As filed with the Securities and Exchange Commission on July
16, 1998
Registration No. _______
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRANTS OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
RAKO CORPORATION
(Name of Small Business Issuer in its charter)
IDAHO 91-0853320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3256 Agate Court, Boise, Idaho 83705
(Address of principal executive officers) (Zip Code)
Issuer's telephone number: (208) 336-3036
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
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
RAKO CORPORATION
FORM 10-SB
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business. . . . . . . . . . . . 3
ITEM 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . 10
ITEM 3. Description of Property. . . . . . . . . . . . 14
ITEM 4. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . 14
ITEM 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . 15
ITEM 6. Executive Compensation . . . . . . . . . . . . 17
ITEM 7. Certain Relationships and Related Transactions 17
ITEM 8. Description of Securities. . . . . . . . . . . 17
PART II
ITEM 1. Market Price of and Dividends on Registrant's
Common Equity and Other Shareholder Matters. 18
ITEM 2. Legal Proceedings. . . . . . . . . . . . . . . 21
ITEM 3. Changes in and Disagreements with Accountants. 21
ITEM 4. Recent Sales of Unregistered Securities. . . . 21
ITEM 5. Indemnification of Directors and Officers. . . 21
PART F/S
Financial Statements . . . . . . . . . . . . . . . . . . 22
PART III
ITEM 1. Index to Exhibits. . . . . . . . . . . . . . . S-1
ITEM 2. Description of Exhibits. . . . . . . . . . . . S-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . S-2
PART I
Except as otherwise indicated, the information in this Registration
Statement reflects the one (1) share for three (3) shares reverse
stock split of the common Stock in May 1996, and the two (2)shares
for one (1) share forward stock split effected in March 1998.
ITEM 1.
BUSINESS DEVELOPMENT
Rako Corporation (the "Company") was organized on October 10,
1968, under the laws of the State of Idaho as Bell Silver Mining and
Milling Corporation, having the stated purpose of engaging in
various oil and mining activities. The Company engaged in limited
oil and mining operations and, from the time of its inception, the
Company has undergone several name changes and business changes.
On May 3, 1969, the Company changed its name to Silver Strike
Mining Co., Inc. In 1973, the Company entered into a Merger
Agreement with Best Corporation, a Montana corporation ("Best"),
whereby Best was merged with and into the Company with the Company
being the surviving corporate entity. In connection with the merger
with Best, the Company changed its name to Rako Corporation,
evidenced by the Certificate of Amendment filed with the State of
Idaho on May 17, 1973. Although the Company did perform some mining
activities, it was inactive from approximately 1986 to April 1996.
On April 4, 1996, the Company entered into a Letter of Intent
whereby it was proposed that the Company would acquire all the
issued and outstanding shares of Spencer Entertainment, Inc., a
Nevada corporation ("Spencer"), in exchange for the issuance of
shares of the Company's common stock representing a controlling
interest in the Company. A special meeting of shareholders was
called for May 9, 1996. At that meeting, the proposal to acquire
Spencer was voted on and approved in addition to various other
proposals including the election of a new Board of Directors
consisting of nominees of Spencer, the one (1) share for three (3)
shares reverse stock split, and the change of the corporate name to
Spencer Entertainment, Inc. Following the special meeting, the
Company changed its name to Spencer Entertainment, Inc. on May 15,
1996.
At the time of the acquisition of Spencer, the Company intended
to become engaged in the film and entertainment business,
specializing in co-production and foreign distribution of high
quality films as well as obtaining video merchandising and music
rights connected with the films with which it became involved.
However, the new principals and directors of the Company were unable
to facilitate the business plan of Spencer and secure adequate
funding. Thus, on November 22, 1996, the Company finalized a
Rescission Agreement with Spencer whereby the Acquisition Agreement
was rescinded and the 3,150,000 shares of the Company's common stock
issued in connection with the Acquisition Agreement, were returned
to the Company and canceled. From May 9, 1996 to November 22, 1996,
the Company did not engage in any material business operations. In
connection with the Rescission Agreement, the Company's directors
that were nominated by Spencer were replaced by those persons who
were directors of the Company immediately prior to the Acquisition
Agreement. On March 17, 1998, the Company held a special meeting of
shareholders, at which meeting the shareholders ratified the
rescission of the Acquisition Agreement with Spencer, approved the
proposal to change the Company's name to Rako Corporation and
approved the proposal to effect the two (2) shares for one (1) share
forward stock split of the Company's issued and outstanding common
stock.
Since November 1996, the Company has been active in seeking
potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses. The Company is
considered a development stage company and, due to its status as a
"shell" corporation, its principal purpose is to locate and
consummate a merger or acquisition with a private entity. Because
of the Company's current status having no assets and no recent
operating history, in the event the Company does successfully
acquire or merge with an operating business opportunity, it is
likely that the Company's current shareholders will experience
substantial dilution and there will be a probable change in control
of the Company.
The Company is voluntarily filling this registration statement
on Form 10-SB in order to make information concerning itself more
readily available to the public. Management believes that being a
reporting company under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), could provide a prospective merger or
acquisition candidate with additional information concerning the
Company. Further, management believes that this could possibly make
the Company more attractive to an operating business opportunity as
a potential merger or acquisition candidate. As a result of filing
its registration statement, the Company is obligated to file with
the Commission certain interim and periodic reports including an
annual report containing audited financial statements. The Company
intends to continue to voluntarily file its periodic reports under
the Exchange Act in the event its obligation to file such reports is
suspended under applicable provisions of the Exchange Act.
Any target acquisition or merger candidate of the Company will
become subject to the same reporting requirements as the Company
upon consummation of any merger or acquisition. Thus, in the event
the Company successfully completes the acquisition of or merger with
an operating business opportunity, that business opportunity must
provide audited financial statements for at least the two most
recent fiscal years or, in the event the business opportunity has
been in business for less than two years, audited financial
statements will be required from the period of inception. This
could limit the Company's potential target business opportunities
due to the fact that many private business opportunities either do
not have audited financial statements or are unable to produce
audited statements without undo time and expense.
The Company's principal executive offices are located at 3256
Agate Court, Boise, Idaho 83705, and its telephone number is (208)
336-3036.
BUSINESS OF ISSUER
The Company has no recent operating history and no
representation is made, nor is any intended, that the Company will
be able to carry on future business activities successfully.
Further, there can be no assurance that the Company will have the
ability to acquire or merge with an operating business, business
opportunity or property that will be of material value to the Company.
Management plans to investigate, research and, if justified,
potentially acquire or merge with one or more businesses or business
opportunities. The Company currently has no commitment or
arrangement, written or oral, to participate in any business
opportunity and management cannot predict the nature of any
potential business opportunity it may ultimately consider.
Management will have broad discretion in its search for and
negotiations with any potential business or business opportunity.
SOURCES OF BUSINESS OPPORTUNITIES
Management of the Company intends to use various resources in
the search for potential business opportunities including, but not
limited to, the Company's officers and directors, consultants,
special advisors, securities broker-dealers, venture capitalists,
members of the financial community and others who may present
management with unsolicited proposals. Because of the Company's
lack of capital, it may not be able to retain on a fee basis
professional firms specializing in business acquisitions and
reorganizations. Rather, the Company will most likely have to rely
on outside sources, not otherwise associated with the Company, that
will accept their compensation only after the Company has finalized
a successful acquisition or merger. To date, the Company has not
engaged or entered into any discussion, agreement or understanding
with a particular consultant regarding the Company's search for
business opportunities, nor is management presently in a position to
identify any future prospective consultants for the Company.
The Company does not intend to limit its search to any specific
kind of industry or business. The Company may investigate and
ultimately acquire a venture that is in its preliminary or
development stage, is already in operation, or in various stages of
its corporate existence and development. Management cannot predict
at this time the status or nature of any venture in which the
Company may participate. A potential venture might need additional
capital or merely desire to have its shares publicly traded. The
most likely scenario for a possible business arrangement would
involve the acquisition of or merger with an operating business that
does not need additional capital, but which merely desires to
establish a public trading market for its shares. Management
believes that the Company could provide a potential public vehicle
for a private entity interested in becoming a publicly held
corporation without the time and expense typically associated with
an initial public offering.
EVALUATION
Once the Company has identified a particular entity as a
potential acquisition or merger candidate, management will seek to
determine whether acquisition or merger is warranted or whether
further investigation is necessary. Such determination will
generally be based on management's knowledge and experience, or with
the assistance of outside advisors and consultants evaluating the
preliminary information available to them. Management may elect to
engage outside independent consultants to perform preliminary
analysis of potential business opportunities. However, because of
the Company's lack of capital it may not have the necessary funds
for a complete and exhaustive investigation of any particular
opportunity.
In evaluating such potential business opportunities, the
Company will consider, to the extent relevant to the specific
opportunity, several factors including potential benefits to the
Company and its shareholders; working capital, financial
requirements and availability of additional financing; history of
operation, if any; nature of present and expected competition;
quality and experience of management; need for further research,
development or exploration; potential for growth and expansion;
potential for profits; and other factors deemed relevant to the
specific opportunity.
Because the Company has not located or identified any specific
business opportunity as of the date hereof, there are certain
unidentified risks that cannot be adequately expressed prior to the
identification of a specific business opportunity. There can be no
assurance following consummation of any acquisition or merger that
the business venture will develop into a going concern or, if the
business is already operating, that it will continue to operate
successfully. Many of the potential business opportunities
available to the Company may involve new and untested products,
processes or market strategies which may not ultimately prove
successful.
FORM OF POTENTIAL ACQUISITION OR MERGER
Presently, the Company cannot predict the manner in which it
might participate in a prospective business opportunity. Each
separate potential opportunity will be reviewed and, upon the basis
of that review, a suitable legal structure or method of
participation will be chosen. The particular manner in which the
Company participates in a specific business opportunity will depend
upon the nature of that opportunity, the respective needs and
desires of the Company and management of the opportunity, and the
relative negotiating strength of the parties involved. Actual
participation in a business venture may take the form of an asset
purchase, lease, joint venture, license, partnership, stock
purchase, reorganization, merger or consolidation. The Company may
act directly or indirectly through an interest in a partnership,
corporation, or other form of organization, however, the Company
does not intend to participate in opportunities through the purchase
of minority stock positions.
Because of the Company's current situation, having no assets
and no recent operating history, in the event the Company does
successfully acquire or merge with an operating business
opportunity, it is likely that the Company's present shareholders
will experience substantial dilution and there will be a probable
change in control of the Company. Most likely, the owners of the
business opportunity which the Company acquires or mergers with will
acquire control of the Company following such transaction.
Management has not established any guidelines as to the amount of
control it will offer to prospective business opportunities, rather
management will attempt to negotiate the best possible agreement for
the benefit of the Company's shareholders.
Management does not presently intend to borrow funds to
compensate any persons, consultants, promoters or affiliates in
relation to the consummation of a potential merger or acquisition.
However, if the Company engages outside advisors or consultants in
its search for business opportunities, it may be necessary for the
Company to attempt to raise additional funds. As of the date
hereof, the Company has not made any arrangements or definitive
agreements to use outside advisors or consultants or to raise any
capital. In the event the Company does need to raise capital, most
likely the only method available to the Company would be the private
sale of its securities. These possible private sales would most
likely have to be to persons known by the directors of the Company
or to venture capitalists that would be willing to accept the risks
associated with investing in a company with no current operation.
Because of the nature of the Company as a development stage company,
it is unlikely that it could make a public sale of securities or be
able to borrow any significant sum from either a commercial or
private lender. Management will attempt to acquire funds on the
best available terms for the Company. However, there can be no
assurance that the Company will be able to obtain additional funding
when and if needed, or that such funding, if available, can be
obtained on terms reasonable or acceptable to the Company. The
Company does not anticipate using Regulation S under the Securities
Act of 1933 to raise any funds prior to consummation of a merger or
acquisition. Although not presently anticipated, there is a remote
possibility that the Company could sell securities to its management
or affiliates.
In the case of a future acquisition or merger, there exists a
possibility that a condition of such transaction might include the
sale of shares presently held by officers and/or directors of the
Company to parties affiliated with or designated by the potential
business opportunity. Presently, management has no plans to seek or
actively negotiate such terms. However, if this situation does
arise, management is obligated to follow the Company's Articles of
Incorporation and all applicable corporate laws in negotiating such
an arrangement. Under this scenario of a possible sale by officers
and directors, it is unlikely that similar terms and conditions
would be offered to all other shareholders of the Company or that
the shareholders would be given the opportunity to approve such a
transaction.
In the event of a successful acquisition or merger, a finder's
fee, in the form of cash or securities, may be paid to persons
instrumental in facilitating the transaction. The Company has not
established any criteria or limits for the determination of a
finder's fee, although it is likely that an appropriate fee will be
based upon negotiations by the Company and the appropriate business
opportunity and the finder. Management cannot at this time make an
estimate as to the type or amount of a potential finder's fee that
might be paid. It is unlikely that a finder's fee will be paid to
an affiliate of the Company because of the potential conflict of
interest that might result. If such a fee was paid to an affiliate,
it would have to be in such a manner so as not to compromise an
affiliate's possible fiduciary duty to the Company or to violate the
doctrine of corporate opportunity. Further, in the unlikely event a
finder's fee was to be paid to an affiliate, the Company would have
such an arrangement ratified by the shareholders in an appropriate
manner.
Presently, it is highly unlikely that the Company will acquire
or merge with a business opportunity in which the Company's
management or affiliates have an ownership interest. Any possible
related party transaction of this type would have to be ratified by
a disinterested Board of Directors and by the shareholders.
Management does not anticipate that the Company will acquire or
merge with any related entity. Further, as of the date hereof, none
of the Company's officers, directors, or affiliates or associates
have had any preliminary contact or discussions with any specific
business opportunity, nor are there any present plans, proposals,
arrangements or understandings regarding the possibility of an
acquisition or merger with any specific business opportunity.
RIGHTS OF SHAREHOLDERS
It is presently anticipated by management that prior to
consummating a possible acquisition or merger, the Company, if
required by relevant state laws and regulations, will seek to have
the transaction ratified by shareholders in the appropriate manner.
However, under Delaware law, certain actions that would routinely be
taken at a meeting of shareholders, may be taken by written consent
of shareholders having not less than the minimum number of votes
that would be necessary to authorize or take the action at a meeting
of shareholders. Thus, if shareholders holding a majority of the
Company's outstanding shares decide by written consent to consummate
an acquisition or a merger, minority shareholders would not be given
the opportunity to vote on the issue. The Board of Directors will
have the discretion to consummate an acquisition or merger by
written consent if it is determined to be in the best interest of
the Company to do so. Regardless of whether an action to acquire or
merge is ratified by written consent or by holding a shareholders'
meeting, the Company will provide to its shareholders complete
disclosure documentation concerning a potential target business
opportunity including the appropriate audited financial statements
of the target. This information will be disseminated by proxy
statement in the event a shareholders' meeting is held, or by
subsequent report to the shareholders if the action is taken by
written consent.
COMPETITION
Because the Company has not identified any potential
acquisition or merger candidate, it is unable to evaluate the type
and extent of its likely competition. The Company is aware that
there are several other public companies with only nominal assets
that are also searching for operating businesses and other business
opportunities as potential acquisition or merger candidates. The
Company will be in direct competition with these other public
companies in its search for business opportunities and, due to the
Company's lack of funds, it may be difficult to successfully compete
with these other companies.
EMPLOYEES
As of the date hereof, the Company does not have any employees
and has no plans for retaining employees until such time as the
Company's business warrants the expense, or until the Company
successfully acquires or merges with an operating business. The
Company may find it necessary to periodically hire part-time
clerical help on an as-needed basis.
FACILITIES
The Company is currently using as its principal place of
business the personal residence of its President located in Boise,
Idaho. Although the Company has no written agreement and pays no
rent for the use of this facility, it is contemplated that at such
future time as the Company acquires or merges with an operating
business, the Company will secure commercial office space from which
it will conduct its business. However, until such time as the
Company completes an acquisition or merger, the type of business in
which the Company will be engaged and the type of office and other
facilities that will be required is unknown. The Company has no
current plans to secure such commercial office space.
INDUSTRY SEGMENTS
No information is presented regarding industry segments. The
Company is presently a development stage company seeking a potential
acquisition of or merger with a yet to be identified business
opportunity. Reference is made to the statements of income included
herein in response to Part F/S of this Form 10-SB for a report of
the Company's operating history for the past two fiscal years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
consolidated financial statements and notes thereto appearing
elsewhere in the Form 10-SB.
The Company is considered a development stage company with no
assets or capital and with no significant operations or income since
approximately 1986. The costs and expenses associated with the
preparation and filing of this registration statement have been paid
for by a shareholder of the Company. It is anticipated that the
Company will require only nominal capital to maintain the corporate
viability of the Company and necessary funds will most likely be
provided by the Company's officers and directors in the immediate
future. However, unless the Company is able to facilitate an
acquisition of or merger with an operating business or is able to
obtain significant outside financing, there is substantial doubt
about its ability to continue as a going concern.
In the opinion of management, inflation has not and will not
have a material effect on the operations of the Company until such
time as the Company successfully completes an acquisition or merger.
At that time, management will evaluate the possible effects of
inflation on the Company related to it business and operations
following a successful acquisition or merger.
PLAN OF OPERATION
During the next 12 months, the Company will actively seek out
and investigate possible business opportunities with the intent to
acquire or merge with one or more business ventures. In its search
for business opportunities, management will follow the procedures
outlined in Item 1 above. Because the Company lacks funds, it may
be necessary for the officers and directors to either advance funds
to the Company or to accrue expenses until such time as a successful
business consolidation can be made. Management intends to hold
expenses to a minimum and to obtain services on a contingency basis
when possible. Further, the Company's directors will defer any
compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity
provide their remuneration. However, if the Company engages outside
advisors or consultants in its search for business opportunities, it
may be necessary for the Company to attempt to raise additional
funds. As of the date hereof, the Company has not made any
arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does
need to raise capital, most likely the only method available to the
Company would be the private sale of its securities. Because of the
nature of the Company as a development stage company, it is unlikely
that it could make a public sale of securities or be able to borrow
any significant sum from either a commercial or private lender.
There can be no assurance that the Company will be able to obtain
additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the
possible exception of part-time clerical assistance on an as-needed
basis. Outside advisors or consultants will be used only if they
can be obtained for minimal cost or on a deferred payment basis.
Management is confident that it will be able to operate in this
manner and to continue its search for business opportunities during
the next twelve months.
NET OPERATING LOSS
The Company has accumulated approximately $2,000 of net
operating loss carryforwards as of March 31, 1998, which may be
offset against taxable income and income taxes in future years. The
use of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration of
the net operating loss carryforwards. The carry-forwards expire in
the year 2011. In the event of certain changes in control of the
Company, there will be an annual limitation on the amount of net
operating loss carryforwards which can be used. No tax benefit has
been reported in the financial statements for the year ended
December 31, 1997 or the four month period ended April 30, 1998
because there is a 50% or greater chance that the carryforward will
not be used. Accordingly, the potential tax benefit of the loss
carryforward is offset by a valuation allowance of the same amount.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" and Statement of Financial Accounting Standards No. 129
"Disclosures of Information About an Entity's Capital Structure."
SFAS No. 128 provides a different method of calculating earnings per
share than is currently used in accordance with Accounting
Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128
provides for the calculation of "Basic" and "Dilutive" earnings per
share. Basic earnings per share includes no dilution and is
computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to
fully diluted earnings per share. SFAS No. 129 establishes
standards for disclosing information about an entity's capital
structure. SFAS No. 128 and SFAS No. 129 are effective for
financial statements issued for periods ending after December 15,
1997. Their implementation is not expected to have a material
effect on the financial statements.
The Financial Accounting Standards Board has also issued SFAS
No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributors to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income
be reported in a financial statement that displays with the same
prominence as other financial statements. SFAS No. 131 supersedes
SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards on the way that
public companies report financial information about operating
segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosure regarding products and services, geographic areas and
major customers. SFAS No. 131 defines operating segments as
components of a company about which separate financial information
is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. Because of the recent
issuance of the standard, management has been unable to fully
evaluate the impact, if any the standard may have on future
financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of
the standard.
INFLATION
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
RISK FACTORS AND CAUTIONARY STATEMENTS
This Registration Statement contains certain forward-looking
statements. The Company wishes to advise readers that actual
results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including, but
not limited to, the following: the ability of the Company search for
appropriate business opportunities and subsequently acquire or merge
with such entity, to meet its cash and working capital needs, the
ability of the Company to maintain its existence as a viable entity,
and other risks detailed in the Company's periodic report filings
with the Securities and Exchange Commission.
ITEM 3. DESCRIPTION OF PROPERTY
The information required by this Item 3, Description of
Property, is set forth in Item 1, Description of Business, of this
Form 10-SB/A.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information, to the best of the
Company's knowledge, as of April 30, 1998, with respect to each
person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, each director and all directors and
officers as a group.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
Kenneth D. Montee* 363,334 35.4%
3256 Agate Court
Boise, ID 83850
Al Scarth 363,334 35.4%
421 Sherman
Coeur D'Alene, ID 83814
Edward Cowle 92,694 9.0%
102 East 87th Street
New York, NY 10128
All directors and officers 363,334 35.4%
a group (2 persons)
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the
Company has been advised that each person above has sole
voting power over the shares indicated above.
(1) Based upon 1,025,030 shares of common stock outstanding on
April 30, 1998.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
Kenneth D. Montee 55 President, Chief Executive
Officer and Director
Ray Montee 53 Secretary / Treasurer and
Director
___________________________
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. There are no agreements with respect to the election of
directors. The Company has not compensated its directors for
service on the Board of Directors or any committee thereof, but
directors are entitled to be reimbursed for expenses incurred for
attendance at meetings of the Board of Directors and any committee
of the Board of Directors. However, due to the Company's lack of
funds, the directors will defer their expenses and any compensation
until such time as the Company can consummate a successful
acquisition or merger. As of the date hereof, no director has
accrued any expenses or compensation. Officers are appointed
annually by the Board of Directors and each executive officer serves
at the discretion of the Board of Directors. The Company does not
have any standing committees. Presently, none of the Company's
directors are directors of any other "shell" companies or other
corporations that are actively pursuing acquisitions or mergers.
No director, officer, affiliate or promoter of the Company has,
within the past five years, filed any bankruptcy petition, been
convicted in or been the subject of any pending criminal
proceedings, or is any such person the subject or any order,
judgment, or decree involving the violation of any state or federal
securities laws.
All of the Company's present directors have other full-time
employment and will routinely devote only such time to the Company
necessary to maintain its viability. The directors will, when the
situation requires, review potential business opportunities or
actively participate in negotiations for a potential merger or
acquisition on an as-needed-basis.
Currently, there is no arrangement, agreement or understanding
between the Company's management and non-management shareholders
under which non-management shareholders may directly or indirectly
participate in or influence the management of the Company's affairs.
Present management openly accepts and appreciates any input or
suggestions from the Company's shareholders. However, the Board of
Directors is elected by the shareholders and the shareholders have
the ultimate say in who represents them on the Board of Directors.
There are no agreements or understandings for any officer or
director of the Company to resign at the request of another person
and none of the current offers or directors of the Company are
acting on behalf of, or will act at the direction of any other person.
In connection with the preparation and filing of this
registration statement, one of the Company's shareholders, Edward F.
Cowle, has paid for certain legal and professional fees related to
the registration statement. Although, as of the date hereof there
is no agreement or arrangement for Mr. Cowle to provide additional
funds, the Company is not precluded from approaching Mr. Cowle or
any other shareholder and requesting additional financial
assistance. Because such additional funding is only speculative at
this time, the Company has not developed any criteria or plans
related to this funding.
The business experience of each of the persons listed above
during the past five years is as follows:
KENNETH D. MONTEE, age 55, is a graduate of Boise State
University with a degree in Finance. Mr. Montee has been active in
real estate and investments since 1972, owing his own real estate
company and working for two years from 1980 to 1982 as a commodity
broker with Dean Witter. In 1986, Mr. Montee acquired a controlling
interest in Rako Corporation. From 1993 to the present, Mr. Montee
has been a developer of real estate through various partnerships and
corporations which he formed. He is also an active investor in
securities and commodities. Mr. Montee is the brother of Ray
Montee, Secretary / Treasurer and a director of the Company.
RAY MONTEE, age 53, was for 23 years and until he retired from
the business in December 1997, the President and a director of Ray's
R.V.'s Inc., a recreational vehicle parts, service and sales company
located in Coeur D'Alene, Idaho. Mr. Montee has also been since
1993, President and a director of Affordable Home Center, Inc., a
manufactured home sales company. He is currently active as General
Manager of Affordable's nine locations throughout Idaho, Washington
and Montana. Mr. Montee attended North Idaho College from 1962 to
1964 taking general courses and vocational courses in body and
fender repair. Mr. Montee is the brother of Kenneth D. Montee,
President and a director of the Company.
ITEM 6. EXECUTIVE COMPENSATION
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or
directors. The Company has not paid any salaries or other
compensation to its officers, directors or employees for the years
ended December 31, 1997 and 1996, or for the three month period
ended March 31, 1998. Further, the Company has not entered into an
employment agreement with any of its officers, directors or any
other persons and no such agreements are anticipated in the
immediate future. It is intended that the Company's directors will
defer any compensation until such time as an acquisition or merger
can be accomplished and will strive to have the business opportunity
provide their remuneration. As of the date hereof, no person has
accrued any compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two fiscal years, there have been no transactions
between the Company and any officer, director, nominee for election
as director, or any shareholder owning greater than five percent
(5%) of the Company's outstanding shares, nor any member of the
above referenced individuals' immediate family
The Company's officers and directors are subject to the doctrine
of corporate opportunities only insofar as it applies to business
opportunities in which the Company has indicated an interest, either
through its proposed business plan or by way of an express statement
of interest contained in the Company's minutes. If directors are
presented with business opportunities that may conflict with
business interests identified by the Company, such opportunities
must be promptly disclosed to the Board of Directors and made
available to the Company. In the event the Board shall reject an
opportunity so presented and only in that event, any of the
Company's officers and directors may avail themselves of such an
opportunity. Every effort will be made to resolve any conflicts
that may arise in favor of the Company. There can be no assurance,
however, that these efforts will be successful.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common
Stock, par value $.001 per share, of which 1,025,030 shares are
issued and outstanding as of the date hereof. In May 1996, the
Company effected the one (1) share for three (3) shares reverse
stock split of its common Stock, and in March 1998, the Company
effected and the two (2) shares for one (1) share forward stock
split. All references to the Company's Common Stock herein are in
post-split shares. All shares of Common Stock have equal rights and
privileges with respect to voting, liquidation and dividend rights.
Each share of Common Stock entitles the holder thereof to (i) one
non-cumulative vote for each share held of record on all matters
submitted to a vote of the stockholders; (ii) to participate equally
and to receive any and all such dividends as may be declared by the
Board of Directors out of funds legally available therefor; and
(iii) to participate pro rata in any distribution of assets
available for distribution upon liquidation of the Company.
Stockholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or any other securities. The
Common Stock is not subject to redemption and carries no
subscription or conversion rights. All outstanding shares of Common
Stock are fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of
Preferred Stock, par value One Tenth of a Cent ($.001) per share.
The Preferred Stock shall have preference as to dividends and to
liquidation of the Corporation. The Board of Directors shall
establish the specific rights, preferences, privileges and
restrictions of such Preferred Stock, or any series thereof, at the
time of issuance. As of the date hereof, no shares of Preferred
Stock have been issued.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
No shares of the Company's common stock have previously been
registered with the Securities and Exchange Commission (the
"Commission") or any state securities agency or authority. The
Company intends to make an application to the NASD for the Company's
shares to be quoted on the OTC Bulletin Board. The Company's
application to the NASD will consist of current corporate
information, financial statements and other documents as required by
Rule 15c2-11 of the Securities Exchange Act of 1934, as amended.
Inclusion on the OTC Bulletin Board permits price quotations for the
Company's shares to be published by such service. The Company is
not aware of any established trading market for its common stock nor
is there any record of any reported trades in the public market in
recent years. Although the Company intends to submit its
application to the OTC Bulletin Board contemporaneously with the
filing of this registration statement, the Company does not
anticipate its shares to be traded in the public market until such
time as a merger or acquisition can be consummated. Also, secondary
trading of the Company's shares may be subject to certain state
imposed restrictions regarding shares of shell companies. Except
for the application to the OTC Bulletin Board, there are no plans,
proposals, arrangements or understandings with any person concerning
the development of a trading market in any of the Company's
securities. The Company's common stock last traded in a public
market as Silver Strike Mining Co., Inc. during the 1970s.
The ability of an individual shareholder to trade their shares in a
particular state may be subject to various rules and regulations of
that state. A number of states require that an issuer's securities
be registered in their state or appropriately exempted from
registration before the securities are permitted to trade in that
state. Presently, the Company has no plans to register its
securities in any particular state. Further, most likely the
Company's shares will be subject to the provisions of Section 15(g)
and Rule 15g-9 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), commonly referred to as the "penny stock"
rule. Section 15(g) sets forth certain requirements for
transactions in penny stocks and Rule 15g-9(d)(1) incorporates the
definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity
security is considered to be a penny stock unless that security is:
registered and traded on a national securities exchange meeting
specified criteria set by the Commission; authorized for quotation
on The NASDAQ Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at
least $5.00 per share) or the issuer's net tangible assets; or
exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements on broker-dealers
who sell penny stocks to persons other than established customers
and accredited investors, generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such
securities and must have received the purchaser's written consent to
the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the first transaction, of a risk
disclosure document relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current
quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks held
in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of
broker-dealers to trade and/or maintain a market in the Company's
common stock and may affect the ability of shareholders to sell
their shares.
As of June 30, 1998 there were 93 holders of record of the
Company's common stock, which figure does not take into account
those shareholders whose certificates are held in the name of
broker-dealers or other nominees. Because there has been no
established public trading market for the Company's securities, no
trading history is presented herein.
As of the date hereof, the Company has issued and outstanding
1,025,030 shares of common stock. In 1996, the Company issued
3,150,000 shares of common stock in connection with the acquisition
of Spencer Entertainment, Inc. However, upon the rescission of the
acquisition, all 3,150,000 shares were returned to the Company and
canceled. No other shares of the Company's common stock have been
issued during the preceding three fiscal years.
Of the Company's total outstanding shares, 205,668 shares may be
sold, transferred or otherwise traded in the public market without
restriction, unless held by an affiliate or controlling shareholder
of the Company. Of these 205,668 shares, the Company has not
identified any shares as being held by affiliates of the Company.
A total of 819,362 shares are considered restricted securities
and are presently held by affiliates and/or controlling shareholders
of the Company and may be sold pursuant to Rule 144, subject to the
volume and other limitations set forth under Rule 144. In general,
under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned restricted shares
of the Company for at least one year, including any person who may
be deemed to be an "affiliate" of the Company (as the term
"affiliate" is defined under the Act), is entitled to sell, within
any three-month period, an amount of shares that does not exceed the
greater of (i) the average weekly trading volume in the Company's
common stock, as reported through the automated quotation system of
a registered securities association, during the four calendar weeks
preceding such sale or (ii) 1% of the shares then outstanding. A
person who is not deemed to be an "affiliate" of the Company and has
not been an affiliate for the most recent three months, and who has
held restricted shares for at least two years would be entitled to
sell such shares without regard to the resale limitations of Rule 144.
DIVIDEND POLICY
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.
ITEM 2. LEGAL PROCEEDINGS
There are presently no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of
its property is subject and, to the best of its knowledge, no such
actions against the Company are contemplated or threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in or disagreements with accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On May 9, 1996, the Company issued a total of 3,150,000 shares
of its authorized, but previously unissued common stock to the
shareholders and designees of Spencer Entertainment, Inc, in
connection with the acquisition of Spencer. This issuance was not
registered with the Commission because it was believed to be exempt
form the registration requirements of the Act under Section 4(2) of
the Act. Upon the rescission of the acquisition, all 3,150,000
shares were returned to the Company and canceled. No other shares
of the Company's common stock have been issued during the preceding
three fiscal years.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the provisions of the Idaho General Business
Corporation Law (the "Idaho Code"), the Company has the power to
indemnify any officer or director who, in their capacity as such, is
made a party to any suit or proceeding, whether criminal,
administrative or investigative, if such officer or director acted
in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Company and, in the case of any
criminal proceeding, the person had no reasonable cause to believe
their conduct was unlawful. An officer or director shall be
indemnified against expenses to the extent they have been successful
on the merits or otherwise in defense of any action, suit or
proceeding. Indemnification or advance expenses to an officer or
director is available only to the extent as permitted under Sections
30-1-850 through 30-1-859 of the Idaho Code. Further, the Idaho
Code permits a corporation to purchase and maintain liability
insurance on behalf of its officers and directors.
TRANSFER AGENT
The Company has designated Interstate Transfer Company, 56 West
400 South, Suite 260, Salt Lake City, Utah 84101, as its transfer
agent.
PART F/S
The Company's financial statements for the fiscal years ended
December 31, 1997 and 1996 and the three month period ended March
31, 1998 have been examined to the extent indicated in their reports
by Jones, Jensen & Company, independent certified public
accountants, and have been prepared in accordance with generally
accepted accounting principles and pursuant to Regulation S-B as
promulgated by the Securities and Exchange Commission and are
included herein in response to Item 15 of this Form 10-SB.
RAKO CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 1998 AND DECEMBER 31, 1997
CONTENTS
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . 7
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . 8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Rako Corporation
Boise, Idaho
We have audited the accompanying balance sheets of Rako Corporation
(a development stage company) as of March 31, 1998 and December 31,
1997 and the related statements of operations, stockholders' equity
and cash flows for the three months ended March 31, 1998, the years
ended December 31, 1997 and 1996, and from inception on October 9,
1968 through March 31, 1998. 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
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether he
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 audits provide 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 Rako
Corporation as of March 31, 1998 and December 31, 1997 and the
results of its operations and its cash flows for the three months
ended March 31, 1998, the years ended December 31, 1997 and 1996,
and from inception on October 9, 1968 through March 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company is a development
stage company with no significant operating revenues to date.
Because the Company has no significant sources of revenue there is
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Jones, Jensen & Company
May 19, 1998
RAKO CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
1998 1997
CURRENT ASSETS $ - $ -
Total Current Assets - -
Total Assets $ - $ -
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - -
Total Current Liabilities - -
STOCKHOLDERS' EQUITY
Common stock at $0.001 par value;
authorized 50,000,000 common
shares and 20,000,000 preferred
shares; 1,025,030 common shares
issued and outstanding 1,025 1,025
Additional paid-in capital 89,611 89,611
Deficit accumulated during the
development stage (90,636) (90,636)
Total Stockholders' Equity - -
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ - $ -
RAKO CORPORATION
(A Development Stage Company)
Statements of Operations
From
Inception on
For the October 9,
Three Months For the Years Ended 1968 Through
March 31, December 31, March 31,
1998 1997 1996 1998
REVENUE $ - $ - $ - $ -
EXPENSES - - 2,461 (93,097)
NET LOSS FROM OPERATIONS $ - $ - (2,461) $(93,097)
LOSS PER SHARE $ 0.00 $ 0.00 $ 0.00
RAKO CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on October 9, 1968 Through March 31, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Inception on October 9, 1968 - $ - $ - $ -
Common stock issued for mining
claims recorded at predecessor
cost of $0.00 per share 400,000 400 (400) -
Common stock issued for services
at $0.15 per share 400,000 400 59,600 -
Common stock issued for cash
at $0.45 per share 14,734 15 6,615 -
Costs associated with
stock offering - - (994) -
Common stock issued for mining
claims recorded at predecessor
cost of $0.075 per share 333,334 333 24,667 -
Net loss for the period ended
December 31, 1995 - - - (90,636)
Balance,
December 31, 1995 1,148,068 1,148 89,488 (90,636)
Cancellation of common stock (123,024) (123) 123 -
Fractional shares adjustment (14) - - -
Capital contributed for payment
of expenses - - 2,461 -
Net loss for the year ended
December 31, 1996 - - - (2,461)
Balance,
December 31, 1996 1,025,030 1,025 92,072 (93,097)
Net loss for the year ended
December 31, 1997 - - - -
Balance,
December 31, 1997 1,025,030 1,025 92,072 (93,097)
Net loss for the three months
ended March 31, 1998 - - - -
Balance,
March 31, 1998 1,025,030 $ 1,025 $ 92,072 $ (93,097)
RAKO CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the October 9,
Three Months For the Years Ended 1968 Through
March 31, December 31, March 31,
1998 1997 1996 1998
CASH FLOWS FROM
OPERATING ACTIVITIES
Income (loss) from operations $ - $ - $ (2,461) $ (93,097)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Stock issued for services - - - 60,000
Increase (decrease) in accounts
payable - - - 25,000
Net Cash Used by Operating
Activities - - (2,461) (8,097)
CASH FLOWS FROM
INVESTING ACTIVITIES - - - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock for cash - - - 5,636
Expenses paid on Company's behalf - - 2,461 2,461
Net Cash Provided by
Financing Activities - - 2,461 8,097
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS - - - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - - -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ - $ - $ - $ -
Cash Paid For:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF
NON-CASH FINANCING ACTIVITIES
Stock issued for services $ - $ - $ - $ 60,000
Stock issued for mining claims $ - $ - $ - $ 25,000
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1998 and December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
On October 9, 1968, Bell Silver Mining and
Milling Corporation was incorporated under the
Laws of Idaho with the purpose of developing
mining claims. On the date of incorporation,
10,000,000 shares of $0.10 par value common
stock were authorized.
On March 3, 1969, Bell Silver Mining and Milling
Corporation changed its name to Silver Strike
Mining Co. Inc. The number of shares of common
stock authorized was changed from 10,000,000
shares of $0.10 par value common stock to
5,000,000 shares of $0.10 par value common stock.
On May 17, 1973, Silver Strike Mining and
Milling Co. Inc, changed its name to Rako
Corporation.
On March 25, 1996, the Articles of Incorporation
were amended to change the par value of the
common stock to $0.005 and the number of
authorized shares to 100,000,000.
On May 15, 1996, the Articles of Incorporation
were amended to change the par value of he
common stock to $0.001 and the number of
authorized shares to 50,000,000 common and
20,000,000 preferred.
The Company has elected a calendar year end.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared
using the accrual method of accounting.
b. Provision for Taxes
No provision for income taxes has been made due
to the inactive status of the Company. The
Company has net operating loss carryovers of
approximately $2,000 which expire in 2011. The
potential tax benefit of the loss carryovers has
been offset in full by a valuation allowance.
c. Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or
less when purchased to be cash equivalents.
d. 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.
RAKO CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 1998 and December 31, 1997 and 1996
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared
using generally accepted accounting principles
applicable to a going concern which contemplates
the realization of assets and liquidation of
liabilities in the normal course of business.
The Company has not established revenues
sufficient to cover its operating costs and
allow it to continue as a going concern. The
Company is seeking a merger with an existing,
operating Company. (see Note 5). Currently
management has committed to covering all
operating and other costs until a merger is
completed.
NOTE 4 - STOCK TRANSACTIONS
On October 10, 1968, the Board of Directors
issued 600,000 shares of $0.10 par value common
stock for mining claims received from the
founder of the Company. The claims were
recorded at predecessor cost of $-0-.
On October 10, 1968, the Board of Directors
issued 600,000 shares of $0.10 par value common
stock for services rendered during the
organization of the Company.
On October 28, 1969, the Board of Directors
initiated a public offering in which 22,100
shares of $0.10 par value common stock were sold
at a gross price of $0.30 per share.
On September 13, 1984, the Board of Directors
issued 500,000 shares of $0.10 par value common
stock for mining claims which were recorded at
predecessor cost of $0.05 per share.
On April 10, 1996, the Company canceled 184,536
shares of common stock.
On May 15, 1996, the shareholders effected a
1-for-3 reverse stock split of all the issued
and outstanding common stock.
On March 17, 1998, the shareholders effected a
2-for-1 forward stock split of all the issued
and outstanding common stock.
The accompanying financial statements reflect
the stock splits on a retroactive basis.
NOTES 5 - FAILED ACQUISITION
On May 9, 1996, the shareholders voted to
acquire all of the issued and outstanding shares
of Spencer Entertainment, Inc., a Nevada
Corporation, in exchange for the Company's
authorized, but previously unissued common
stock. On June 11, 1996, the Company issued
6,300,000 shares as part of the terms of this
agreement, however, on November 22, 1996, the
Company completed a recission agreement
regarding the plan of reorganization and
acquisition agreement between the Company and
Spencer Entertainment, Inc. and canceled the
6,300,000 shares that were issued. The
recission has been reflected in the financial
statements on a retroactive basis.
PART III
ITEM 1. INDEX TO EXHIBITS
THE FOLLOWING EXHIBITS ARE FILED WITH THIS REGISTRATION
STATEMENT:
Exhibit No. Exhibit Name
2.1 Acquisition Agreement and Plan of
Reorganization with Spencer Entertainment, Inc.
3.1 Articles of Incorporation and Amendments thereto
3.2 By-Laws of Registrant
4. See Exhibit No. 3.1, Articles of
Incorporation, Article V
10.1 Rescission Agreement with Spencer
Entertainment, Inc.
27. Financial Data Schedule
________________
2. DESCRIPTION OF EXHIBITS
See Item I above.
SIGNATURES
In accordance with Section 12 of the Securities and
Exchange Act of 1934, the registrant caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly organized.
RAKO CORPORATION
(Registrant)
Date: July 16, 1998 By: /S/ Kenneth D. Montee
(Signature)
Kenneth D. Montee
President, Chief
Executive Officer and
Director
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION,
(hereinafter the "Agreement") is made and entered into
this 9th day of May, 1996 by and between Rako
Corporation, an Idaho corporation (hereinafter "Rako"),
Spencer Entertainment, Inc., a Nevada corporation
(hereinafter "Spencer"), and the shareholders of Spencer
(hereinafter "Shareholders").
RECITALS
WHEREAS, Rako desires to acquire all of the issued and
outstanding shares of Spencer common stock in exchange
for 6,300,000 shares of authorized but previously
unissued Rako common stock, par value $.001 per share
(post-split and adjusted as per Section 1.4 below), and
pursuant to the terms, conditions and other
consideration set forth herein;
WHEREAS, the Shareholders of Spencer desire to
exchange their shares of Spencer common stock for shares
of Rako common stock in the respective amounts set forth
herein; and
WHEREAS, the parties hereto desire to reorganize the
management and operations of Rako, to change its
corporate name, and to change its principal place of
business.
NOW, THEREFORE, in consideration of the premises and
mutual representations, warranties and covenants herein
contained, the parties hereby agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.1 Acquisition and Plan of Reorganization.
Rako and Spencer have executed a certain Letter of
Intent dated April 4, 1996 concerning the transactions
contemplated by this Agreement. The parties hereto
agree that this Agreement and the terms and conditions
contained herein shall supplant and take precedence over
said Letter of Intent. The parties hereby agree that
Rako shall acquire 100% of the issued and outstanding
shares of Spencer common stock, without regard to
outstanding stock options, in exchange for six million,
three hundred thousand (6,300,000) shares of authorized
but previously unissued Rako common stock, par value
$.001 per share, post-split and adjusted as per the
terms of Section 1.4 below. It is also agreed to by the
parties hereto that by acquiring the shares of Spencer
common stock, Rako will acquire all rights, title and
interest to certain identified assets and property
presently owned by Spencer and its subsidiaries and
specifically described and set forth in Exhibit 1.1,
annexed hereto and by this reference made a part hereof,
by virtue of such shareholdings. Said assets and
property may be subject to certain interests, liens
and/or encumbrances which are further described in
Exhibit 1.1. The parties hereto hereby further agree
that (i) at the Closing, as hereinafter defined, Spencer
shall be a wholly-owned subsidiary of Rako subject to
the conditions and provisions of Section 1.5 hereof;
(ii) as promptly as practicable after the effectiveness
of the Closing, Rako's corporate name shall be changed
to Spencer Entertainment, Inc.; (iii) as promptly as
practicable after the Closing, the necessary steps shall
be taken in order to reflect the relocation of Rako's
principal place of business to Beverly Hills,
California; and (iv) following the Closing the combined
entity shall become engaged in the current business of
Spencer.
SECTION 1.2 Issuance of Shares.
(a) Upon the Closing of this Agreement, Rako shall
cause to be issued and delivered to the
Shareholders of Spencer, as set forth in Exhibit
1.2 annexed hereto and by this reference made a
part hereof, or their designees, stock certificates
representing an aggregate of 6,300,000 shares (the
"Rako Shares") of Rako common stock in exchange for
all the Shareholders' shares of Spencer common stock.
(b) The Rako Shares to be issued hereunder shall
be authorized but previously unissued shares of
Rako common stock, and shall be issued to those
persons and in the respective amounts set forth in
Exhibit 1.2.
(c) All Rako Shares to be issued hereunder are
deemed "restricted securities" as defined by Rule
144 of the Securities Act of 1933, as amended (the
"1933 Act"), and the recipients shall represent
that they are acquiring the Rako Shares for
investment purposes only and without the intent to
make a further distribution of the Rako Shares.
All Rako Shares to be issued under the terms of
this Agreement shall be issued pursuant to an
exemption from the registration requirements of the
1933 Act, under Section 4(2) of the 1933 Act and
the rules and regulations promulgated thereunder.
Certificates representing the Rako Shares to be
issued hereunder shall bear the following legend:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be
offered for sale, sold or otherwise
transferred except in compliance with the
registration provisions of such Act or
pursuant to an exemption from such
registration provisions, the availability of
which is to be established to the satisfaction
of the Company.
SECTION 1.3 Closing. The closing of this Agreement and
the transactions contemplated hereby (the "Closing")
shall take place on the 9th day of May 1996 (the
"Closing Date"), at a time and place to be mutually
agreed upon by the parties hereto, and shall be subject
to the provisions of Article X of this Agreement. At
the Closing:
(a) Spencer and Shareholders shall deliver to Rako
stock certificates representing 100% of the issued
and outstanding shares of Spencer common stock,
duly endorsed, so as to make Rako the sole holder
thereof, free and clear of all claims and
encumbrances;
(b) Rako shall deliver to those persons listed in
Exhibit 1.2 stock certificates representing an
aggregate of 6,300,000 shares of Rako common stock
and which certificates shall bear a standard
restrictive legend in the form customarily used
with restricted securities and as set forth in
Section 1.2(c) above;
(c) Rako shall deliver an Officer's Certificate as
described in Sections 9.1, 9.2 and 9.4 hereof,
dated the Closing Date, that all representations,
warranties, covenants and conditions set forth
herein by Rako are true and correct as of, or have
been fully performed and complied with by, the
Closing Date; and
(d) Spencer shall deliver an Officer's Certificate
as described in Sections 8.1, 8.2 and 8.4 hereof,
dated the Closing Date, that all representations,
warranties, covenants and conditions set forth
herein by Spencer and Shareholders are true and
correct as of, or have been fully performed and
complied with by, the Closing Date;
SECTION 1.4 Rako Special Meeting of Shareholders. In
anticipation of this Agreement and prior to the Closing
Date, Rako shall have taken all necessary and requisite
corporate action to call for a Special Meeting of
Shareholders to be held on May 9, 1996, or the earliest
practical date, in order to approve and transact the
following business:
(a) To ratify the proposal to amend the Articles
of Incorporation to change the authorized
capitalization of the Company to 50,000,000 shares
of non-assessable shares of common stock, par value
$.001 per share;
(b) To ratify the proposal to effect a one (1)
share for three (3) shares reverse stock split of
Rako's currently issued and outstanding shares of
common stock;
(c) To ratify this Agreement and all transactions
contemplated hereby;
(d) To elect a new Board of Directors to consist
of the following nominees: Charles Gay, Jeffrey P.
Kranzdorf, Lionel Schaen, Robert Sidell and Robert
Siner;
(e) To amend the Articles of Incorporation to
change the corporate name to Spencer Entertainment,
Inc., or any other name deemed suitable by the
shareholders;
(f) To ratify the proposal to amend the Articles
of Incorporation to change the stated corporate
purpose to a general purpose; and
(g) The proposal to amend the Articles of
Incorporation to deny pre-emptive rights to the
shareholders and to extinguish any preemptive
rights that may presently exist.
SECTION 1.5 Consummation of Transaction. If at the
Closing, no condition exists which would permit any of
the parties to terminate this Agreement, or a condition
then exists and the party entitled to terminate because
of that condition elects not to do so, then the
transactions herein contemplated shall be consummated
upon such date, and then and thereupon, Rako shall file
any additional necessary documents that may be required
by the State of Idaho, the State of California, or any
other governmental authority or agency required in order
to effectuate the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RAKO
Rako hereby represents, warrants and agrees that:
SECTION 2.1 Organization of Rako. Rako is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Idaho, is duly
qualified and in good standing as a foreign corporation
in every jurisdiction in which such qualification is
necessary, and has the corporate power and authority to
own its properties and assets and to transact the
business in which it is engaged. There are no
corporations or other entities with respect to which (i)
Rako owns any of the outstanding stock or other
interest, or (ii) Rako may be deemed to be in control
because of factors or relationships other that the
quantity of stock or other interest owned. Rako has all
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of Rako, enforceable
against Rako in accordance with its respective terms
except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
SECTION 2.2 Capitalization of Rako. The authorized
capital stock of Rako consists of 100,000,000 shares of
common stock, par value $.005 per share, of which
1,537,564 shares are presently issued and outstanding.
Following the one share for three shares reverse stock
split to be effected in connection with the transactions
contemplated hereby, there will be approximately 512,522
shares issued and outstanding, without taking into
consideration the rounding up of fractional shares. All
shares of Rako common stock currently issued and
outstanding have been duly authorized and validly
issued, are fully paid and non-assessable, and have been
issued in compliance with applicable federal and state
laws or pursuant to appropriate exemptions therefrom.
There are no options, warrants, rights, calls,
commitments or agreements of any character obligating
Rako to issue any shares of its capital stock or any
security representing the right to purchase or otherwise
receive any such stock. Shares of Rako common stock to
be issued pursuant to this Agreement, when so issued,
will be duly authorized, validly issued, fully paid and
non-assessable.
SECTION 2.3 Charter Documents. Complete and correct
copies of the Articles of Incorporation and By-Laws of
Rako and all amendments thereto, have been or will be
delivered to Spencer prior to the Closing.
SECTION 2.4 Corporate Documents. The Rako
shareholders' list and corporate minute books are
complete and accurate as of the date hereof and the
corporate minute books contain the recorded minutes of
all corporate meetings of shareholders and directors.
SECTION 2.5 Financial Statements. Rako's financial
statements for the fiscal years ended December 31, 1995
and 1994, a copy of which is annexed hereto as Exhibit
2.5 and by this reference made a part hereof, are true
and complete in all material respects, having been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis for
the periods covered by such statements, and fairly
present, in accordance with generally accepted
accounting principles, the financial condition of Rako,
and results of its operations for the periods covered
thereby. Except as otherwise disclosed to Spencer in
writing and as set forth herein, there has been no
material adverse change in the business operations,
assets, properties, prospects or condition (financial or
otherwise) of Rako taken as a whole from that reflected
in the financial statements referred to in this Section 2.5.
SECTION 2.6 Absence of Certain Changes or Events.
Since the date of the Rako financial report attached
hereto as Exhibit 2.5 and except as disclosed otherwise
herein, Rako has not (i) issued or sold any promissory
note, stock, bond, option or other corporate security of
which it was an issuer or other obligor, (ii) discharged
or satisfied any lien or encumbrance or paid any
obligation or liability, absolute or contingent, direct
of indirect, (iii) incurred or suffered to be incurred
any liability or obligation whatsoever, (iv) caused or
permitted any lien, encumbrance or security interest to
be created or arise on or in any of its properties or
assets, (v) declared or made any dividend, payment or
distribution to stock holders or purchased or redeemed
or agreed to purchase or redeem any shares of its
capital stock, (vi) reclassified its shares of capital
stock, or (vii) entered into any agreement or
transaction except in connection with the execution and
performance of this Agreement.
SECTION 2.7 Assets and Liabilities. Rako does not have
any material assets and, as of the date hereof, Rako
does not have any material debts, liabilities or
obligations of any nature, whether accrued, absolute,
contingent, or otherwise, whether due or to become due,
that are not fully reflected in the Rako financial
statements or otherwise disclosed.
SECTION 2.8 Tax Returns and Payments. Rako has filed
with the appropriate governmental authority tax returns,
whether based upon income, sales or franchise, as
required by law to be filed on or before the date of
this Agreement. Rako has paid all taxes to be due on
said returns, any assessments made against Rako and all
other taxes, fees and similar charges imposed on Rako by
any governmental authority. No tax liens have been
filed and no claims are being assessed and no returns
are under audit with respect to any such taxes, fees or
other similar charges.
SECTION 2.9 Contracts. Rako is not a party to or bound
by any contract or commitment, including guaranty
whether written or oral, except as otherwise disclosed
in Exhibit 2.9.
SECTION 2.10 Required Authorizations. There have been
or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions
of any kind required by virtue of execution and delivery
of this Agreement by Rako or the consummation by it of
the transactions contemplated hereby. The Rako Board of
Directors has approved this Agreement and prior to the
Closing, the shareholders of Rako shall have ratified
this Agreement and the transactions contemplated
hereunder. Immediately following the Closing, the
appropriate corporate filings shall be made with the
State of Idaho.
SECTION 2.11 Compliance with Law and Government
Regulations. Rako is in compliance with and is not in
violation of, applicable federal, state, local or
foreign statutes, laws and regulations (including
without limitation, any applicable building, zoning or
other law, ordinance or regulation) affecting its
properties or the operation of its business. Rako is
not subject to any order, decree, judgment or other
sanction of any court, administrative agency or other
tribunal.
SECTION 2.12 Litigation. There is no litigation,
arbitration, proceeding or investigation pending or
threatened to which Rako is a party or which may result
in any material change in the business or condition,
financial or otherwise, of Rako or in any of its
properties or assets, or which might result in any
liability on the part of Rako, or which questions the
validity of this Agreement or of any action taken or to
be taken pursuant to or in connection with the
provisions of this Agreement, and to the best knowledge
of Rako, there is no basis for any such litigation,
arbitration, proceeding or investigation.
SECTION 2.13 Trade Names and Rights. Rako does not use
any trade mark, service mark, trade name, or copyright
in its business, nor does it own any trade marks, trade
mark registrations or application, trade name, service
marks, copyrights, copyright registrations or
application. No person owns any trade mark, trade mark
registration or application, service mark, trade name,
copyright, or copyright registration or application, the
use of which is necessary or contemplated in connection
with the operation of Rako's business.
SECTION 2.14 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with,
any governmental authority on the part of Rako is
required in connection with the execution and delivery
of this Agreement or the carrying out of any
transactions contemplated hereby with the exception of
the necessary corporate filings with the State of Idaho
relating to the amendment of the Articles of
Incorporation and the proposed exchange of shares.
SECTION 2.15 Authority. Rako's Board of Directors has
approved execution of this Agreement and its
shareholders will, prior to the Closing, ratify this
Agreement and the transactions contemplated hereby and
will duly authorize the execution and delivery hereof.
Rako has full power, authority and legal right to enter
into this Agreement and to consummate the transactions
contemplated hereby, and all corporate action necessary
to authorize the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby has been duly and validly taken.
The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and
compliance by Rako with the provisions hereof will not
(a) conflict with or result in a breach of any
provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation
of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Rako under, any
of the terms, conditions or provisions of the Articles
of Incorporation or By-Laws of Rako, or any note, bond,
mortgage, indenture, license, lease, agreement or any
instrument or obligation to which Rako is a party or by
which it is bound; or (b) violate any order, writ,
injunction, decree, statute, rule or regulation
applicable to Rako or any of its properties or assets.
SECTION 2.16 Full Disclosure. None of the
representations and warranties made by Rako herein, or
in any exhibit, certificate or memorandum furnished or
to be furnished by Rako, on its behalf pursuant hereto,
contains or will contain any untrue statement of
material fact, or omits any material fact, the omission
of which would be misleading.
ARTICLE III
COVENANTS OF RAKO
SECTION 3.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
(a) Rako will not enter into any material
agreement, contract or commitment, whether written
or oral, or engage in any transaction, without the
prior written consent of Spencer;
(b) Rako will not declare any dividends or
distributions with respect to its capital stock or
amend its Articles of Incorporation or By-Laws,
without the prior written consent of Spencer;
(c) Rako will not authorize, issue, sell, purchase
or redeem any shares of its capital stock or any
options or other rights to acquire its capital
stock, without the prior written consent of Spencer;
(d) Rako will comply with all requirements which
federal or state law may impose on it with respect
to this Agreement and the transactions contemplated
hereby, and will promptly cooperate with and
furnish written information to Spencer in
connection with any such requirements imposed upon
the parties hereto in connection therewith;
(e) Rako will not incur any indebtedness for money
borrowed, or issue or sell any debt securities,
incur or suffer to be incurred any liability or
obligation of any nature whatsoever, or cause or
permit any lien, encumbrance or security interest
to be created or arise on or in any of its
properties or assets, acquire or dispose of fixed
assets, change employment terms or hire any
additional employees, enter into any material or
long-term contract, guarantee obligations of any
third party, settle or discharge any balance sheet
receivable for less than its stated amount or enter
into any other transaction other than in the
regular course of business, except to comply with
the terms of this Agreement, without the prior
written consent of Spencer;
(f) Rako shall grant to Spencer and its counsel,
accountants and other representatives, full access
during normal business hours during the period
prior to the Closing to all its respective
properties, books, contracts, commitments and
records and, during such period, furnish promptly
to Spencer and such representatives all information
relating to Rako as Spencer may reasonably request,
and shall extend to Spencer the opportunity to meet
with Rako's accountants and attorneys to discuss
the financial condition of Rako; and
(g) Except for the transactions contemplated by
this Agreement, Rako will conduct its business in
the normal course, and shall not sell, pledge or
assign any of its assets without the prior written
consent of Spencer.
SECTION 3.2 Affirmative Covenants. Prior to Closing,
Rako will do the following:
(a) Use its best efforts to accomplish all
actions necessary to consummate this Agreement,
including satisfaction of all the conditions
contained in this Agreement;
(b) Promptly notify Spencer in writing of any
material adverse change in the financial condition,
business, operations or key personnel of Rako, any
threatened material litigation or investigation,
any breach of its representations or warranties
contained herein, and any material contract,
agreement, license or other agreement which, if in
effect on the date of this Agreement, should have
been included in this Agreement or in an exhibit
annexed hereto and made a part hereof;
(c) Obtain approval of this Agreement from its
shareholders;
(d) Accept the resignations of the current
directors of Rako and cause to be nominated
immediately a new Board of Directors consisting of
the following nominees: Charles Gay, Jeffrey P.
Kranzdorf, Lionel Schaen, Robert Sidell and Robert
Siner;
(e) Reserve, and promptly after the Closing, issue
and deliver to Shareholders or their designees the
number of shares of Rako common stock required
hereunder;
(f) Take the necessary corporate action to amend
its Articles of Incorporation to change its name to
Spencer Entertainment, Inc. or any other name
deemed suitable and approved by the shareholders; and
(g) Take all other necessary corporate actions to
accomplish those items set forth in Section 1.4
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPENCER AND SHAREHOLDERS
Spencer and Shareholders hereby represent, warrant and
agree that:
SECTION 4.1 Organization of Spencer. Spencer is a
corporation duly organized, validly existing and in good
standing under the laws of Nevada and is duly qualified
and in good standing in every jurisdiction in which such
qualification is necessary. There are no corporations
or other entities with respect to which (i) Spencer
owns any of the outstanding stock or other interest, or
(ii) Spencer may be deemed to be in control because of
factors or relationships other than the percentage of
outstanding stock or other interest owned in such
entity, except as otherwise disclosed in Exhibit 4.1
annexed hereto and by this reference made a part hereof,
which Exhibit describes all of Spencer's subsidiaries.
Spencer has all requisite corporate power and authority
to enter into this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2 Charter Documents. Complete and correct
copies of the Articles of Incorporation and By-Laws of
Spencer and all amendments thereto, have been or will be
delivered to Rako prior to the Closing.
SECTION 4.3 Financial Statements / Assets and
Liabilities. Spencer's financial statements for the
period ended August 30, 1995 and unaudited statements
for the six month period ended February 29, 1996, copies
of which are annexed hereto as Exhibit 4.3 and by this
reference made a part hereof, are true and complete in
all material respects, having been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis for the periods covered by
such statements, and fairly present the financial
condition of Spencer and results of its operations for
the periods covered thereby. Spencer has good and
marketable title to all of its assets and property to be
delivered to Rako hereunder (by way of Shareholders
tendering their outstanding shares of common stock to
Rako), free and clear of any and all liens, claims and
encumbrances, except as may be otherwise set forth
herein and in its financial statements or as otherwise
set forth in Exhibit 1.1.
SECTION 4.4 Tax Returns and Payments. All of Spencer's
tax returns (federal, state, city, county or foreign)
which are required by law to be filed on or before the
date of this Agreement, have been duly filed or extended
with the appropriate governmental authority. Spencer
has paid or accrued all taxes to be due on said returns,
any assessments made against Spencer and all other
taxes, fees and similar charges imposed on Spencer by
any governmental authority (other than those, the amount
or validity of which is being contested in good faith by
appropriate proceedings). No tax liens have been filed
and no claims are being assessed with respect to any
such taxes, fees or other similar charges.
SECTION 4.5 Required Authorizations. There have been
or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions
of any kind required by virtue of execution and delivery
of this Agreement by Spencer or the consummation by it
of the transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government
Regulations. Spencer is in compliance with all
applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards affecting its
properties and operations, imposed by the State of
Nevada, the State of California, the United States of
America or any state to which Spencer is subject.
SECTION 4.7 Litigation. With the exception of any
disclosure set forth in an exhibit attached hereto,
there is no material litigation, arbitration, proceeding
or investigation pending or threatened to which Spencer
is a party or which may result in any material change in
the business or condition, financial or otherwise, of
Spencer or in any of its properties or assets, or which
if determined against Spencer would have a material
adverse effect against Spencer, or which might result in
any liability on the part of Spencer, or which questions
the validity of this Agreement or of any action taken or
to be taken pursuant to or in connection with the
provisions of this Agreement, and to the best knowledge
of Spencer, there is no basis for any such litigation,
arbitration, proceeding or investigation except as
otherwise set forth herein.
SECTION 4.8 Patents, Trademarks, Rights and Technology.
Exhibit 4.8 annexed hereto and by this reference made a
part hereof, contains a complete list of all patents,
trademarks, service marks, trademark and service mark
registrations, applications and licenses with respect to
the foregoing owned or held by Spencer. Spencer has no
knowledge of any facts and nothing has come to its
attention that would lead it to believe that it has
infringed or misappropriated or is infringing upon any
trademark, copyright, patent or other similar right of
any person. No claim relating thereto is pending or to
the knowledge of Spencer is threatened. Spencer further
represents and warrants that its present technology,
systems and products are commercially viable and fully
operational as previously represented and demonstrated
to Rako.
SECTION 4.9 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with,
any governmental authority on the part of Spencer is
required in connection with the execution and delivery
of this Agreement or the carrying out of any
transactions contemplated hereby.
SECTION 4.10 Authority. Spencer and its Shareholders
representing no less than one hundred percent (100%) of
the issued and outstanding shares of Spencer common
stock of record, have approved this Agreement and duly
authorized the execution and delivery hereof. Spencer
has full power, authority and legal right to enter into
this Agreement on behalf of Spencer and its Shareholders
and to consummate the transactions contemplated hereby,
and all corporate action necessary to authorize the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has
been duly and validly taken. The execution and delivery
of this Agreement, the consummation of the transactions
contemplated hereby and compliance by Spencer with the
provisions hereof will not (a) conflict with or result
in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in
the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of
Spencer under, any of the terms, conditions or
provisions of the Articles of Incorporation or By-Laws
of Spencer, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to
which Spencer is party or by which it is bound; or (b)
violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Spencer or any of its
properties or assets. Execution of this Agreement
represents and acknowledges that the Spencer Board of
Directors and its Shareholders have ratified this
Agreement and agreed to proceeds as per the terms stated
herein.
SECTION 4.11 Ownership of Shares. Shareholders
representing 100% of the Spencer common stock currently
issued and outstanding and which stock is to be
transferred to Rako under this Agreement, have full
power and authority to transfer such shares of Spencer
common stock to Rako hereunder, and such shares are free
and clear of any liens, charges, mortgages, pledges or
encumbrances and such shares are not subject to any
valid claims as to the ownership thereof, or any rights,
powers or interest therein, by any third party.
SECTION 4.12 Investment Purpose . Spencer and
Shareholders represent that the recipients of the Rako
Shares hereunder are acquiring the shares for investment
purposes only and acknowledges that the Rako Shares
issued hereunder are "restricted securities" and may not
be sold, traded or otherwise transferred without
registration under the 1933 Act or exemption therefrom.
SECTION 4.13 Full Disclosure. None of the
representations and warranties made by Spencer and
Shareholders herein, or in any exhibit, certificate or
memorandum furnished or to be furnished by Rako, on its
behalf, contains or will contain any untrue statement of
material fact, or omit any material fact, the omission
of which would be misleading.
ARTICLE V
COVENANTS OF SPENCER
SECTION 5.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
(a) Except within the regular course of business,
Spencer and its subsidiaries will not enter into
any material agreement, contract or commitment,
whether written or oral, or engage in any
transaction outside the normal scope of its
business, without the prior written consent of Rako;
(b) Spencer and its subsidiaries will not declare
any dividends or distributions with respect to its
common stock or amend its Articles of Incorporation
or By-Laws, without the prior written consent of Rako;
(c) Except within the regular course of business
and for the unsecured note detailed in Exhibit 5.1,
attached hereto and by this reference made a part
hereof, Spencer and its subsidiaries will not incur
any indebtedness for money borrowed or issue any
debt securities, or incur or suffer to be incurred
any liability or obligation of any nature
whatsoever, or cause or permit any lien,
encumbrance or security interest to be created or
arise on or in any of its properties or assets,
without the prior written consent of Rako;
(d) Spencer will comply with all requirements
which federal or state law may impose on it with
respect to this Agreement and the transactions
contemplated hereby, and will promptly cooperate
with and furnish information to Rako in connection
with any such requirements imposed upon the parties
hereto in connection therewith; and
(e) Spencer shall grant to Rako and its counsel,
accountants and other representatives, full access
during normal business hours during the period
prior to the Closing to all its respective
properties, books, contracts, commitments and
records and, during such period, furnish promptly
to Rako and such representatives all information
relating to Spencer as Rako may reasonably request,
and shall extend to Rako the opportunity to meet
with Spencer's accountants and attorneys to discuss
the financial condition of Spencer.
SECTION 5.2 Affirmative Covenants. Prior to Closing,
Spencer will do the following:
(a) Use its best efforts to accomplish all actions
necessary to consummate this Agreement, including
satisfaction of all the conditions contained in
this Agreement;
(b) Promptly notify Rako in writing of any
materially adverse change in the financial
condition, business, operations or key personnel of
Spencer, any breach of its representations or
warranties contained herein, and any material
contract, agreement, license or other agreement
which, if in effect on the date of this Agreement,
should have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the transactions
contemplated in this Agreement are consummated, all
costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense or as
otherwise agreed to herein. Certain expenses related to
this Agreement shall be paid as provided by Section 6.3
below.
SECTION 6.2 Brokers and Finders. Each of the parties
hereto represents, as to itself, that no agent, broker,
investment banker or other firm or person is or will be
entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms
and conditions herein provided, each of the parties
hereto agree to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated by this
Agreement. In the event at any time after the Closing,
any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers
and/or directors of Rako or Spencer, as the case may be,
shall take all such necessary action.
SECTION 6.4 Indemnification.
(a) Spencer and Shareholders agree to defend and
hold Rako harmless against and in respect of any
and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, and
reasonable attorney fees, that Rako shall incur or
suffer, which arise out of, result from or relate
to any material breach of, or failure by Spencer
and/or Shareholders to perform any of its
representations, warranties, covenants and
agreements in this Agreement or in any exhibit or
other instrument furnished or to be furnished by
Spencer and Shareholders under this Agreement.
(b) Rako agrees to defend and hold Spencer and
Shareholders harmless against and in respect of any
and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, and
reasonable attorney fees, that Spencer and/or
Shareholders shall incur or suffer, which arise out
of, result from or relate to any material breach
of, or failure by Rako to perform any of its
representations, warranties, covenants and
agreements in this Agreement or in any exhibit or
other instrument furnished or to be furnished by
Rako under this Agreement.
SECTION 6.5 Confidentiality. All parties hereto agree
to keep confidential this Agreement and all information
and documents relating to this Agreement until such time
as the Agreement and the transactions contemplated
hereunder are made public by means of an appropriate
press release or by any other means reasonably assured
to make such information publicly available. It is the
intent of the parties hereto that as soon as practical
following the execution of this Agreement, Rako and
Spencer shall cause to be prepared and distributed in
the appropriate manner a press release publicly
announcing the execution of the Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
All obligations of Rako under this Agreement are subject
to the fulfillment and satisfaction by Spencer and Shareholders
prior to or at the time of Closing, of each of the following
conditions:
SECTION 7.1 Legal Action. No preliminary or permanent
injunction or other order by any federal or state court
which prevents the consummation of this Agreement or any
of the transactions contemplated by this Agreement shall
have been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations to
consummate the transactions contemplated hereby shall
not have been canceled pursuant to Article X hereof.
SECTION 7.3 Required Approvals. Rako and Spencer shall
have received all such approvals, consents,
authorizations or modifications as may be required to
permit the performance by Rako and Spencer of the
respective obligations under this Agreement, and the
consummation of the transactions herein contemplated,
whether from governmental authorities or other persons,
and Rako and Spencer shall each have received any and
all permits and approvals from any regulatory authority
having jurisdiction required for the lawful consummation
of this Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have been
obtained any and all permits, approvals and consents of
the Securities or "Blue Sky" Commissions of any
jurisdictions, and of any other governmental body or
agency, which counsel for Rako may reasonably deem
necessary or appropriate so that consummation of the
transactions contemplated by this Agreement may be in
compliance with all applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF RAKO
All obligations of Rako under this Agreement are
subject to the fulfillment and satisfaction by Spencer
and Shareholders prior to or at the time of the Closing,
of each of the following conditions, any one or more of
which may be waived by Rako.
SECTION 8.1 Representations and Warranties True at the
Closing. All representations and warranties of Spencer
and Shareholders contained in this Agreement will be
true and correct at and as of the time of the Closing,
and Spencer and Shareholders shall have delivered to
Rako certificates, dated the date of the Closing, to
such effect and in the form and substance satisfactory
to Rako, and signed, in the case of Spencer, by its
president and secretary.
SECTION 8.2 Performance. The obligations of Spencer
and Shareholders to be performed on or before the
Closing pursuant to the terms of this Agreement shall
have been duly performed at such time, and Spencer and
Shareholders shall have delivered to Rako a certificate,
dated the date of the Closing, to such effect and in
form and substance satisfactory to Rako.
SECTION 8.3 Authority. All action required to be taken
by, or on the part of Spencer and its Shareholders to
authorize the execution, delivery and performance of
this Agreement by Spencer and Shareholders and the
consummation of the transactions contemplated hereby,
shall have been duly and validly taken.
SECTION 8.4 Absence of Certain Changes or Events.
There shall not have occurred, since the date hereof,
any adverse change in the business, condition,
(financial or otherwise), assets or liabilities of
Spencer or any event or condition of any character
adversely affecting Spencer, and it shall have delivered
to Rako, certificates, dated the date of the Closing, to
such effect and in form and substance satisfactory to
Rako and signed, in the case of Spencer, by its
president and secretary.
SECTION 8.5 Acceptance by Spencer Shareholders. The
holders of record as of the Closing of an aggregate of
not less than one hundred percent (100%) of the issued
and outstanding shares of common stock of Spencer have
agreed to exchange their shares for the Rako Shares
specified herein.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SPENCER
All obligations of Spencer and Shareholders under this
Agreement are subject to the fulfillment and
satisfaction by Rako, prior to or at the time of
Closing, of each of the following conditions, any one or
more of which may be waived by Spencer and Shareholders.
SECTION 9.1 Representations and Warranties True at the
Closing. All representations and warranties of Rako
contained in this Agreement will be true and correct at
and as of the time of the Closing, and Rako shall have
delivered to Spencer a certificate, dated the date of
the Closing, to such effect and in the form and
substance satisfactory to Spencer and Shareholders, and
signed, in the case of Rako, by its president and
secretary.
SECTION 9.2 Performance. Each of the obligations of
Rako to be performed on or before the Closing pursuant
to the terms of this Agreement shall have been duly
performed at the time of the Closing, and Rako shall
have delivered to Spencer a certificate, dated the date
of the Closing, to such effect and in form and substance
satisfactory to Spencer and Shareholders, and signed, in
the case of Rako, by its president and secretary.
SECTION 9.3 Authority. All action required to be taken
by, or on the part of Rako, to authorize the execution,
delivery and performance of this Agreement by Rako, and
the consummation of the transactions contemplated hereby
shall be duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events.
There shall not have occurred, since the date hereof,
any adverse change in the business, condition,
(financial or otherwise), assets or liabilities of Rako
or any event or condition of any character adversely
affecting Rako and it shall have delivered to Spencer,
certificates, dated the date of the Closing, to such
effect and in form and substance satisfactory to Spencer
and Shareholders and signed, in the case of Rako, by its
president and secretary.
SECTION 9.5 Action by Rako Shareholders. Prior to the
Closing of this Agreement, the shareholders of Rako
shall have ratified this Agreement and the transactions
contemplated hereunder, and shall have approved the
amendments to the Rako Articles of Incorporation and
elected new directors as set forth in Section 1.4 above.
The current directors and officers of Rako shall have
submitted their resignations as directors and officers
of Rako effective on the Closing of this Agreement or at
such other time as mutually agreed to by Rako and Spencer.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything
herein or elsewhere to the contrary, this Agreement may
be terminated:
(a) By mutual agreement of all the parties hereto
at any time;
(b) By the board of directors of Rako at any time
prior to the Closing if:
(i) a condition to performance by Rako under
this Agreement or a covenant of Spencer and/or
Shareholders contained herein shall not be
fulfilled on or before the time of the Closing
or at such other time and date specified for
the fulfillment for such covenant or
condition; or
(ii) a material default or breach of this
Agreement shall be made by Spencer,
Shareholders, or any individual Shareholder.
(c) By the board of directors of Spencer at any
time prior to the Closing if:
(i) a condition to Spencer's and
Shareholders' performance under this Agreement
or a covenant of Rako contained in this
Agreement shall not be fulfilled on or before
the Closing or at such other time and date
specified for the fulfillment of such covenant
or conditions; or
(ii) a material default or breach of this
Agreement shall be made by Rako.
SECTION 10.2 Effect of Termination. If this Agreement
is terminated, this Agreement, except as to Section 11.1
and Section 11.2, shall no longer be of any force or
effect and there shall be no liability on the part of
any party or its respective directors, officers or
stockholders; provided however, that in the case of a
Termination without cause by a party or a termination
pursuant to Sections 10.1(b)(i) or 10.1(c)(i) hereof
because of a prior material default under or a material
breach of this Agreement by another party, the damages
which the aggrieved party or parties may recover from
the defaulting party or parties shall in no event exceed
the amount of out-of-pocket costs and expenses incurred
by such aggravated party or parties in connection with
this Agreement, and no party to this Agreement shall be
entitled to any injunctive relief.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. All costs and expenses
incurred in connection with this Agreement will be paid
by the party incurring such expenses unless otherwise
expressly provided for herein. In the event of any
termination of this Agreement pursuant to Section 10.1,
subject to the provisions of Section 10.2, Rako and
Spencer will each bear their own respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time
prior to the Closing date:
(a) Rako may (i) extend the time for the
performance of any of the obligations or other acts
of Spencer and/or Shareholders, (ii) waive any
inaccuracies in the representations and warranties
of Spencer and/or Shareholders contained herein or
in any document delivered pursuant hereto by
Spencer and Shareholders, and (iii) waive
compliance with any of the agreements or conditions
contained herein to be performed by Spencer and/or
Shareholders. Any agreement on the part of Rako to
any such extension or waiver shall be valid only if
set forth in an instrument, in writing, signed on
behalf of Rako;
(b) Spencer and Shareholders may (i) extend the
time for the performance of any of the obligations
or other acts of Rako, (ii) waive any inaccuracies
in the representations and warranties of Rako
contained herein or in any document delivered
pursuant hereto by Rako and (iii) waive compliance
with any of the agreements or conditions contained
herein to be performed by Rako. Any agreement on
the part of Spencer and Shareholders to any such
extension or waiver shall be valid only if set
forth in an instrument, in writing, signed on
behalf of Spencer and Shareholders.
SECTION 11.3 Notices. Any notice to any party hereto
pursuant to this Agreement shall be in writing and given
by Certified or Registered Mail or by facsimile,
addressed as follows:
Copy to:
Rako Corporation c/o Leonard E. Neilson
3256 Agate Court Attorney at Law
Boise, Idaho 83705 1121 East 3900 South, Suite C-200
Salt Lake City, Utah 84124
Copy to:
Spencer Entertainment, Inc. --------------
9701 Wilshire Blvd., Suite 1200 --------------
Beverly Hills, California 90212 ---------------
Additional notices are to be given as to each
party, at such other address as should be designated in
writing complying as to delivery with the terms of this
Section 11.3. All such notices shall be effective when
sent, addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall
inure to the benefit of and be binding upon the parties
hereto and the respective successors and assigns.
Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement.
SECTION 11.5 Counterparts. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed an original and together shall
constitute one document. The delivery by facsimile of
an executed counterpart of this Agreement shall be
deemed to be an original and shall have the full force
and effect of an original executed copy.
SECTION 11.6 Severability. The parties hereto agree
and affirm that none of the provisions herein is
dependent upon the validity of any other provision, and
if any part of this Agreement is deemed to be
unenforceable, the remainder of the Agreement shall
remain in full force and effect.
SECTION 11.7 Headings. The Article and Section
headings are provided herein for convenience of
reference only and do not constitute a part of this
Agreement.
SECTION 11.8 Governing Law. This Agreement shall be
governed by the laws of the State of Idaho. Any action
to enforce the provisions of this Agreement shall be
brought in a court of competent jurisdiction in the
State of Idaho and in on other place.
SECTION 11.9 Survival of Representations and
Warranties. All terms, conditions, representations and
warranties set forth in this Agreement or in any
instrument, certificate, opinion, or other writing
providing for in it, shall survive the Closing and the
delivery of the Rako Shares issued hereunder at the
Closing, for a period of one year from the Closing
regardless of any investigation made by or on behalf of
any of the parties hereto.
SECTION 11.10 Assignability. This Agreement shall not
be assignable by any of the parties hereto without the
prior written consent of the other parties.
SECTION 11.11 Amendment. This Agreement may be amended
with the approval of Shareholders and the boards of
directors of Rako and Spencer at any time before or
after approval thereof by stockholders of Rako, if
required, and Spencer; but after such approval by the
Rako shareholders, no amendment shall be made which
substantially and adversely changes the terms hereof.
This Agreement may not be amended except by an
instrument, in writing, signed on behalf of each of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement in a manner
legally binding upon them as of the date first above
written.
"Rako"
RAKO CORPORATION
Attest:
By: _______________________ ______________________
Its: President Secretary
"Spencer"
SPENCER ENTERTAINMENT, INC..
Attest:
By: _______________________ ______________________
Its: President Secretary
ARTICLES OF INCORPORATION
OF
BELL, SILVER MINING & MILLING CORPORATION
KNOW ALL MEN BY THESE PRESENTS: That we, the
undersigned, have this day voluntarily associated
ourselves for the purpose of forming a corporation under
the laws of the State of Idaho, and we do hereby certify:
I.
That the corporate name of this organization shall
be BELL SILVER MINING AND MILLING CORPORATION.
II.
That the purposes and objects for which said
corporation is formed, is
as follows;
1. To form a private profit-making corporation.
2. To purchase, locate, lease, or otherwise,
acquire, mines, mining claims, mining rights and lands
and any interest therein, and explore, work, exercise,
process, develop, and turn to account the same; to
quarry, mine, smelt, refine, dress, amalgamate, and
prepare for market, ore metal and mineral substances of
all kinds and to carry on any other operations or
business which may seem necessary, convenient, or
incidental to any of the objects of the company; to buy,
sell, manufacture, and deal in minerals, plants,
machinery, implements, conveniences, provisions, and
things capable of being used in connection with the
mining or other operations of this corporation or
required by workmen and others employed by the company;
to construct, carry out, maintain, improve, manage,
work, control, and superintend, any roads, ways,
railways, bridges, reservoirs, watercourses, aqueducts,
wharves, furnaces, mills, crushing works, hydraulic
works, factories, warehouses and other works and
conveniences which may seem necessary., convenient, or
incidental to any object of the company and to
contribute to subsidize, or otherwise aid or take part in any such
operations.
3. To organize or cause to be organized under the laws
of the State of Idaho, or of any other State of the
United States of America, or of the District of
Columbia, or of any territory, dependency, colony or
possession of the United States of America, or of any
foreign country, corporation or corporations for the
purpose of transacting, promoting or carrying on any or
all of the objects or purposes for which the corporation
is organized, and to dissolve, wind up, liquidate, merge
or consolidate any such corporation or corporations or
to cause the same to be dissolved, wound up, liquidated,
merged or consolidated.
4. To buy, sell, exchange, encumber, lease or transfer,
or carry on any transaction with or concerning real and
personal property which will forward the mining operation.
5. To erect any structure, structures, or buildings
necessary to carry forward the purposed above set-forth.
6. To hire and retain workmen, laborers or any other
employees necessary for the carrying out of the proposed
mining operation.
7. To issue certificates of stock in the proposed
corporation, which will be transferable upon the
approval of the Board of Directors.
8. To enter into any financial arrangements that may be
necessary to effect the above purposes, including but
not limited to the public sale of stock, floating of
debentures, borrowing of monies, purchase of other
corporations stock, purchase of public and private
debentures and such other transactions as may appear
convenient and necessary.
III
The duration of this corporation shall be perpetual.
IV.
The location and post office address of the
corporation's registered office
in this State shall be at Kellogg, Idaho.
V.
The total number of authorized shares of this
corporation shall be Ten Million (10,000,000),
non-assessable; all shares shall be on one class, common
stock with a par value of ten (10Cent) cents per share,
aggregating a dollar value capitalization of
$1,000,000.00. All shares shall be non-assessable.
VI.
The corporate Board of Directors shall consist of not
more than five (5) nor less than three (3) stockholders)
to be elected by the stockholders at their
organizational meeting and thereafter at the annual
stockholders meeting. The first directors of this
corporation shall serve one (1) year, and until their
successors are elected and qualified, unless replaced
earlier.
VII.
The names and post office addresses of each of the
incorporators together with the subscribed shares of
corporate stock of each are as follows:
Ronald Fuller, Pritchard, Idaho 1000 shares
Donald D. Wilch,328 W. 8th, Spokane, Washington 1000 shares
Paul Narkin, Rt. 1, Box 329, Hayden Lake, Idaho 1000 shares
VII.
This corporation may acquire, hold, mortgage, pledge or
dispose of the shares, bonds, securities., and other
evidence of indebtedness of any domestic or foreign
corporation, public, quasi public, or private, including
the right to deal in its own stock, authority to make,
alter or repeal the by-laws of the corporation; to fix
the amount to be preserved as or for working capital or
for any other proper purpose; to fund such reserve or
reserves, and to abolish any such reserve or reserves,
fund or funds; to authorize and cause to be executed
mortgages and liens upon the real and personal property
of this corporation; all corporate authority to so act
shall be vested in the Board of Directors subject to the
power of the shareholders to change or repeal such
by-laws (Provided, However, that the Board of Directors
shall not make or alter any by-laws fixing their number,
qualification and term of office.)
IN TESTIMONY WHEREOF, The undersigned incorporators,
each of whom is a person of full age, have hereunto subscribed
these articles this 9th day of October 1968, at Kellogg, Idaho,
_____________________________
Ronald Fuller
_____________________________
Donald D. Wilch
_____________________________
Paul Narkin
STATE OF IDAHO)
)ss.
County of Shoshone)
On this 9th Day of October 1968, before me, a Notary
Public in and for the State of Idaho, personally appeared
RONALD FULLER, DONALD D. WILCH and PAUL NARKIN, know to me to be the
persons whose signatures are affixed to the foregoing
Articles of Incorporation, and acknowledged to me that
they executed the same as their free act and deed, and
each of the said persons did depose on oath before me
that he is of full age.
Notary Public in and
for the State of
Idaho,. Residing at
Kellogg, Idaho.
My commission expires
AFFIDAVIT AS TO NON-PRODUCTIVE STATUS OF MINING COMPANY
WE, THE UNDERSIGNED, being all of the incorporators
of BELL SILVER MINING AND MILLING CORPORATION, Kellogg,
Idaho, upon first being sworn, do jointly, and each of
us, depose and state that said BELL SILVER MINING AND
MILLING CORPORATION is now a NON-PRODUCTIVE joining
company according to the applicable statutes of the
State of Idaho.
INCORPORATORS OF-BELL SILVER
MINING AND MILLING CORPORATION
____________________________
Ronald Fuller
____________________________
Donald D. Wilch
____________________________
Paul Narkin
STATE OF IDAHO )
)
County of Shoshone )
On this 9th day of October, 1968, before me, a
Notary Public in and for the State of Idaho, personally
appeared RONALD FULLER, DONALD D. WILCH, and PAUL
NARKIN, known to me to be the persons whose signatures
are affixed to the foregoing Affidavit, and acknowledged
to me that they executed the same as their free act and
deed, and each of the said persons did depose on oath
before me that he is of full age.
Notary Public in and
for the State of Idaho,
Residing at Kellogg, Idaho.
My commission expires
(S E A L)
CERTIFICATE OF AMENDMENTS OF
ARTICLES OF INCORPORATION
BY INCORPORATORS
KNOW ALL MEN BY THESE PRESENTS: That We, the
undersigned, constituting at least two-thirds of the
incorporators of the BELL SILVER MINING & MILLING
CORPORATION, do hereby certify as follows:
That BELL SILVER MINING & MILLING CORPORATION is a
corporation duly organized and existing under and by
virtue of the laws of the State of Idaho; that the
Articles of Incorporation of said Corporation were filed
in the office
of the Secretary of State on the 10th day of October, 1968.
That the undersigned constitute at least two-thirds
of the incorporators, to-wit: 2 of Incorporators out of
3 of Incorporators.
That said Corporation has issued no shares and has
accepted no subscription therefor since the filing of
its Articles of Incorporation with the Secretary of State.
That the signers hereof hereby adopt the following
amendments to the Articles of Incorporation, that is to
say, by amending Paragraph I, so that it shall, as
amended, read as follows, to-wit:
That the corporate name of this organization shall
be SILVER STRIKE MINING CO., INC.; and,
That is to say, by amending Paragraph V, so that it
shall, as amended, read as follows, to-wit:
The total number of authorized shares of this
corporation shall be Five Million (5,000,000),
non-assessable; all shall be of one class, common stock
with a par value of ten (10Cent) cents per share,
aggregating a dollar value capitalization of
$500,000.00. All shares shall be non-assessable.
IN WITNESS WHEREOF, the undersigned have executed
this certificate this 26th day of February, 1969.
________________________
Ronald Fuller
_________________________
Donald D. Wilch
STATE OF IDAHO)
:ss.
County of Shoshone )
RONALD FULLER and DONALD D. WILCH, Being first duly
sworn, each for himself, deposes and says: That he is
one of the Incorporators of the Corporation mentioned in
the foregoing certificate; that he has read said
certificate and that the statements therein made are
true of his own knowledge.
_______________________
Ronald Fuller
_______________________
Donald D. Wilch
SUBSCRIBED and sworn to before me this 26th day of
February, 1969.
Notary Public in and
for the State of Idaho,
Residing at Kellogg, Idaho.
My commission expires
CERTIFICATE OF AMENDMENTS OF
ARTICLES OF INCORPORATION
KNOW ALL MEN BY THESE PRESENTS: That at a meeting of
shareholders of Silver Strike Mining Co., Inc., held on
November 22, 1972, at 4 McKinley Avenue, Kellogg, Idaho,
for the purpose of considering change of the name of
said corporation into RAKO CORPORATION, more than
two-thirds of the shareholders of Silver Strike Mining
Co., Inc., either in person or by proxy voted in favor
of said change of name, specifically of the 1,600,000
shares of Silver Strike Mining Co., Inc., outstanding,
1,495,893 voted in favor of name change and 7,100 voted
against said name change, and from date hereof, the
corporate name of this said corporation shall be RAKO
CORPORATION.
IN WITNESS WHEREOF, the undersigned have executed
this Certificate this 15th day of May, 1973.
SILVER STRIKE MINING CO., INC.
_____________________________
ATTEST: President
______________________
Secretary
STATE OF Idaho )
ss.
County of Shoshone)
On this 15th day of May, 1973, before me, the
undersigned Notary Public in and for the State of
Washington, personally appeared the President and
Secretary respectively of SILVER STRIKE MINING CO.,
INC., an Idaho corporation, known to me to be the
persons whose signatures are affixed to the within
instrument and acknowledged to me that they executed the
same on behalf of said Corporation.
IN WITNESS WHEREOF, I have set my hand and affixed
my official seal the day and year in this certificate
first above appearing.
Notary Public for State of Idaho
Residing at Wallace, Idaho
CERTIFICATE OF AMENDMENTS OF
ARTICLES OF INCORPORATION
BY THE
BOARD OF DIRECTORS AND SHAREHOLDERS
Pursuant to Resolution passed by the Board of Directors
of RAKO Corporation, a special meeting of shareholders convened
at Kellogg, Idaho_, on October 26, 1973, at 7:00 P.M.,
said meeting having been duly and regularly called.
That at said meeting more than a majority of the issued
and outstanding stock of said Corporation were present
in person or by proxy. That the purpose of which said
meeting was called was to amend the Articles of
Incorporation of RAKO Corporation, an Idaho Corporation.
At said meeting the following Resolution was
submitted to
the stockholders for their vote, said Resolution
being as follows, to-wit:
"WHEREAS, it is desired to amend Paragraph Numbered II
of Articles of Incorporation of the RAKO Corporation
to provide specifically that the company is authorized
to enter into and engage in businesses unrelating to
mining.
NOW, THEREFORE, BE IT RESOLVED, that Paragraph
Numbered II of Articles of Incorporation of RAKO
Corporation is deleted and the following is adopted in
lieu thereof:
The Corporation is formed for the following purposes:
(1) To engage in and carry on the business of
mining, milling, concentrating, smelting,
treating of, preparing for market any and all
metals, minerals, including elements and compounds
not now known, but which may hereafter be discovered
or developed, also gold, silver, copper, lead, brass,
iron, steel and all kinds of ore,.metals and minerals,
and to locate mining claims, acquire, own, rent,
lease and deal in mines, minerals and mineral lands
of every kind, and description, including mill sites,
water rights, timber lands and timber claims and real
estate of any and all kinds.
(2) To purchase, to receive by way of gift,
subscribe for, invest in, and in all other ways
acquire import, lease, possess, maintain,
handle on consignment, own, hold for investment
or otherwise use, enjoy, exercise, operate,
manage, conduct, perform, make, borrow,
guarantee, contract in respect of, trade and
deal in, sell, exchange, let, lend, export,
mortgage, pledge I deed in trust, hypothecate,
encumber, transfer, assign and in all other
ways dispose of, design, develop, invent,
improve, equip, repair, alter, fabricate,
assemble, build, construct, operate,
manufacture, plant, cultivate, produce, market,
and in all other ways (whether like or unlike
any of the foregoing), deal in and with
property of every kind and character, real,
personal or mixed, tangible or intangible,
wherever situated and however held including,
but not limited to, money, credits, choses in
action, securities, stocks, bonds, warrants,
script, certificates, debentures, mortgages,
notes, commercial paper and other obligations
and evidences of interest in or indebtedness of
any person, firm or corporation, foreign or
domestic, or of any government or
subdivision or agency thereof, documents of
title, and accompanying rights, and every other
kind and character of personal property, real
property (improved or unimproved), and the
products and avails thereof, and every
character of interest therein and appurtenance
thereto, including, but not limited to,
mineral, oil, gas and water rights, all or any
part of any business and its incidents,
franchises, subsidies, charters, concessions,
grants, rights, powers or privileges, granted
or conferred by any government or subdivision
or agency thereof, and any interest in or part
of any of the foregoing, and to exercise in
respect thereof all of the rights, powers,
privileges, and immunities of individual owners
or holders thereof.
(3) To-hire and employ agents, servants and
employees, and to enter into agreements of
employment and collective bargaining
agreements, and to act as agent, contractor,
trustee, factor or otherwise, either along or
in company with others.
(4) To promote or aid in any manner, financially or
otherwise, any person, firm, association or
corporation, and to guarantee contracts and
other obligations.
(5) To let concessions to others to do any of the
things that this corporation is empowered to
do, and to enter into, make, perform and carry
out, contracts and arrangements of every kind
and character with any person, firm,
association or corporation, or any government
or authority or subdivision or agency thereof.
(6) To carry on any business whatsoever that this
corporation may deem proper or convenient in
connection with any of the foregoing purposes
or otherwise, or that it may deem calculated,
directly or indirectly, to improve the
interests of this corporation, and to do all
things specified in Chapter 1 of Title 30, I.C.
and to have and to exercise all powers
conferred by the laws of the State of Idaho on
corporations formed under the laws pursuant to
which and under which this corporation is
formed, as such laws are now in effect or may
at any time hereafter be amended, and to do any
and all things hereinabove set forth to the
same extent and as fully as natural persons
might or could do, either alone or in
connection with other persons, firms,
associations or corporations, and in any part
of the world.
The foregoing statement of purposes shall be
construed as a statement of both purposes and
powers, shall be liberally construed in aid of
the powers of this corporation, and the powers
and purposes stated in each clause shall,
except where otherwise stated, be in nowise
limited or restricted by any term or provision
of any other clause, and shall be regarded not
only as independent purposes, but the purposes
and powers stated shall be construed
distributively as each object expressed, and
the enumeration as to specific powers shall not
be construed as to limit in any manner the
aforesaid general powers, but are in
furtherance of, and in addition to and not in
limitation of said general powers."
That upon the aforesaid Resolution being put to
vote, it was found that stockholders having a two-third
(2/3) majority of the issued and outstanding stock of
the corporation voted in favor of said Resolution.
The Secretary's Report showed the vote was 1,090,000
shares in favor of said Resolution. There are 1,600,000
shares of issued and outstanding stock of said Corporation.
IN WITNESS WHEREOF, said RAKO CORPORATION has caused
its corporate seal to be hereunto affixed and this
certificate to be signed by its proper officers duly
authorized on this 26th day of October, 1973.
______________________________
President
ATTEST:
________________________
Secretary
STATE OF IDAHO )
:ss.
County of Shoshone)
On this 26th day of October, 1973, before me, the
undersigned Notary Public in and for the State of Idaho,
personally appeared the President and Secretary
respectively of RAKO CORPORATION, known to me to be the persons whose
names are subscribed to the foregoing instrument, and
acknowledged to me that they executed the same on behalf
of the said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this
certificate first above appearing.
_____________________________
Notary Public for State of Idaho
Residing at Wallace, Idaho
My Commission expires 4/15/77
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
RAKO CORPORATION
Pursuant to the provisions of the Idaho Code, the
following amendments to the Articles of Incorporation of
Rako Corporation, an Idaho corporation (the
"Corporation"), were adopted by the shareholders of the
Corporation on May 9, 1996, in the manner prescribed by
the Idaho Code.
FIRST: Article I of the Articles of Incorporation
is hereby amended to read as follows:
"I
The name of the Corporation shall be Spencer
Entertainment, Inc."
SECOND: Article II of the Articles of
Incorporation is hereby amended to read as follows:
"II
The purpose of this Corporation shall be to
engage in any lawful act or activity for which a
corporation may be organized under the Idaho
Business Corporation Act."
THIRD: Article V of the Articles of Incorporation
is hereby amended read as follows:
"V
The aggregate number of shares of all classes
of capital stock that this corporation shall have
authority to issue is 70,000,000 non-assessable
shares, 50,000,000 of which shall be of a class
designated as common stock (the "Common Stock") with
a par value of One Tenth of a Cent ($0.001) per
share, and 20,000,000 shares of which shall be of a
class designated as preferred stock (the "Preferred
Stock") with a par value of One Tenth of a Cent
($0.001) per share. The Preferred Stock shall have
preference as to dividends and to liquidation of the
Corporation. The Board of Directors of the Company
shall establish the specific rights, preferences,
privileges and restrictions of such Preferred Stock,
or any series thereof. Cumulative voting shall not
prevail in any election by the stockholders of this
corporation. No stockholder shall have any
preemptive rights to acquire the corporation's
unissued shares and any and all such existing
preemptive rights shall be extinguished.
The number of shares of the Corporation outstanding
at the time of adoption of the above amendments was
1,537,564, and the number of shares entitled to vote
thereon was 1,537,564. As to each of the amendments set
forth above, the number of shares consenting and voting
For each such amendment was 1,257,635, and the number of
shares voting Against each such amendment was -0-.
Also approved at the meeting was the proposal to
effect a one share for three shares reverse stock split
of the shares of the Company's common stock issued and
outstanding at the time of the meeting. As a result of
the reverse stock split and amendment to Article V
changing the capitalization from 100,000,000 shares of
$.005 par value common stock to 50,000,000 shares of
$.001 par value common stock, the stated capital of the
corporation was reduced by $7,175 to $513.
DATED this 9th day of May, 1996.
KEN MONTEE, President
RAY MONTEE, Secretary
ACKNOWLEDGEMENT
STATE OF ______________)
:ss
COUNTY OF _____________)
THE UNDERSIGNED, the President and Secretary
respectively of Rako Corporation, a corporation
organized and existing under the laws of the State of
Idaho, do hereby certify that at a Special Meeting of
Shareholders of said Corporation properly called on May
9, 1996, the foregoing Amendment to the Articles of
Incorporation for said Corporation was duly adopted and
authorized by more than fifty percent (50%) of the
issued and outstanding shares of said Corporation, which
shares were properly represented and voted at said
Meeting. Also that said Meeting was held pursuant to a
resolution of the Board of Directors setting forth the
amendments and directing that it be submitted to a vote
at the Meeting, and that written notice of said Special
Meeting setting forth the proposed amendments was given
by first class mail to each shareholder of record
entitled to vote thereon at least twenty (20) days prior
to the holding of the Meeting. The Undersigned further
certify that the foregoing Amendment correctly sets
forth the amendments adopted by the shareholders and
correctly states the date of adoption thereof, the
number of shares outstanding, the number of shares voted
for and the number of shares voted against each such
amendment.
_____________________________
KEN MONTEE, President
_____________________________
RAY MONTEE, Secretary
SUBSCRIBED AND SWORN to before me this ____ day of
_________, 1996.
______________________________
NOTARY PUBLIC
Residing at:__________________
My Commission Expires:
______________________
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
SPENCER ENTERTAINMENT, INC.
Pursuant to the provisions of the Idaho Code, the
following amendment to the Articles of Incorporation of
Spencer Entertainment, Inc., an Idaho corporation (the
"Corporation"), were adopted by the shareholders of the
Corporation on March 17, 1998, in the manner prescribed
by the Idaho Code.
FIRST: Article I of the Articles of Incorporation
is hereby amended to read as follows:
"I
The name of the Corporation shall be Rako Corporation."
The number of shares of the Corporation outstanding
at the time of adoption of the above amendment was
512,515 and the number of shares entitles to vote
thereon was 512,515. As to each of the amendment set
forth above, the number of shares consenting and voting
FOR the amendment was 436,701 and the number of shares
voting AGAINST the amendment was -O-.
Also approved at the meeting was the proposal to
effect it two (2) shares-for-one (1) share FORWARD stock
split. As a result of the forward stock split, the
stated capital of the corporation increased from $513 to
$1,026.
DATED this 30 day of March, 1998.
__________________________
Ken Montee, President
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
RAKO CORPORATION
THE UNDERSIGNED President of Rako Corporation., an
Idaho Corporation. pursuant to the provisions of Section
30-1-61 of the Idaho Business Corporation Act, for the
purpose of amending the Articles of Incorporation of
said Corporation, hereby certifies as follows:
That the shareholders of said Corporation at its
Special Meeting in Lieu of Annual Meeting of
Shareholders duly convened and held on the 25th day of
March 1996, adopted resolutions to amend the Articles of
Incorporation of the Corporation as follows:
(1) Article V shall be amended to read as follows".
"Article V
The total number of authorized shares of this
corporation shall be one hundred million (100,000,000)
non-assessable; all shares shall be one class, common
stock, with a par value of one-half cent ($.005) per
share, aggregating a dollar value capitalization of
$500,000. All shares shall be non-assessable."
The foregoing amendments to the Articles of
Incorporation were duly adopted by- the shareholders of
the Corporation on the 25th day of March, 1996.
At the date of the Meeting of Shareholders, the number
of shares of the Corporation's common stock outstanding
and entitled to vote on the foregoing amendment to the
Articles of Incorporation was one million five-hundred
thirty-seven thousand, five hundred and sixty-four
(1,537,564). A total of 1,261,560 shares voted FOR
amendment (1) (representing approximately 82% of the
issued and outstanding shares of the Corporation) and
13,750 shares voted AGAINST amendment (1) (representing
approximately .008% of the issued and outstanding shares
of the Corporation).
This amendment to the Articles of Incorporation to
change the authorization and par value
did not result in any change in the Company's
capitalization as it remains at $500,000.
DATED this 4th day of April, 1996.
The undersigned President of the Corporation hereby
declare that the foregoing Certificate of Amendment to
the Articles of Incorporation is true and correct to the
best of their knowledge and belief.
KEN MONTEE, President
Rako Corporation
STATE OF IDAHO)
) ss.
COUNTY OF ADA )
On this 4th day of April, 1996, before me. the
undersigned, a Notary Public, in
and for said State, personally appeared KEN MONTEE who
first being duly sworn did each hereby affirm that he
is the President of Rako Corporation, an Idaho
Corporation, and that he did execute the foregoing
Amendment to the Articles of Incorporation on behalf of
said Corporation and that such instrument was executed
pursuant to a resolution of the Board of Directors and
ratified by more than 50% margin of the issued and
outstanding shares of the Corporation's common stock.
NOTARY PUBLIC
Residing at: Boise
My Commission Expires: 10/14/99
2
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
RAKO CORPORATION
ARTICLE I
Offices
Section 1. PRINCIPAL OFFICE. The principal
office for the transaction of the business of the
corporation is hereby fixed and located at 3256 Agate
Court, Boise, ID. The Board of Directors is hereby
granted full power and authority to change said
principal office from one location to another.
Section 2. OTHER OFFICES. Branch or
subordinate offices may at any time be established by
the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE 11
Meetings of Shareholders
Section 1. MEETING PLACE. The annual
meetings of shareholders and all other meetings of
shareholders shall be held either at the principal
office or at any other place within or without the State
of Idaho which may be designated either by the board of
directors, pursuant to authority hereinafter granted to
said board, or by the written consent of all
shareholders entitled to vote thereat, given either
before or after the meeting and filed with the Secretary
of the corporation.
Section 2. ANNUAL MEETINGS. The annual
meetings of shareholders shall be held on the 2nd
Wednesday of January each year, at the hour of 2@00
o'clock p.m. of said day commencing with the year 1996,
provided, however, that should said day fall upon a
legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on
the next day thereafter ensuing which is not a legal
holiday.
Written notice of each annual meeting signed by the
president or a vice president, or the secretary, or an
assistant secretary, or by such other person or persons
as the directors shall designate, shall be given to each
shareholder entitled to vote thereat, either personally
or by mail or other means of written communication,
charges prepaid, addressed to such shareholder at his
address appearing on the books of the corporation or
given by him to the corporation for the purpose of
notice. If a shareholder gives no address, notice shall
be deemed to have been given to him, if sent by mail or
other means of written communication addressed to the
place where the principal office of the corporation is
situated, or if published at least once in some
newspaper of general of the corporation is situated, or
if published at least once in some newspaper of general
circulation in the county in which said office is
located. All such notices shall be sent to each
shareholder entitled thereto not less than ten (10) nor
more than sixty (60) days before each annual meeting,
and shall specify the place, the day and the hour of
such meeting, and shall also state the purpose or
purposes for which the meeting was called.
Section 3. SPECIAL MEETINGS. Special meetings of
the shareholders, for any purpose or purposes
whatsoever, may be called at any time by the president
or by the board of directors, or by one or more
shareholder holding not less than 60% of the voting
power in the corporation. Except in special cases where
other express provision is made by statute, notice of
such special meetings shall be given in the same manner
as for annual meetings of shareholders. Notices of any
special meeting shall specify in addition to the place,
day and hour of such meeting, the purpose or purposes
for which the meeting is called.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF.
Any shareholders' meeting, annual or special, whether
or not a quorum is present, may be adjourned from time
to time by the vote of a majority of the shares, the
holders of which are either present in person or
represented by a proxy thereat, but in the absence of a
quorum, no other business may be transacted at any such
meeting.
When any shareholders' meeting, either annual or
special, is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the
case of an original meeting. Save as aforesaid, it
shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the
meeting at which such adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any
shareholder entitled to vote has been absent from any
meeting of shareholders, whether annual or special, an
entry in the minutes to the effect that notice has been
duly given shall be conclusive and incontrovertible
evidence that due notice of such meeting was given to
such shareholders, as required by law and the by-laws of
the corporation.
Section 6. VOTING. At all annual and special
meetings of stockholders entitled to vote
thereat, every holder of stock issued to a bona fide
purchaser of the same, represented by the holders
thereof, either in person or by proxy in writing, shall
have one vote for each share of stock so held and
represented at such meetings, unless the Articles of
Incorporation of the company shall otherwise provide, in
which event the voting rights, powers and privileges
prescribed in the said Articles of Incorporation shall
prevail. Voting for directors and, upon demand of any
stockholder, upon any question at any meeting shall be
by ballot.
Section 7. QUORUM. The presence in person or
by proxy of the holder of a majority of the shares
entitled to vote at any meeting shall constitute a
quorum for the transaction of business. The
shareholders present at a duly called or held meeting at
which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 8. CONSENT OF ABSENTEES. The
transaction of any meeting of shareholders, either
annual or special, however called and noticed, shall be
as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either
in person or by proxy, and if either before or after the
meeting, each of the shareholders entitled to vote, not
present in person or by proxy, sign a written Waiver of
Notice, or a consent to the holding of such meeting, of
an approval of the minutes thereof All such waivers,
consents or approvals shall be filed with the corporate
records or made a part of the minutes of this meeting.
Section 9. PROXIES. Every person entitled to
vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by
a written proxy, executed by such person or his duly
authorized agent and filed with the secretary of the
corporation-, provided that no such proxy shall be valid
after the expiration of eleven (I 1) months from the
date of its execution, unless the shareholder executing
it specifies therein the length of time for which such
proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
ARTICLE III
Section 1. POWERS. Subject to the
limitations of the Articles of Incorporation or the
bylaws, and the provisions of the Idaho Statutes as to
action to be authorized or approved by the shareholders,
and subject to the duties of directors as prescribed by
the by-laws, all corporate powers shall be exercised by
or under the authority of, and the business and affairs
of the corporation shall be controlled by the board of
directors. Without prejudice to such general powers,
but subject to the same limitations, it is hereby
expressly declared that the directors shall have the
following powers to wit:.
First -- To select and remove all the other
officers, agents and employees of the corporation,
prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of
Incorporation or the by-laws, fix their compensation,
and require from them security for faithful service.
Second To conduct, manage and control the
affairs and business of the corporation, and to make
such rules and regulations therefore not inconsistent
with the law, with the Articles of Incorporation or the
by-laws, as they may deem best.
Third To change the principal office for the
transaction of the business of the corporation from one
location to another within the same county as provided
in Article 1, Section 1, hereof, to fix and locate from
time to time one or more subsidiary offices of the
corporation within or without the State of Idaho, as
provided in Article 1, Section 2, hereof, to designate
any place within or without the State of Idaho for the
holding of any shareholders' meeting or meetings; and to
adopt, make and use a corporate seal, and to prescribe
the forms of certificates from time to time, as in their
judgment they may deem best, provided such seal and such
certificates shall at all times comply with the
provisions of law.
Fourth -- To authorize the issue of shares of
stock of the corporation from time to time, upon such
terms as may be lawful, in consideration of money paid,
labor done or services actually rendered, debts or
securities canceled, or tangible or intangible property
actually received, or in the case of shares issued as a
dividend, against amounts transferred from surplus to
stated capital.
Fifth To borrow money and incur indebtedness for
the purposes of the corporation, and to cause to be
executed and delivered therefore, in the corporate name,
promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of
debt and securities therefore.
Sixth To appoint an executive committee and
other committees and to delegate to the executive
committee any of the powers and authority of the board
IN management of the business and affairs of the
corporation, except the power to declare dividends and
to adopt, amend or repeal by-laws. The executive
committee shall be composed of one or more directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.
The authorized number of directors of the corporation
shall not be less than three (3) and no more than
fifteen (15).
Section 3. ELECTION AND TERM OF OFFICE.
The directors shall be elected at each annual meeting of
shareholders, but if any such annual meeting is not
held, or the directors are not elected thereat, the
directors may be elected at any special meeting of
shareholders. All directors shall hold office until
their respective successors are elected.
Section 4. VACANCIES. Vacancies in the
board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a
sole remaining director, and each director so elected
shall hold office until his successor is elected at an
annual or a special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall
be deemed to exist in case of the death, resignation or
removal of any director, or if the authorized number of
directors be increased, or if the shareholders fall at
any annual or special meeting of shareholders at which
any director or directors are elected to elect the full
authorized number of directors to be voted for at that
meeting.
The shareholders may elect a director or directors at
any time to fill any vacancy or vacancies not filled by
the directors. If the board of directors accept the
resignation of a director tendered to take effect at a
future time, the board or the shareholders shall have
the power to elect a successor to take office when the
resignation is to become effective.
Section 5. PLACE OF MEETING. Regular
meetings of the board of directors shall be held at a
place within or without the State of Idaho which has
been designated from time to time by resolution of the
board or by written consent of all members of the board
In the absence of such designation regular meeting shall
be held at the principal office of the corporation.
Special meetings of the board may be held either at a
place so designated, or at the principal office.
Section 6. ORGANIZATION MEETING.
Immediately following each annual meeting of
shareholders, the board of directors shall hold a
regular meeting for the purpose of organization,
election of officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other
regular meetings of the board of directors shall be held
without call on the first Monday of each month at the
hour of 9:00 o'clock a.m. of said day-, provided,
however, should said day fall upon a legal holiday, then
said meeting shall be held at the same time on the next
day thereafter ensuing which is not a legal holiday.
Notice of all such regular meetings of the board of
directors is hereby dispensed with.
Section 8. SPECIAL MEETINGS. Special meetings of
the board of directors for any purpose or purposes shall
be called at any time by the president, or, if he is
absent or unable or refuses to act, by any vice
president or by any two directors. Written notice of
the time and place of special meeting shall be delivered
personally to the directors or sent to each director by
mail or other form of written communication, charges
prepaid, addressed to him at his address as it Is shown
upon the records or is not readily ascertainable, at the
place in which the meetings of the directors are
regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States
mail or delivered to the telegraph company in the place
in which the principal office of the corporation is
located at least twenty-four (24) hours prior to the
time of the holding of the meeting. Such mailing,
telegraphing or delivery as above provided shall be due,
legal and personal notice to such director.
Section 9. NOTICE OF ADJOURNMENT. Notice
of the time and place of holding an adjourned meeting
need not be given to absent directors, if the time and
place be fixed at the meeting adjourned.
Section 10. ENTRY OF NOTICE. Whenever any
director has been absent from any special meeting of the
board of directors, an entry in the minutes to the
effect that notice has been duly given shall be
conclusive and incontrovertible evidence that due notice
of such special meeting was given to such director, as
required by law and the by-laws of the corporation.
Section 11. WAIVER OF NOTICE. The
transactions of any meeting of the board of directors,
however called and noticed or wherever held, shall be as
valid as though had a meeting duly held after regular
call and notice, if a quorum be present, and if, either
before or after the meeting, each of the directors not
present sign a written waiver of notice or a consent to
holding such meeting or an approval of the minutes
thereof All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the
minutes of the meeting.
Section 12. QUORUM. A majority of the
authorized number of directors shall be necessary to
constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or
decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is
present, shall be regarded as the act of the board of
directors, unless a greater number be required by law or
by the Articles of Incorporation.
Section 13. ADJOURNMENT. A quorum of the
directors may adjourn any directors' meeting to meet
again at a stated day and hour; provided however, that
in the absence of a quorum, a majority of the directors
present at any director's meeting, either regular or
special, may adjourn from time to time until the time
fixed for the next regular meeting of the board.
Section 14. FEES AND COMPENSATION. Directors
shall not receive any stated salary
for their services as directors, but by resolution of
the board, a fixed fee, with or without expenses of
attendance may be allowed for attendance at each meeting.
ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the
corporation shall be a president, a secretary, and a
treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the
board, one or more vice presidents, one or more
assistant secretaries, one or more assistant treasurers,
and such other officers as may be appointed in
accordance with the provisions of Section 3 of this
Article. Officers other than president and chairman of
the board need not be directors. Any person may hold
two or more offices.
Section 2. ELECTION. The officers of the
corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5
of this Article, shall be chosen annually by the board
of directors, and shall hold his office until he shall
resign or shall be removed or other-wise disqualified to
serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The
board of directors may appoint such other officers as
the business of the corporation my require, each of whom
shall hold office for such period, have such authority
and perform such duties as are provided in the by-laws
or as the board of directors may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION. Any
officer may be removed, either with or without cause, by
a majority of the directors at the time in office, at
any regular or special meeting of the board.
Any officer may resign at any time by giving written
notice to the board of directors or to the president, or
to the secretary of the corporation. Any such
resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein,
and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it
effective.
Section 5. VACANCIES. A vacancy in any
office because of death, resignation, removal,
disqualification or any other cause shall be filled in
the manner prescribed in the by-laws for regular
appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The
chairman of the Board, if there shall be such an
officer, shall, if present, preside at all meetings of
the board of directors and exercise and perform such
other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed
by the by-laws.
Section 7. PRESIDENT. Subject to such
supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be
such an officer, the president shall be the chief
executive officer of the corporation and shall, subject
to the control of the board of directors, have general
supervision, direction and control of the business and
officers of the corporation. He shall preside at all
meetings of the shareholders and in the absence of the
chairman of the board, of it there be none, at all
meetings of the board of directors. He shall be
ex-officio a member of all the standing committees,
including powers and duties of management usually vested
in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed
by the board of directors or the by-laws.
Section 8. VICE PRESIDENT. In the absence
or disability of the president, the vice president in
order of their rank as fixed by the board of directors,
or if not ranked, the vice president designated by the
board of directors, shall perform all 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. The vice presidents shall have such other
powers and perform such other duties as from time to
time may be prescribed for them respectively by the
board of directors or the bylaws.
Section 9. SECRETARY. The secretary shall
keep, or cause to be kept, a book of minutes at the
principal office or such other place as the board of
directors may order, of all meetings of directors and
shareholders, with the time and place of holding,
whether regular or special, and if special, how
authorized, the notice thereof given, the names of those
present at directors' meetings, the number of shares
present or represented at the shareholders' meetings and
the proceedings thereof.
The secretary shall keep, or cause to be kept, at the
principal office, a share register, or a duplicate share
register, showing the names of the shareholders and
their addresses-, the number and classes of shares held
by each-, the number and date of cancellation of every
certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice
of all the meetings of the shareholders and of the board
of directors required by the by-laws or by law to be
given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the
board of directors or the by-laws
Section 10. TREASURER. The treasurer shall
keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and
business assets, liabilities, receipts, disbursement,
gains, losses, capital, surplus, paid-in surplus, and
surplus arising from a reduction of stated capital,
shall be classified according to source and shown in a
separate account. The books of the account shall at all
times be open to inspection by any director.
The treasurer shall deposit all moneys and other
valuables in the name and to the credit of the
corporation with such depositories as may be designated
by the board of directors. He shall disburse the funds
of the corporation as may be ordered by the board of
directors, shall render to the president and directors,
whenever they request it, an account of all of his
transaction as treasurer and of the financial condition
of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the
board of directors or the by-laws.
ARTICLE V
Miscellaneous
Section 1. RECORD DATE AND CLOSING STOCK BOOKS.
The board of directors may fix a time, in the
future, not exceeding fifteen (I 5) days preceding the
date of any meeting of shareholders, and not exceeding
thirty (30) days preceding the date fixed for the
payment of any dividend or distribution, or for the
allotment of rights, or when any change or conversion or
exchange of shares shall go into effect, as a record
date for the determination of the shareholders entitled
to notice of and to vote at any such meeting, or
entitled to receive any such dividend or distribution,
or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or
exchange of shares, and in such case only shareholders
of record on the date so affixed shall be entitled to
notice of and to vote at such meetings, or to receive
such dividend, distribution or allotment of rights, or
to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books
of the corporation after any record date fixed as
aforesaid. The board of directors may close the books
of the corporation against transfers of shares during
the whole, or any part of any such period-
Section 2. INSPECTION OF CORPORATE RECORDS.
The share register or duplicate share register, the
books of account, and minutes of proceeding of the
shareholders and directors shall be open to inspection
upon the written demand of any shareholder or the holder
of a voting trust certificate, at any reasonable time,
and for a purpose reasonably related to his interests as
a shareholder, or as the holder of a voting trust
certificate, and shall be exhibited at any time when
required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such
inspection may be made in person or by an agent or
attorney, and shall include the right to make extracts.
Demand of inspection other than at a shareholders'
meeting shall be made in writing upon the president,
secretary or assistant secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. All
checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed
or endorsed by such person or persons and in such a
manner as, from time to time, shall be determined by
resolution of the board of directors.
Section 4. ANNUAL REPORT. The board of directors
of the corporation shall cause to be
sent to the shareholders not later than one hundred
twenty (120) days after the close of the fiscal or
calendar year an annual report.
Section 5. CONTRACT, ETC., HOW EXECUTED.
The board of directors, except as in the by-laws
otherwise provided, may authorize any officer or
officers, agent or agents, to enter into any contract,
deed or lease or execute any instrument in the name of
and on behalf of the corporation, and such authority may
be general or confined to specific instances-, and
unless so authorized by the board of directors, no
officer, agent or employee shall have any power or
authority to bind the corporation by any contract or
engagement or to pledge its credit to render it liable
for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A
certificate or certificates for shares of the capital
stock of the corporation shall be issued to each
shareholder when any such shares are fully paid up. All
such certificates shall be signed by the president or a
vice-president and the secretary or an assistant
secretary, or be authenticated by facsimiles of the
signatures of the president and the written signature of
the secretary or an assistant secretary. Every
certificate authenticated by a facsimile of a signature
must be counter-signed by a transfer agent or transfer
clerk. Certificates for shares may be issued prior to
full payment under such restrictions and for such
purposes as the board of directors or the by-laws may
provide- provided, however, that any such certificate so
issued prior to full payment shall state the amount
remaining unpaid and the terms of payment thereof
Section 7. REPRESENTATIONS OF SHARES OF OTHER
CORPORATIONS. The president or any vice president
and the secretary or assistant secretary of this
corporation are authorized to vote, represent and
exercise on behalf of this corporation all rights
incident to any and all shares of any other corporation
or corporations standing in the name of this
corporation. The authority herein granted to said
officers to vote or represent on behalf of this
corporation or corporations may be exercised either by
such officers in person or by any person authorized to
do so by proxy or power of attorney duly executed by
said officers.
Section 8. INSPECTION OF BY-LAWS. The
Corporation shall keep in its principal office for the
transaction of business the original or a copy of the
by-laws as amended, or otherwise altered to date,
certified by the secretary, which shall be open to
inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
Amendments
Section 1. POWER OF SHAREHOLDERS. New
by-laws may be adopted or these by-laws may be amended
or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the
corporation or by the written assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to
the right of shareholders as provided in Section I of
this Article VI to adopt, amend or repeal by-laws,
by-laws other than a by-law or amendment thereof
changing the authorized number of directors may be
adopted, amended or repealed by the board of directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT
IN LIEU OF MEETING. Any action required or
permitted to be taken at any meeting of the board of
directors or of any committee thereof, may be taken
without a meeting, if a written consent thereto is
signed by all the members of the board or of such
committee. Such written consent shall be filed with the
minutes of proceedings of the board of committee.
_______________________________
Ken Montee, President
_______________________________
Ray Montee, Secretary
RESCISSION AGREEMENT
THIS RESCISSION AGREEMENT (the "Rescission
Agreement") is made and entered into this 22nd day of
November, 1996, by and between Rako Corporation, an
Idaho corporation (hereinafter "Rako"), now known as
Spencer Entertainment, Inc.. pursuant to an amendment to
the Articles of Incorporation; and Spencer
Entertainment, Inc., a California corporation
(hereinafter "Spencer").
WHEREAS, the parties hereto previously entered into
and executed that certain Acquisition Agreement and Plan
of Reorganization dated the 9th day of May, 1996 (the
"Acquisition Agreement"), a copy of which is annexed
hereto as Exhibit "A" and by this reference made a part
hereof; and
WHEREAS, the parties hereto now desire to rescind
the Acquisition Agreement and revoke the terms and
conditions set forth therein and transfer and return to
their prior respective owners all assets and property
that may have been transferred pursuant to the terms of
the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual
representations and covenants herein contained, the
parties hereby agree as follows:
1. The parties to this Rescission Agreement hereby
individually and jointly agree that the Acquisition
Agreement shall be rescinded and deemed null and void,
effective immediately, and that all terms, conditions,
covenants, representations and warranties contained in
said Acquisition Agreement shall terminate immediately
and shall be deemed null and void and of no further
effect whatsoever.
2. Spencer agrees that as consideration for the
execution of this Rescission Agreement, it shall,
together with its former shareholders, relinquish and
forever waive any ownership claim or right to the
6,300,000 shares of Rako common stock issued to the
shareholders of Spencer or their designees pursuant to
the terms of the Acquisition Agreement, and Spencer
agrees to return to Rako all 6,300,000 shares to be
canceled on the stock transfer records of Rako. Rako
also agrees that as consideration for the execution of
this Rescission Agreement, it shall relinquish and
forever waive any ownership claim or right to the
Spencer capital stock that was to be delivered to Rako
as consideration for the issuance of Rako common stock
pursuant to the terms of the Acquisition Agreement, but
which share were never delivered..
3. All parties to this Rescission Agreement hereby
agree that any and all assets, property, securities or
items of value that may have been assigned or
transferred pursuant to the terms of the Acquisition
Agreement are to be, immediately upon the execution of
this Rescission Agreement, transferred and reconveyed to
the respective parties that assigned and/or transferred
such items under the terms of the Acquisition Agreement,
and that each party shall be returned to its same
position as immediately prior the execution of the
Acquisition Agreement.
4. Spencer represents and warrants that there have
been no debts or liabilities incurred by it in the name
of or which encumbered the Rako corporate entity between
the date of the Acquisition Agreement and the date
hereof and, in the event any such debt and/or liability
has been incurred during such time period, Spencer
agrees to assume and become obligated to any such debt
and/or liability. Spencer further agrees to indemnify
and hold harmless Rako against any debt, liability or
other obligation that may have been incurred by Spencer
between the date of the Acquisition Agreement and the
date hereof.
5. Rako represents and warrants that there have
been no debts or liabilities incurred by it in the name
of or which encumbered the Spencer corporate entity
between the date of the Acquisition Agreement and the
date hereof and, in the event any such debt and/or
liability has been incurred during such time period,
Rako agrees to assume and become obligated to any such
debt and/or liability. Rako further agrees to indemnify
and hold harmless Spencer against any debt, liability or
other obligation that may have been incurred by Rako
between the date of the Acquisition Agreement and the
date hereof.
6. Immediately prior to the execution of this
Rescission Agreement, those current directors of Rako
who were nominated by Spencer and became directors of
Rako, specifically Robert Sidell, Lionel Schaen, Jeffrey
P. Kransdorf, Charles Gay and Robert Siner, shall cause
the appointment of at least three new directors, to be
designated by Rako, and each current director shall then
tender his written resignations from the Rako Board of
Directors. Such resignations shall be effective the
date hereof and shall be annexed hereto as Exhibits and
become a part of this Rescission Agreement.
7. All parties hereto shall bear their respective
costs and expenses associated with the Acquisition
Agreement and this Rescission Agreement.
8. This Rescission Agreement shall be governed by
the laws of the State of Idaho. Any action to enforce
the provisions of this Agreement shall be brought within
the State of Idaho and in no other place.
9. This Rescission Agreement may be executed in
one or more counterparts, each of which shall be deemed
an original and together shall constitute one document.
The delivery by facsimile of an executed counterpart of
this Rescission Agreement shall be deemed to be an
original and shall have the full force and effect of an
original executed copy.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Rescission Agreement in a manner
legally binding upon them as of the date first written
above.
"Rako"
RAKO CORPORATION Attest:
(nka Spencer Entertainment, Inc.)
By:__________________________
___________________________
Its: President Secretary
"Spencer"
SPENCER ENTERTAINMENT, INC. Attest:
By:___________________________
___________________________
Its: President Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE RAKO CORPORATION FINANCIAL STATEMENTS FOR
THE PERIODS ENDED MARCH 31, 1998 AND DECEMBER 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 0
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,025 1,025
<OTHER-SE> 89,611 89,611
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> .00 .00
<EPS-DILUTED> .00 .00
</TABLE>
