of Section 3.8 of this Article 3.
Unless the Articles of Incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. Minutes of
any such meeting shall be prepared and entered into the records of the
corporation. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless: (1) he objects at the beginning of the
meeting, or promptly upon his arrival, to holding it or transacting business at
the meeting; or (2) his dissent or abstention from the action taken is entered
in the minutes of the meeting; or (3) he delivers written notice of his dissent
or abstention to the presiding officer of the meeting before its adjournment or
to the corporation within 24 hours after adjournment of the meeting. The right
of dissent or abstention is not available to a director who votes in favor of
the action taken.
3.8 Establishing a "Supermajority" Quorum or Voting Requirement for the Board
of Directors.
For purposes of this Section 3.8, a "supermajority" quorum is a requirement
that more than a majority of the directors in office constitute a quorum; and a
"supermajority" voting requirement is one which requires the vote of more than a
majority of those directors present at a meeting at which a quorum is present to
be the act of the directors.
A Bylaw that fixes a supermajority quorum or supermajority voting
requirement may be amended or repealed:
(1) if originally adopted by the shareholders, only by the
shareholders (unless otherwise provided by the shareholders); or
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(2) if originally adopted by the Board of Directors, either by the
shareholders or by the Board of Directors.
A Bylaw adopted or amended by the shareholders that fixes a supermajority
quorum or supermajority voting requirement for the Board of Directors may
provide that it may be amended or repealed only by a specified vote of either
the shareholders or the Board of Directors.
Subject to the provisions of the preceding paragraph, action by the Board
of Directors to adopt, amend, or repeal a Bylaw that changes the quorum or
voting requirement for the Board of Directors must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirement then in effect or proposed to be adopted,
whichever is greater.
3.9 Director Action Without a Meeting.
Unless the Articles of Incorporation provide otherwise, any action required
or permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if all the directors sign a written consent describing the
action taken. Such consents shall be filed with the records of the corporation.
Action taken by consent is effective when the last director signs the consent,
unless the consent specifies a different effective date. A signed consent has
the effect of a vote at a duly noticed and conducted meeting of the Board of
Directors and may be described as such in any document.
3.10 Removal of Directors.
The shareholders may remove one or more directors at a meeting called for
that purpose if notice has been given that a purpose of the meeting is such
removal. The removal may be with or without cause unless the Articles of
Incorporation provide that directors may only be removed for cause. If
cumulative voting is not authorized, a director may be removed only if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal.
3.11 Director Vacancies.
Unless the Articles of Incorporation provide otherwise, if a vacancy occurs
on the Board of Directors, excluding a vacancy resulting from an increase in the
number of directors, the director(s) remaining in office shall fill the vacancy.
If the directors remaining in office constitute fewer than a quorum of the Board
of Directors, they may fil the vacancy by the affirmative vote of a majority of
all the directors remaining in office.
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If a vacancy results from an increase in the number of directors, only the
shareholders may fill the vacancy.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled by the Board of Directors
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders meeting at which directors are elected, However, if his term
expires, he shall continue to serve until his successor is elected and qualifies
or until there is a decrease in the number of directors.
3.12 Director Compensation.
Unless otherwise provided in the Articles of Incorporation, by resolution
of the Board of Directors, each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board of
Directors, or both. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
3.13 Director Committees.
(a) Creation of Committees. Unless the Articles of Incorporation provide
otherwise, the Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each
committee must have two or more members, who serve at the pleasure of
the Board of Directors.
(b) Selection of Members. The creation of a committee and appointment of
members to it must be approved by the greater of (1) a majority of all
the directors in office when the action is taken, or (2) the number of
directors required by the Articles of Incorporation to take such
action.
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(c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.71 3.8 and 3.9 of this
Article 3 apply to committees and their members.
(d) Authority. Unless limited by the Articles of Incorporation or the Act,
each committee may exercise those aspects of the authority of the
Board of Directors which the Board of Directors confers upon such
committee in the resolution creating the committee. Provided, however,
a committee may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that the Act
requires be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the Board of Directors; or
(8) authorize or approve the issuance or sale, or contract for sale
of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares;
except that the Board of Directors may authorize a committee to
do so within limits specifically prescribed by the Board of
Directors.
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ARTICLE 4.
OFFICERS
4.1 Designation of Officers.
The officers of the corporation shall be a president, a secretary, and a
treasurer, each of whom shall be appointed by the Board of Directors. Such other
officers and assistant officers as may be deemed necessary, including any
vice-presidents, may be appointed by the Board of Directors. The same individual
may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office.
The officers of the corporation shall be appointed by the Board of
Directors for a term as determined by the Board of Directors. If no term is
specified, they shall hold office until the first meeting of the directors held
after the next annual meeting of shareholders. If the appointment of officers is
not made at such meeting, such appointment shall be made as soon thereafter as
is convenient. Each officer shall hold office until his successor has been duly
appointed and qualified, until his death, or until he resigns or has been
removed in the manner provided in Section 4.3 of this Article 4.
The designation of a specified term does not grant to the officer any
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term.
Appointment of an officer shall not of itself create any contract rights.
4.3 Removal of Officers.
Any officer may be removed by the Board of Directors at any time, with or
without cause. Such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
4.4 President.
The president shall be the principal executive officer of the corporation
and, subject to the control of the Board of Directors, shall generally supervise
and control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the shareholders. He may sign, with the
secretary or any other proper officer of the corporation thereunto duly
authorized by the Board of Directors, certificates for shares of the corporation
and deeds, mortgages, bonds, contracts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation, or shall be
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required by law to be otherwise signed or executed. The president shall
generally perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
4.5 Vice-President.
If appointed, in the absence of the president or in the event of the
president's death, inability or refusal to act; the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their appointment) shall perform the duties of the
president, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the president. If there is no vice-president, then the
treasurer shall perform such duties of the president. Any vice-president may
sign, with the secretary or an assistant secretary, certificates for shares of
the corporation the issuance of which have been authorized by resolution of the
Board of Directors. A vice-president shall perform such other duties as from
time to time may be assigned to him by the president or by the Board of
Directors.
4.6 Secretary.
The secretary shall (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of any seal of the corporation and, if there is a seal of
the corporation, see that it is affixed to all documents, the execution of which
on behalf of the corporation under its seal is duly authorized; (d) when
requested or required, authenticate any records of the corporation; (e) keep a
register of the post office address of each shareholder, as provided to the
secretary by the shareholders; (f) sign with the president, or a vice-resident,
certificates for shares of the corporation, the issuance of which has been
authorized by resolution of the Board of Directors; (g) have general charge of
the stock transfer books of the corporation; and (h) generally perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the Board of Directors.
4.7 Treasurer
The treasurer shall (a) have charge and custody of and be responsible for
all funds and securities of the corporation; (b) receive and give receipts for
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moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as may be selected by the Board of Directors;
and (c) generally perform all of the duties incident to the office of treasurer
and such other duties as from time to time may be assigned to him by the
president or by the Board of Directors.
If required by the Board of Directors, the treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
4.8 Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of Directors, may
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which has been authorized by a resolution of the
Board of Directors. The assistant treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine.
The assistant secretaries and assistant treasurers, generally, shall
perform such duties as may be assigned to them by the secretary or the
treasurer, respectively, or by the president or the Board of Directors.
4.9 Salaries.
The salaries of the officers, if any, shall be fixed from time to time by
the Board of Directors.
ARTICLE 5.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS,
AND EMPLOYEES
5.1 Indemnification of Officers. Directors Employees and Agents.
Unless otherwise provided in the Articles of Incorporation, the corporation
shall indemnify any individual made a party to a proceeding because he is or was
an officer, director, employee or agent of the corporation against liability
incurred in the proceeding, all pursuant to and consistent with the provisions
of NRS 78.751, as amended from time to time.
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5.2 Advance Expenses for Officers and Directors.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, but only after receipt by the corporation of an undertaking by or on
behalf of the officer or director on terms set by the Board of Directors, to
repay the expenses advanced if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
5.3 Scope of Indemnification.
The indemnification permitted herein is intended to be to the fullest
extent permissible under the laws of the State of Nevada, and any amendments
thereto.
ARTICLE 6.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares.
(a) Content
Certificates representing shares of the corporation shall at minimum,
state on their face the name of the issuing corporation; that the
corporation is formed under the laws of the State of Nevada; the name
of the person to whom issued; the certificate number; class and par
value of shares; and the designation of the series, if any, the
certificate represents. The form of the certificate shall be as
determined by the Board of Directors. Such certificates shall be
signed (either manually or by facsimile) by the president or a
vice-president and by the secretary or an assistant secretary and may
be sealed with a corporate seal or a facsimile thereof. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
(b) Legend as to Class or Series
If the corporation is authorized to issue different classes of shares
or different series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the
variations in rights, preferences, and limitations determined for
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each series (and the authority of the Board of Directors to determine
variations for future series) must be summarized on the front or back
of the certificate indicating that the corporation will furnish the
shareholder this information on request in writing and without charge.
(c) Shareholder List
The name and address of the person to whom the shares are issued, with
the number of shares and date of issue, shall be entered on the stock
transfer books of the corporation.
(d) Transferring Shares
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered
and canceled, except that in case of a lost, destroyed, or mutilated
certificate, a new one may be issued therefore upon such terms as the
Board of Directors may prescribe, including indemnification of the
corporation and bond requirements.
6.2 Registration of the Transfer of Shares.
Registration of the transfer of shares of the corporation shall be made
only on the stock transfer books of the corporation. In order to register a
transfer, the record owner shall surrender the share certificate to the
corporation for cancellation, properly endorsed by the appropriate person or
persons with reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure by which a
beneficial owner of shares held by a nominee is to be recognized by the
corporation as the owner, the person in whose name shares stand on the books of
the corporation shall be deemed by the corporation to be the owner thereof for
all purposes.
6.3 Restrictions on Transfer of Shares Permitted.
The Board of Directors may impose restrictions on the transfer or
registration of transfer of shares, including any security convertible into, or
carrying a right to subscribe for or acquire shares. A restriction does not
affect shares issued before the restriction was adopted unless the holders of
the shares are parties to the restriction agreement or voted in favor of the
restriction.
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A restriction on the transfer or registration of transfer of shares may be
authorized:
(1) to maintain the corporation's status when it is dependent on the
number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares
may:
(1) obligate the shareholder first to offer the corporation or other
persons (separately, consecutively, or simultaneously) an
opportunity to acquire the restricted shares;
(2) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted
shares;
(3) require the corporation, the holders or any class of its shares,
or another person to approve the transfer of the restricted
shares, if the requirement is not manifestly unreasonable; or
(4) prohibit the transfer of the restricted shares to designated
persons or classes of persons, if the prohibition is not
manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 6.3 and its existence is noted
conspicuously on the front or back of the certificate. Unless so noted, a
restriction is not enforceable against a person without knowledge of the
restriction.
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6.4 Acquisition of Shares.
The corporation may acquire its own shares and unless otherwise provided in
the Articles of Incorporation, the shares so acquired constitute authorized but
unissued shares.
If the Articles of Incorporation prohibit the reissue of shares acquired by
the corporation, the number of authorized shares is reduced by the number of
shares acquired, effective upon amendment of the Articles of Incorporation,
which amendment shall be adopted by the shareholders, or the Board of Directors
without shareholder action (if permitted by the Act). The amendment must be
delivered to the Secretary of State and must set forth:
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by
class and series; and
(3) the total number of authorized shares, itemized by class and
series, remaining after reduction of the
shares.
ARTICLE 7.
DISTRIBUTIONS
7.1 Distributions.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner and
upon the terms and conditions provided by law.
ARTICLE 8.
CORPORATE SEAL
8.1 Corporate Seal
The Board of Directors may adopt a corporate seal which may be circular in
form and have inscribed thereon any designation, including the name of the
corporation, Nevada as the state of incorporation, and the words "Corporate
Seal."
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ARTICLE 9.
EMERGENCY BYLAWS
9.1 Emergency Bylaws.
Unless the Articles of Incorporation provide otherwise, the following
provisions shall be effective during an emergency, which is defined as a time
when a quorum of the corporation's directors cannot be readily assembled because
of some catastrophic event. During such emergency:
(a) Notice of Board Meetings
Any one member of the Board of Directors or any one of the following
officers: president, any vice-president, secretary, or treasurer, may
call a meeting of the Board of Directors. Notice of such meeting need
be given only to those directors whom it is practicable to reach, and
may be given in any practical manner, including by publication and
radio. Such notice shall be given at least six hours prior to
commencement of the meeting.
(b) Temporary Directors and Quorum
One or more officers of the corporation present at the emergency board
meeting, as is necessary to achieve a quorum, shall be considered to
be directors for the meeting, and shall so serve in order of rank, and
within the same rank, in order of seniority. In the event that less
than a quorum (as determined by Section 3.6 of Article 3) of the
directors are present (including any officers who are to serve as
directors for the meeting), those directors present (including the
officers serving as directors) shall constitute a quorum.
(c) Actions Permitted To Be Taken
The Board of Directors, as constituted in paragraph (b), and after
notice as set forth in paragraph (a), may:
(1) Officers' Powers
Prescribe emergency powers to any officer of the corporation;
(2) Delegation of Any Power
Delegate to any officer or director, any of the powers of the
Board of Directors;
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(3) Lines of Succession
Designate lines of succession of officers and agents, in the
event that any of them are unable to discharge their duties;
(4) Relocate Principal Place of Business
Relocate the principal place of business, or designate successive
or simultaneous principal places of business;
(5) All Other Action
Take any other action which is convenient, helpful, or necessary
to carry on the business of the corporation.
ARTICLE 10.
AMENDMENTS
10.1 AMENDMENTS
The Board of Directors may amend or repeal the corporation's Bylaws unless:
(1) the Articles of Incorporation or the Act reserve this power
exclusively to the shareholders, in whole or part; or
(2) the shareholders, in adopting, amending, or repealing a
particular Bylaw, provide expressly that the Board of Directors
may not amend or repeal that Bylaw; or
(3) the Bylaw either establishes, amends or deletes a "supermajority"
shareholder quorum or voting requirement, as defined in Section
2.8 of Article 2.
Any amendment which changes the voting or quorum requirement for the Board
of Directors must comply with Section 3.8 of Article 3, and for the
shareholders, must comply with Section 2.8 of Article 2.
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The corporation's shareholders may also amend or repeal the corporation's
Bylaws at any meeting held pursuant to Article 2.
CERTIFICATE OF THE SECRETARY
I hereby certify that I am the Secretary of ECLIPSE ENTERTAINMENT GROUP;
INC. and that the foregoing Bylaws, consisting of twenty-nine (29) pages,
constitutes the Code of ECLIPSE ENTERTAINMENT GROUP, INC. as duly adopted by the
Board of Directors of the corporation on this 29th day of January, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 29th day of
January, 1997.
/s/ ???????????
---------------
Secretary
29
Business Service Center Of Bellevue
LEASE AGREEMENT
PARTIES
This lease made this 11th day of March, 1997, between Certus Corporation, dba
Business Service Center of Bellevue, hereinafter referred to as Landlord, and
Eclipse Entertainment Group, Inc., hereinafter referred to as Tenant.
TERM
The term of this lease shall be 3 months, commencing on the the 11th day of
March, 1997, and terminating on the last day of the 3rd month, June 30, 1997. If
Tenant shall occupy the premises for permitted uses prior to the date set forth
herein, the commencement date for rent purposes shall be prorated and charged
accordingly as part of the first month's rent. The termination date shall not be
affected by early occupancy. If either Landlord or Tenant desires to terminate
the lease at the end of the term, the party desiring to terminate shall, 30 days
prior to the expiration date, give the other written notice of its intention to
do so. Should written notice of intention to terminate not be given by either
party, the lease shall be extended under the same terms and conditions for a
like period of time. The lease shall continue to renew itself under the same
terms and conditions until one party notifies the other, as set forth above, of
its intent to terminate.
PREMISES
Premises shall consist of Suite No. 1026 on the ninth/tenth floor of the Plaza
Center Building, Bellevue, Washington. In addition to Suite No. 1026 Tenant
shall have use of the common area on the ninth/tenth floor, including the
conference rooms on a reasonable and shared basis with other ninth/tenth floor
tenants as outlined under the Conference Room section. Tenant agrees to abide by
the prevailing conference room rules.
RENT
The rent amount for the term of this lease shall be $585.00 per month. Tenant
shall pay Landlord the monthly rent, in advance, on the first day of each
calendar month during said term. Rent shall be delivered to the Landlord's
office in the Plaza Center Building. If the monthly rent is not paid by the
tenth of the month in which it is due, a late charge of ten percent of the rent,
including prorations, will be payable by the Tenant as a special handling
charge. Delinquent rent shall be cause for termination of this agreement at the
discretion of the Landlord. Acceptance of late rent and forbearance of
collection and/or eviction action on the part of the Landlord shall not
constitute a waiver of any of Landlord's rights under the lease.
DEPOSIT AND FIRST MONTH'S CHARGES
Concurrent with the execution of this Agreement, Tenant shall deliver to
Landlord the sum of $1,620.00 in payment of the first month's charges and
deposits as follows: First month rent $585.00; rent deposit $585.00; telephone
installation fee $150.00; first month telephone service $200.00; and telephone
service and long distance deposit $100.00.
REPAIRS AND ALTERATIONS
Tenant agrees by taking possession of premises that premises are then in a
tenantable and good condition; that Tenant will take good care of premises, and
the same will not be altered or changed without written consent of the Landlord.
Tenant shall not make changes to locks on doors or add or in any way change any
shelving, wall covering, or any fixtures without first obtaining written consent
of Landlord. Any wall hangings should be carefully hung with small nails, first
applying scotch tape to the wall so the paint will not chip when the nail is
removed.
<PAGE>
Any repairs of the wall s necessary because of damage caused by wall decorations
installed by Tenant shall be paid for by Tenant. Al damage or injury done to
premises by Tenant or by any persons who may be in or upon premises with the
consent of Tenant, shall be paid for by Tenant, and Tenant shall pay for all
damage to the building caused by Tenant's misuse of premises or the
appurtenances thereto. Tenant shall pay for the replacement of doors or windows
of premises which are cracked, broken or damaged by Tenant, its employees, agent
or invitee and Tenant shall not put any curtains, draperies, or other hangings
on or beside the windows in premises without first obtaining Landlord's consent.
All alterations, additions, and improvements, except fixtures installed by
Tenant and which are removable without damage to the building, shall become the
property of Landlord. Tenant shall, at the termination of this lease by the
expiration of time or otherwise, surrender and deliver up premises to Landlord
in as good a condition as when received by Tenant from Landlord. Tenant agrees
that if he moves out prior to one year from date of this lease, Landlord shall
be entitled to add a One Hundred Dollars ($100) charge to Tenant's closing
statement to cover the expense of Landlord's repainting Tenant's office.
SIGNS
No sign, picture, sticker, advertisement, or notice shall be displayed,
inscribed, painted or affixed to any of the glass, walls, sign plaques, or
woodwork of the office or buildouts without the prior written consent of
Landlord. Tenant agrees that if e decides to have his name displayed on the
office directory, or outside his door, Tenant's name display shall be on a sign
approved, built and installed by Landlord. The total charge for the design,
construction, and installation of Tenant's directory sign and office sign shall
be in conformity with prevailing prices for signs at the time of ordering said
signs. Should Tenant decide to order a directory sign or office sign, Tenant
will indicate such affirmative decision and the exact wording to appear on the
sign order form. Tenant further agrees that Landlord shall be entitled to bill
Tenant for said sign(s), and that Tenant shall pay Landlord for said sign(s) on
the same date his rent is next paid.
ENTRY AND INSPECTION
Tenant will permit Landlord and its agents to enter into and upon premises at
all reasonable times for the purpose of inspection the same or for the purpose
of cleaning, repairing, altering or improving premises or building. The Landlord
shall have the right to enter premises for the purpose of showing premises to
prospective tenants for a period of 30 days prior to the expiration of the
Rental Agreement term.
ACCIDENTS, INDEMNITY AND WAIVER OF SUBROGATION
Tenant shall defend and indemnify Landlord and save it harmless from and against
any and all liability, damages, costs, or expenses, including attorneys' fees,
arising from any act, omission, or negligence of Tenant, or the officers,
contractors, licensees, agents, servants, employees, guests, invitee, or
visitors of Tenant in or about the premises, or arising from any accident,
injury, or damage, howsoever and by whomsoever caused, to any person or
property, occurring in or about the premise. Whether the loss or damage is due
to the negligence of either Tenant or Landlord, their agents or employees, or
any other cause, Landlord and Tenant do each herewith and hereby release and
relieve the other from responsibility for, and waive their entire claim of
recovery for (i) any loss or damage to the real or personal property of either
located anywhere in the building and including the building itself, arising out
of or incident to the occurrence of any of the perils which may be covered by
fire and lightning insurance policy, with extended coverage endorsement, in
common use in the Bellevue locality, and policies covering any loss by theft or
water damage, and (ii) loss resulting from business interruption at premises
arising out of or incident to the occurrence of any of the perils which may be
covered by the business interruption insurance policy in common use in the
Bellevue locality; to the extent that such risks under (i) and (ii) are, in
fact, covered by insurance, each party shall cause its insurance carriers to
consent to such waiver and to waive all rights of subrogation against the other
party.
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DEFAULT AND RE-ENTRY
If Tenant fails to pay any installment of rent within ten (10) days after it is
due, or to perform any other covenant under this Rental Agreement within ten
(10) days after written notice from Landlord stating the nature of default,
Landlord may cancel this Rental Agreement and re-enter and take possession of
premises using all legal means to do so; provided, however, that if the nature
of such default other than for nonpayment of rent is such that the same cannot
reasonably be cured within such ten-day period, Tenant shall not be deemed to be
in default if Tenant shall within such period commence such cure and thereafter
diligently prosecute the same to completion. Notwithstanding such retaking of
possession by Landlord, Tenant's liability for the rent provided herein shall
not be extinguished for the balance of the term of this Rental Agreement.
SUPPORT SERVICES
Complete administrative support services are provided by Business Service Center
of Bellevue at the rates indicated on the price lists which will be provided by
Business Service Center of Bellevue. These rates are subject to change. Services
include telephone answering, voice mail, word processing, personal computer data
entry, secretarial, dictation, facsimile, mailing handling, and other
administrative services. Tenant will be assigned a copier access code and
charged for copies made at published rates.
Support services and telephone answering services are closed on those holidays
normally observed by the business community.
Tenant may employ his/her own secretary, however, Tenant shall not offer for
sale/trade to any other tenants of Business Service Center of Bellevue, any of
the administrative support services offered by Business Service Center.
MAIL
Mail is delivered to Tenant's mail box each day at no additional charge to
Tenant. Outgoing mail should be deposited in the mail basket prior to 4:30 p.m.
for posting that evening. Outgoing mail service will be charged at the cost of
postage plus 20% processing fee (minimum fee $2.50) or at rates specified on the
price list.
CONFERENCE ROOMS
The conference rooms on the ninth and tenth floors may be used by all Tenants
for up to ten hours per month per office at no charge. These conference rooms
are assigned on a first-come, first-served basis. Reservations may be made by
contacting the receptionist at the front desk.
In addition, the Plaza Center Building conference room, which will accommodate
up to 60 people, is located on the second floor. This conference room may be
rented for an hourly charge of $15. Reservations are made through the Business
Service Center receptionist.
TELEPHONE
Landlord agrees to rent Tenant a telephone instrument(s) and line(s) for his use
at rates published on a separate telephone service agreement. Tenant agrees that
Business Service Center of Bellevue will be the sole supplier of telephone lines
for all offices at its location.
Should any of Tenant's telephone instruments become defective in the normal
course of business, Landlord shall, upon notification by Tenant and at the
earliest opportunity, replace or repaid the instrument at no charge to Tenant.
Tenant agrees to exercise reasonable care of rented telephone instrument. Should
the telephone instrument fail due to abuse and/or misuse, tenant will be charged
for repair or replacement. Should Tenant develop any problems with his telephone
lines, he shall immediately notify Landlord of the same, after which Landlord
shall take immediate action to correct the problem. Tenant agrees that telephone
instrument or line failure shall not relieve Tenant of his obligations under
this Lease Agreement, provided Landlord takes reasonable steps to correct the
same. Tenant shall purchase his long-distance service through Landlord, which
shall be at a rate competitive with that charged by AT&T.
<PAGE>
Tenant agrees to pay Landlord any and all telephone instrument rental charges
and telephone line charges in advance under the same terms as stated for rent
under the paragraph entitled rent and to pay telephone long-distance charges,
and telephone instrument/line installation charges within ten business days of
being billed by Landlord for the same. Should Tenant fail to do so, Landlord
shall be entitled, without notice or liability to Tenant, to terminate the
Tenant's telephone service and Landlord shall not be required to reconnect the
same until Tenant's account has been brought current and Tenant pays Landlord a
reconnection fee of $50.00 per line. In addition, at the Landlord's sole option,
such failure to pay may be deemed to be an event of default of this Lease
Agreement.
Tenant acknowledges that there will be a charge associated for taking his
telephone number with him, if e desires upon terminating his tenancy. In such
event, Tenant shall pay to Business Service Center of Bellevue a service charge
of $125.00 and pay to the applicable vendor(s) any service charges which they
may impose therefor.
Tenant shall be responsible for his own directory listings and advertising and
shall arrange for direct billing to Tenant regarding the same.
PARKING
Parking is available to tenants in the Plaza Center parking garage. Tenants may
park in any available space, except space designated "visitor," or on a
first-come, first-served basis. One parking permit will be issued per office at
a reduced rate.
KEYS
Tenant will receive one key to the individual office suite for each person who
occupies the office up to two keys. Additional keys may be issued at Tenant's
expense. Any keys issued shall be returned at the end of the rental period, or
the Tenant will be charged $5.00 for each key that is not returned. In addition,
each occupant of the office will receive a card key which allows access to the
building front door and elevator after hours. If the card keys are lost or
broken, a replacement card key can be obtained at Tenant's expense from Building
Manager.
SPECIAL IMPROVEMENTS
Any special improvements requested by the Tenant shall be made in writing to the
Landlord. Performance of said special improvements shall be at the discretion of
the Landlord. In the event Landlord makes special improvements on behalf of
Tenant, Tenant shall reimburse Landlord for Landlord's costs of making said
special improvements requested by Tenant within ten days of receipt of statement
from Landlord for special improvements.
COSTS AND ATTORNEY'S FEES
Tenant agrees that all payments for any rent or other services or other products
provided under the terms of this agreement by landlord are the sole
responsibility of Tenant. Tenant understands all payments are due ten (10)
calendar days after date of invoice. Tenant agrees to pay a late fee of 1.5% per
month on all past due amounts. Tenant also agrees to pay all collection agency
fees in the event Tenant's past due accounts are assigned to a collection agency
to enforce payment by Tenant.
If Tenant or Landlord shall engage the services of an attorney to collect monies
due or to bring any action for any relief against the other, declaratory or
otherwise, arising out of this lease, including any suit by Landlord for
recovery of rent, additional rent or other payments hereunder or possession of
the premises, each party shall, and hereby does, to the extent permitted by law,
waive trail by jury and the losing party shall pay the prevailing party a
reasonable sum for attorney's fees in such suit, at trial and on appeal, and
such attorneys' fees shall be deemed to have accrued on the commencement of such
action.
<PAGE>
NOTICE
Any notice required to be given by either party to the other pursuant to the
provisions of this lease or any law, present or future, shall be in writing and
shall be deemed to have been duly given or sent if either delivered personally
or deposited in the United States mail, postage prepaid, registered or
certified, return receipt requested, and addressed to the Landlord or Tenant at
their respective office addresses in the Plaza Center Building, Bellevue,
Washington.
ENTIRE AGREEMENT
It is expressly understood and agreed by landlord and Tenant that there are no
promises, agreements, conditions, understandings, induces, warranties or
representations, oral or written, express or implied, between them, other than
as herein set forth and that this Lease shall not be modified in any manner
except by an instrument in writing executed by the parties.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement on the day
and year first above set forth.
LANDLORD: TENANT:
CERTUS CORPORATION, dba Eclipse Entertainment Group, Inc.
Business Service Center of Bellevue
By:_________________________ By: /s/ B???????????
----------------------
Title:______________________ Title: Director
<PAGE>
ADDENDUM A
TELEPHONE SERVICE AGREEMENT
As agreed in the Lease Agreement subsection Telephone (page 3), the Lessor
agrees to rent the Lessee telephone instruments and lines as defined in this
addendum.
____ Initial telephone port and instrument, with telephone
answering service and one voice mailbox $130.00 $130.00
____ Additional line appearances $40.00 $______
____ Additional telephone port with one voice mailbox $55.00 $______
with an additional office
2nd and additional phones within the same office $65.00 $______
____ Telephone ports for wild lines (modems & fax) $45.00 $45.00
____ Additional Directory Listings $5.00 $______
ADDITIONAL TELEPHONE ANSWERING & VOICE MAIL OPTIONS
__X__ Call Announcing $25.00 $25.00
_____Voice Mail Paging $2.00 $______
_____ Automatic Message Delivery $6.00 $______
_____ Additional Voice Mailboxes $10.00 $______
_____ 15 Additional message storage units $2.00 $______
_____ Other $______
Monthly Telephone Service Fee $200.00
INSTALLATION SERVICE
First telephone port, instrument and telephone answering and voice mailbox
$100.001$100.00
_____ Additional telephone ports, instruments and voice mail
configuration $50.00 $______
__1__ Wild line ports for modems and fax $50.00 $50.00
Total one-time installation fee $150.00
DEPOSITS
Monthly Telephone Service Fee Deposit $100.00
Estimated Intralata (within 206) long distance $_____ $______
Estimated Interlata (outside 206) long distance $_____ $______
Telephone Service Deposit $100.00
The undersigned agrees to all terms and conditions stated in the Lease Agreement
under subsection Telephone (page 3), the lessee understands that telephones will
not be installed until the appropriate first month's Telephone Service Fee,
Installation Fees, and Telephone Service Deposits are paid in accordance with
the Lease Agreement subsection Deposits and First Month's Charges (page 1).
/s/ B????????????? _____________________
Tenant Signature Date
