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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 27, 1999
Sunderland Acquisition Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
000-24803 52-2102142
(Commission File Number) (IRS Employer Identification No.)
(Address of Principal Executive Offices, Including Zip Code)
2901 El Camino Avenue, Las Vegas, Nevada 89102
(Registrant's Telephone Number, Including Area Code)
(702) 227-0965
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
(a) A change of control of Sunderland Acquisition Corporation
("SUNDERLAND" or "COMPANY"), a Delaware corporation, may be deemed to have
occurred on April , 1999, as a result of concurrent transactions in which
Sunderland acquired all of the outstanding capital stock of Capsource, Inc.,
a Nevada corporation ("CAPSOURCE") (which is a licensed Nevada mortgage
company), and consummated the related acquisitions of certain assets of Del
Mar Mortgage, Inc., a Nevada corporation, ("DEL MAR MORTGAGE")and Del Mar
Holdings, Inc., a Nevada corporation ("DEL MAR HOLDINGS"), in exchange for an
aggregate of 2,946,762 shares of common stock of Sunderland (collectively,
the "TRANSACTIONS"). In connection with the Transactions, 4,250,000 shares of
the 5,000,000 shares of common stock of Sunderland held by Sunderland's
previous 100% owners, Mr. James M. Cassidy, his wholly owned affiliate,
Pierce Mill Associates, and Cassidy & Associates, a law firm in which Mr.
Cassidy is a principal, have been retired.
Giving effect to the Transactions, Capsource will be a wholly-owned
subsidiary of Sunderland, and Mr. Michael V. Shustek, the controlling
shareholder of Del Mar Mortgage and Del Mar Holdings, will own approximately
53.07% of Sunderland's issued and outstanding voting stock. The consideration
for the Sunderland shares consisted of certain assets of Del Mar Mortgage and
Del Mar Holdings. Mr. Shustek has agreed, pursuant to the terms of a voting
trust agreement attached hereto as an exhibit to this report on Form 8-K
(this "REPORT"), that through February 28th, 2000, his Sunderland shares will
be voted in direct proportion to the manner in which the voted shares in
Sunderland not held by him are voted.
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As of the effective date of the Transactions, the officer and
director of Sunderland Acquisition Corporation resigned and certain other
persons became the officers and directors of the Company. See "Management"
below.
Subsequent to the Transactions, effective as of the date of
consummation of the Transactions, the Company will change its name to
"Sunderland Corporation", and effect a 5 for 3 stock split (the "Stock
Split") of its issued and outstanding common stock. The table below does not
give effect to the Stock Split.
Sunderland was formed to provide a method for a foreign or domestic
private company to become a reporting company whose securities would be
qualified for trading in the United States secondary market. Prior to the
Transactions, Sunderland had no operations, revenues or liabilities.
Copies of each of the Transaction Documents (as defined below) have
been filed as exhibits to this Report and are incorporated in their entirety
herein. The foregoing description is modified by such reference.
(b) The following table contains information regarding the
shareholdings of the Company's current directors and executive officers and
those persons or entities who beneficially own more than 5% of the Company's
common stock:
<TABLE>
<CAPTION>
AMOUNT OF COMMON PERCENT OF
STOCK BENEFICIALLY COMMON STOCK
NAME OWNED (1) BENEFICIALLY OWNED
<S> <C> <C>
Stephen J. Byrne............................................................ 18,000 *
President, Director
1808 Dalton Avenue
Henderson, Nevada 89104
Lance Bradford.............................................................. 18,000 *
Chief Financial Officer, Secretary, Director
3441 Eastern Avenue
Las Vegas, Nevada 89109
Robert W. Fine.............................................................. 240,000 6.49%
Director
111 Ashley Ave
Brielle, New Jersey 08730
Michael V. Shustek.......................................................... 1,962,000 53.07%
Chairman and Chief Executive Officer, Director
129 Augusta
Henderson, Nevada 89104
All directors and
executive officers as
a group (4 persons)......................................................... 2,238,000 60.54%
Cassidy & Associates........................................................ 750,000 20.29%
1504 R Street N.W
Washington, D.C 20009 ...................................................... 810,000(2) 21.91%
</TABLE>
*Represents less than one percent of the outstanding shares of common stock
(1) Based upon 3,696,762 outstanding shares of common stock.
(2) Assumes exercise of a warrant to purchase 60,000 shares of common stock at
$16.67 per share.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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(a) On April 19, 1999, pursuant to an Agreement and Plan of
Reorganization between Sunderland and Capsource, dated as of April 9, 1999,
and the Asset Acquisition Agreements between Sunderland and Del Mar Mortgage,
and Sunderland and Del Mar Holdings, each dated as of April 9, 1999,
Sunderland concurrently consummated the following related Transactions: (i)
the acquisition of all of the outstanding capital stock of Capsource in
exchange for 12,000 shares of common stock of Sunderland; (ii) the
acquisition of certain assets of Del Mar Mortgage for 60,000 shares of common
stock of Sunderland to be distributed to its sole shareholder, Michael V.
Shustek; and (iii) the acquisition of certain assets of Del Mar Holdings for
2,874,762 shares of common stock of Sunderland to be distributed to its
respective shareholders. The Transactions are more fully set forth in the
agreements that are attached hereto as exhibits to this Report (collectively,
the "TRANSACTION DOCUMENTS").
(b) The Company intends to continue the loan origination segment of
the various business operations formerly conducted by Del Mar Mortgage. The
company plans to operate its loan origination business through its wholly
owned operating subsidiary, Capsource. Certain assets of Del Mar Mortgage, as
well as the business operations resulting from such assets, will remain as
assets and business operations of Del Mar Mortgage, including: (i) all direct
loans and lending activities by Del Mar Mortgage; (ii)all capital or other
assets which secured any debt obligations of Del Mar Mortgage; and (iii) any
and all rights and obligations to make any collections upon, or take any
actions with respect to any loans of Del Mar Mortgage and/or of
third-parties. Following the Transactions the Company will own all the rights
to the name "Del Mar Mortgage."
RISK FACTORS
An investment in the Company involves a high degree of risk.
Prospective investors should carefully consider, among other factors
described elsewhere herein, the following risks relating to the Company, its
business, its capital stock, and other securities of Company, as well as the
mortgage brokerage business generally. Risks include, among others, the
following factors which are not exhaustive, but are merely illustrative.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company and its principals as well as assumptions made by and information
currently available to them. These statements include, among other things,
the discussions of the Company's business strategy and expectations
concerning the Company's market position, future operations, expansion
opportunities, and profitability. When used in these documents, the words
"ANTICIPATE," "FEEL," "BELIEVE," "ESTIMATE," "EXPECT," "PLAN," and "INTEND"
and similar expressions, as they relate to the Company or its principals, are
intended to identify forward-looking statements. Such statements reflect the
current view of the Company respecting future events and are subject to
certain risks, uncertainties, and assumptions, including the meaningful and
important risks and uncertainties noted, particularly those related to the
operations, results of operations, and growth strategy of the Company,
liquidity, competitive factors and pricing pressures, changes in legal and
regulatory requirements, general economic conditions, and other factors
described in this Report. Although the Company has attempted to identify
important facts that could cause actual results to differ materially, there
may be other factors that cause the forward-looking statement not to come
true as anticipated, believed, estimated, expected, planned, or intended.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected, or
intended. Neither the Company nor any other person undertakes any obligation
to revise these forward-looking statements, to identify important facts, or
to reflect the occurrence of unanticipated events after the date hereof that
could cause actual results to differ materially.
DEPENDENCE ON KEY PERSONNEL
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The operations of the Company will depend to a great extent on the
efforts and expertise of the Company's executive officers and directors,
particularly, its Chairman and Chief Executive Officer, Michael V. Shustek,
its President, Stephen J. Byrne, and its Secretary and Chief Financial
Officer, Lance Bradford, each of whom were previously associated with Del Mar
Mortgage. Except for Mr. Byrne, the Company has no employment contracts on
these individuals, and it has no key man insurance on any of these
individuals, although all are shareholders of the Company. In addition, it is
not anticipated that the Company will maintain "KEY MAN" insurance with any
of its senior management or other employees, although the Company, in its
discretion, may enter into employment contracts with such management or
employees in the future as it deems appropriate. See "MANAGEMENT." If the
Company is unable to retain its senior management for any reason, the Company
could be materially and adversely affected.
FINANCIAL RESULTS; LACK OF OPERATING HISTORY; NO ASSURANCE OF FUTURE
PROFITABILITY
The Company expects to be profitable for the year ended December 31,
1998 on a consolidated "pro forma" basis giving effect to the Transactions.
Capsource does not service any loans, but instead relies solely on
third-parties to service the loans it originates. While the exclusion of
revenues from servicing is not material to the Company's current financial
condition or its results of operations as reflected in its pro forma
consolidated financial statements for the year ended December 31, 1998, there
can be no assurance that the absence of servicing in the future will not have
a material adverse impact on the Company. In addition, while the Company's
executive management, as well as the assets it acquired from Del Mar Mortgage
provide the Company with experience and recognition in the real estate
mortgage business, the Company has no operating history as it is currently
structured. Because of the nature of the Company's business, and its lack of
operating history under its current structure, historical results of
operations may not be indicative of future financial operating results and,
while the operating revenues and profitability of the activities not acquired
are not material to the pro forma financial statement, the impact on future
financial performance is unknown. There is no assurance the Company will show
operating profits. Moreover, because of the risks associated with Company's
industry, there is no assurance that the Company will achieve profitability
at any time in the future nor any assurance that any such future
profitability will be consistently maintained.
REGULATION
The Company is subject to extensive regulation and supervision by
federal, state, and local authorities, including the Nevada Division of
Financial Institutions (the "DIVISION"). In addition, the Company is subject
to various laws and judicial administrative decisions imposing requirements
and restrictions on part or all of its operations, including ongoing
compliance audits, and a broad range of disciplinary actions ranging from
informal warnings to revocation of license. Pursuant to one such audit, the
Division subjected Del Mar Mortgage and its principal to a disciplinary
action (see,"MANAGEMENT," "LEGISLATION," and "LICENSING," below). Since the
Company purchased the Del Mar Mortgage name in the Transactions, and intends
to utilize the name in connection with its real estate loan origination
operations on a going forward basis, no assurances can be given as to whether
the adverse publicity created by the Division's subsequently vacated actions
will have a material adverse effect on the future operations of the Company.
The Company plans to operate its Nevada real estate loan origination business
through its Capsource subsidiary, which was previously owned by the Company's
President, Mr. Stephen J. Bryne; neither Capsourse nor Mr. Bryne has ever
been subject to any disciplinary action by the Division or any other state or
federal regulatory authority.
GENERAL BUSINESS RISKS
The Company's business is subject to a variety of business risks.
Demand for loan origination by the Company fluctuates depending upon real estate
value, prevailing interest rates, the level of consumer confidence and the
expectation of investment returns by the financial community, any one of which
could adversely affect the
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marketability of the Company's products. In addition, the Company may be
adversely affected by other factors, that could (i) increase the cost to the
borrower of loans originated by the Company, (ii) create alternative lending
sources for such borrowers, or (iii) adversely impact returns realized by its
funding sources. Governmental intervention through elimination of tax
benefits for home equity loans, regulation of an increased scope of loans or
introduction of additional regulations aimed at mortgage loans could also
adversely affect the Company's business. See "Regulation" above. In the
ordinary course of its business the Company is subject to claims made against
it by borrowers and lenders arising from, among other things, losses that are
claimed to have been incurred as a result of breaches of fiduciary
obligation, misrepresentations, errors and omissions of employees and
officers of the Company (including its appraisers), incomplete documentation
and failures by the Company to comply with various laws and regulations
applicable to its business. The Company believes that any liability with
respect to any currently asserted claims or legal actions is not likely to
have a material effect on the Company's results of operations, however, there
can be no assurance that claims asserted in the future will not result in
legal expenses or liabilities which could have a material adverse effect on
the Company's financial position and results of operations.
LEGISLATION
Because the Company's business is highly regulated, the laws, rules
and regulations applicable to the Company are subject to on-going
modification and change. There are currently proposed various laws
(including, Assembly Bill No. 72, which are currently before the 70th session
of the Nevada legislature), rules and regulations which, if adopted, could
significantly increase the cost and complexity of regulatory compliance to
the Company and adversely impact the Company. There can be no assurance that
these proposed laws, rules and regulations, or other such laws, rules or
regulations, will not be adopted in the future which could make compliance
much more difficult or expensive, restrict the Company's ability to originate
or broker loans, further limit or restrict the amount of fees, interest and
other charges earned on loans originated or sold by the Company, or otherwise
adversely effect the business of the Company.
GEOGRAPHIC CONCENTRATION
The Company (through its wholly owned operating subsidiary,
Capsource) currently originates loans secured by real estate located
principally within the State of Nevada, and in particular within the greater
Las Vegas area. Accordingly, the volume of the Company's loan originations,
and the Company's business in general, will be greatly affected by the
economic conditions of Nevada and the Las Vegas area. While the Company hopes
to expand its operations outside the State of Nevada (see, "Expansion into
New Markets"), it has not yet begun this expansion and there can be no
assurances that the Company will be able to successfully achieve such an
expansion. Therefore, a downturn or stagnation in the economic environment of
Nevada, and of the Las Vegas area in particular, could have a material
adverse effect on the Company's financial condition and the value of the real
estate securing loans originated by the Company.
DEPENDENCE ON AVAILABILITY OF FUNDING SOURCES
The Company currently raises funds for the origination of loans
primarily through private investor-lenders, including retirees and successful
professionals. Among the benefits accruing to the Company from Mr. Shustek is
his established bases of repeat investors through which the Company intends
to place the majority of the loans it originates in the future. Mr. Shustek,
directly and through his business entities, has expended substantial time,
effort and expense to build this investor base, and the Company expended
significant resources in the Transactions in order to acquire the rights to
this investor base. A decline in the willingness of investors to become
repeat investors or an erosion of the investor base through death,
alternative investments, adverse publicity or otherwise, could have a
material adverse effect on the Company's ability to place new loans and would
require the Company to expend substantially more resources to attract new
investors. There can be no assurance that the Company will be able to retain
its current investor base (including Mr. Shustek's investor base) as sources
of funding for new loans or that it will be able to attract new investors.
Although it has not previously done so, the
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Company may also seek alternative sources of financing, but there can be no
assurance that such other financing, if sought, will be available on terms
acceptable to the Company, if at all.
COMPETITION
In addition to competing with other mortgage brokers and consumer
finance lenders, the Company competes with financial institutions that have
substantially greater financial resources than the Company. These financial
institutions also offer lower interest rates and longer terms combined with
lower fees or commissions than those offered by the Company. Although as a
result of consolidation the number of financial institutions is being
reduced, there can be no assurance that the Company with not face increased
competition from remaining institutions or new financial institutions.
Moreover, non-conventional lenders also compete with the Company within its
specific market niche. While the Company believes that it competes favorably
against both traditional and non-conventional mortgage lenders, there can be
no assurance that the Company will remain competitive. Changes in the
mortgage lending industry or within the Company's market niche, and a failure
or inability to timely respond to such changes could have a materially
adverse effect on the Company's competitiveness and operations.
SEASONALITY
The mortgage banking industry is generally subject to seasonal
trends. These trends reflect the general pattern of resales of homes, which
sales typically peak during the spring and summer seasons and decline from
January through March. Refinancings tend to be less seasonal and more closely
related to changes in interest rates. Because of the seasonality, results for
any single quarter are not necessarily indicative of results that may be
achieved for a full fiscal year.
EXPANSION INTO NEW MARKETS
The Company intends to expand its business into new markets and has
established a broker participation program in which brokers outside of Nevada
will market the Company's products. In the event that such programs evidence
sufficient demand in other markets, the Company anticipates establishing
branch offices and/or acquiring existing licensed mortgage companies (such as
Capsource) in such other markets. There can be no assurance that the
expertise and experience of management in the Nevada market will be adaptable
to other markets. The inability of the Company to understand other markets or
to implement its strategy in other markets could materially adversely affect
the Company's expansion plans and results of operations.
CENTRALIZED CONTROL
The ownership positions of the existing shareholders, together with
the authorization of blank check preferred stock and the implementation, if
certain conditions are met, of a staggered board and elimination of
cumulative voting in the Company's Articles of Incorporation and Bylaws, may
have the effect of delaying, deferring or preventing a change in control of
the Company, may discourage bids for the Company's Common Stock at a premium
over the market price of the Common Stock, and may adversely affect the
market price of the Company's securities.
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; STOCK PRICE
VOLATILITY
Prior to the Transactions there has been no public market for the
Company's common stock, and there can be no assurance that an active trading
market for the Company's common stock will develop or be sustained after the
Transactions. In addition, in recent years, the stock market has experienced
significant price and volume fluctuations. These fluctuations, which are
often unrelated to the operating performances of specific companies, have had
a substantial effect on the market price of stocks, particularly for many
Lower Capitalization companies.
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Accordingly, the factors described in this Risk Factors section or market
conditions in general may cause the market price of the Company's securities
to fluctuate, perhaps substantially.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Transactions, all of the Company's Common
Stock outstanding immediately prior to consummation of the Transactions will
be "restricted securities" as that term is defined in Rule 144. All of the
restricted securities will (upon the filing of this Report) become available
for immediate sale in the public market, subject in certain cases to the
volume, holding period and other restrictions of Rule 144. Sales of
substantial amounts of the Company's securities in the public market
following the Transactions or even the potential or such sales could have an
adverse effect on the market price of the Company's securities.
YEAR 2000 COMPUTER PROGRAM ERRORS
Computer programs involving dates and time periods generally have
been written to express years by their last two digits, on the assumption
that the first two digits of every year are 19, such that "98" means 1998. In
the year 2000, these computer programs will produce errors with respect to
any statements, calculations or other measures involving dates or time
periods. Such programs require substantial review and rewriting in order to
correct the potential problems. The Company uses a significant number of
software applications which require correction to avoid errors in its loan
origination and administrative operations. The failure or inability to timely
address year 2000 issues with respect to the Company's computer programs
could have a material adverse effect on the Company.
ISSUANCE OF FUTURE SHARES MAY DILUTE INVESTORS SHARE VALUE
The Certificate of Incorporation of the Company authorizes the
issuance of a maximum of 100,000,000 shares of common stock and 20,000,000
shares of preferred stock. The future issuance of all or part of the
remaining authorized common or preferred stock may result in substantial
dilution in the percentage of the Company's common stock held by the
Company's then existing shareholders. Moreover, any common stock issued in
the future may be valued on an arbitrary basis by the Company. The issuance
of the Company's shares for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares
held by investors, and might have an adverse effect on any trading market,
should a trading market develop for the Company's common stock.
POTENTIAL ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK
The Company may, without further action or vote by shareholders of
the Company, designate and issue shares of preferred stock. The terms of any
series of preferred stock, which may include priority claims to assets and
dividends and special voting rights, could adversely affect the rights of
holders of the common stock and thereby reduce the value of the common stock.
The designation and issuance of preferred stock favorable to current
management or shareholders could make the possible takeover of the Company or
the removal of management of the Company more difficult and discourage
hostile bids for control of the Company where such bids might have provided
shareholders with premiums for their shares.
NO CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES
No assurance can be given that an active trading market in the
Company's securities will develop or, if developed, that it will be
sustained. If and when qualified, the Company intends to apply for admission
to quotation on the Nasdaq SmallCap Market. There can be no assurance that a
regular trading market for the common stock will develop or that, if
developed, it will be sustained. Various factors, such as the Company's
operating results, changes in laws, rules or regulations, general market
fluctuations, changes in financial estimates
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by securities analysts and other factors may have a significant impact on the
market price of the Company's securities. The market price for the securities
of public companies often experience wide fluctuations which are not
necessarily related to the operating performance of such public companies,
but rather are predicted upon matters such as high interest rates or the
impact of overseas markets.
PENNY STOCK REGULATION
Upon commencement of trading in the Company's stock, if such occurs
(of which there can be no assurance), the Company's common stock may be
deemed a "penny stock". Penny stocks generally are equity securities with a
price of less than $5.00 per share other than securities registered on
certain national securities exchanges or quoted on the Nasdaq Stock Market,
provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The
Company's securities may be subject to "penny stock rules" that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000 individually or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make
a special suitability determination for the purchase of such securities and
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 "penny stock rules" require the delivery, prior to the
transaction, of a disclosure schedule prescribed by the Commission relating
to the penny stock market. The 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 on the limited
market in penny stocks. Consequently, the "penny stock rules" may restrict
the ability of broker-dealers to sell the Company's securities. The foregoing
required penny stock restrictions will not apply to the Company's securities
if such securities maintain a market price of $5.00 or greater. There can be
no assurance that the price of the Company's securities will reach or
maintain such a level.
BUSINESS
Unless otherwise indicated or required by context, all references to
"Company" in this Report refers to Sunderland, and its wholly owned
subsidiary, Capsource, subsequent to the Transactions.
BACKGROUND
Capsource, Inc. is a private mortgage lender, licensed to engage in
similar activities as Del Mar Mortgage in the State of Nevada. It was
incorporated in the State of Nevada in 1997. The Company intends to continue
the loan origination segment of the various business operations formerly
conducted by Del Mar Mortgage.
Del Mar Mortgage, Inc., a Nevada corporation incorporated on April
20, 1995, is a leading private mortgage lender in the State of Nevada. The
Company originates loans, primarily for commercial and residential
developers, and obtains funds for these loans through private lenders. The
Company earns its principal revenues through (i) loan origination fees on the
loans it originates; and (ii) loan progress fees equal to the spread between
the interest rate collected from borrowers and the interest rate to be paid
to investors. Because of the speed of the Company's approval and funding of
loans (typically 10-20 days) compared to conventional mortgage lenders
(typically 30-120 days), the Company's borrowers have been willing to pay a
higher interest rate, which in turn attracts lenders willing to fund such
loans.
Del Mar Holdings, Inc. was incorporated in the State of Nevada in
1998. It was formed to hold selected real estate mortgage assets and serve as
an investment vehicle in related real estate and other business activities
that either were not consistent with Del Mar Mortgage's strategic business
objectives or would - by their very nature - be diversionary with respect to
the operational effectiveness of Del Mar Mortgage.
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DESCRIPTION OF BUSINESS
Mortgage lending refers to the origination and funding of loans
secured by real property. Loan origination involves the processing of a loan
application, including necessary documentation and research, the approval of
the loan and the funding of the loan.
The mortgage lending industry consists of large public and private
institutional lenders, such as banks, insurance companies, and savings and
loan associations, as well as numerous private and non-conventional lenders.
An origination through traditional mortgage lenders, such as banks, generally
involves cumbersome procedures, extensive documentation and the passage of a
substantial length of time. To obtain a loan from a traditional mortgage
lender, Borrowers need to establish (i) good character, as determined through
credit checks and references, (ii) capacity to repay the loan, as determined
by bank statements and sources of income, and (iii) adequate collateral, as
determined by property appraisal, environmental reports and other
documentation. A deficiency in any one area can result in rejection of the
loan application. The typical loan origination process takes between 30-120
days.
Non-conventional lenders seek to address the needs of borrowers
unable or unwilling to accommodate the more restrictive requirements of
traditional lenders, and who require more responsive turn around time. These
lenders typically emphasize the value of collateral in their review, thereby
reducing the paperwork and time required to judge other factors.
KEY MARKETS
The Company's key market is borrowers who have significant equity in
real property but whose needs are not being met by traditional mortgage
lenders. The extensive requirements of traditional lenders and the cumbersome
documentation and time length involved in conventional loans leave many
borrowers without financial services capable of meeting their particularized
needs. Commercial and residential developers are an important segment of
these borrowers.
Typically, developers depend upon, among other things, the timely
completion of a project to obtain a competitive advantage in the sale of
their properties. Traditional mortgage lenders generally require extensive
documentation and between 30 -120 days to process and fund a loan, which
creates an administrative burden and substantially delays construction. The
Company has sought to service the developer by offering expedited loan
processing, which generally provides expedited loan funding of a loan between
1-3 months earlier than traditional mortgage lenders. The Company's focus on
collateral also reduces the paperwork involved in lien processing. In meeting
such needs, the Company has established a market niche as a non-conventional
mortgage lender. Currently, approximately 85% of the loans originated by the
Company service this specific market segment. The remaining 15% of the
Company's loans involve primarily (i) land loans (10%), and (ii) bridge
financing loans (5%).
SOURCES OF REVENUE
The Company intends to generate revenues primarily through fees
charged in connection with the origination of loans, loan progress fees equal
to amounts received from the spread between interest rates charged to
Borrowers and interest rate paid to investors, and fees related to its
voucher control and disbursement operations.
LOAN FEES
The Company generates revenues from fees related to the origination
of loans. For each loan originated by the Company, the Company receives a
loan origination fee of up to 4% of the principal amount of the loan. A
processing fee of approximately $2,000 per loan is charged to document and
package the loan. Late charges are assessed for non-timely payments. The
Company may also receive additional fees for closing accounts upon
termination of the loan (i.e., "EXIT FEES"). Lastly, the Company receives
loan extension fees in connection with the extension of the term of any loan.
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LOAN PROGRESS FEES -- INTEREST SPREAD
The Company earns a portion of its revenues through loan progress
fees of amounts equal to the difference between the interest rates charged to
borrowers and the interest rates paid to lenders. The Company typically
receives an interest spread of .75% as loan progress fees. For construction
loans, which constitute the bulk of the Company's loans, interest begins to
accrue on the amounts set forth on the initial draw schedule as of the date
of each draw, with the condition that interest will commence to accrue on the
entire principal of the loan in the fifth (5th) month after the closing of
the loan regardless of the draw schedule. In the event that the actual
schedule of the borrower differs from the draw schedule, interest will still
commence to accrue on the dates and in the amounts set forth on the draw
schedule, or sooner in the event that the actual dates precede the scheduled
dates. Therefore, to the extent that the borrower experiences delays, the
actual draw schedule will occur later than the initial draw schedule and the
borrower will begin to pay interest on the draw amounts even though
disbursement of such amount has not been made. The Company receives loan
progress fees to the extent that such interest due from the borrowers is
greater than the interest due to the Company's investors under their
subscriptions to invest in such loans.
LOANS
The Company originates five different types of loans. Construction
loans, however, constitute approximately 85% of the loans originated by the
Company. Land loans comprise approximately 10% of the Company's loan
portfolio and the remaining 5% of the Company's loans involve bridge
financing.
There are various stages in the development of land and the
construction of structures thereon, which stages correspond to the different
types of loans originated by the Company.
RAW AND UNIMPROVED LAND LOANS
The Company offers loans for the purchase and/or development of raw,
unimproved land. Traditional lenders generally cannot make such loans because
the potential for distorted valuations of such land impairs their ability to
value the collateral appropriately. Generally, the Company determines whether
to make such loans based upon the 90-day quick sale value of the property and
the Borrower's actual capital investment in the property. The "90-day quick
sale value" is the highest price for which such land could actually be sold
within 90 days, the approximate time of a foreclosure, as determined by
contacting real estate brokers and others. Such value is generally the same
as the cost of the land to the Borrower. Typically, the Company will lend
less than 60% of the "90-day quick sale value" and generally requires that
the Borrower will have invested in the property actual capital expenditures
equal to at least 25% of the property's value.
Raw Land Inventory Loan. Raw land inventory loans represent property
which is outside of current urbanization but which will be the next land to
be developed. Such land contains no improvements or infrastructure (i.e.
roads, sewer hook-ups, power lines), but such infrastructure is within the
municipal plans for expansion. For raw land inventory, the Company also
typically does a " 90-day quick sale valuation", upon which it will generally
lend up to 60% of such value. In addition, the Company usually requires that
the Borrower has invested in the property actual capital expenditures equal
to at least 20% of the value.
DEVELOPMENT PROPERTY LOANS
A development property loan consists of financing to complete the
basic development of the property, such as utility installation and curbing,
prior to construction. Upon completion of development, the property can
readily be sold. Generally, the Company undertakes an appraisal of the real
value of the property and will make a loan of up to 60% of such value.
CONSTRUCTION LOANS
<PAGE>
A construction loan provides funds for the construction of one or
more structures on developed land. Typically, the Company does an appraisal
of the real value of the property and proposed improvements and will lend up
to 75% of such value. In the event the construction loan is for the
construction of multiple structures, such as a subdivision of homes, the
Company will lend money based solely upon the construction of the model homes
which are to be used to attract homebuyers. Upon satisfactory completion of
the model homes, the Company will provide an additional loan for the
construction of the remainder of the subdivision. The additional loan amount
will depend upon the pre-sales activity for the homes to be built. If the
developer has signed a contract for the sale of a home, then the Company will
generally lend up to 100% of the cost of construction to build such home. The
loan amount for unsold houses varies and can exceed the 75% loan to value
ratio of the model homes.
BRIDGE LOANS
A bridge loan provides financing for commercial borrowers to make
improvements necessary for increasing the net operating income of the
business so that they can qualify for institutional refinancing. The Company
will value the existing property and generally loan up to 75% of such value.
BROKERED LOANS; HOME MORTGAGE LOANS
In addition to originating loans, the Company acts as a broker with
respect to permanent residential loans. Upon completion of a construction
loan involving residences, the Company typically offers the homebuyers an
opportunity to originate a home mortgage loan through the Company. In such
event, because of the low interest rate involved in individual home
mortgages, the Company will usually arrange the loan with the Borrower and
place the loan with another lender. Loans brokered by the Company typically
meet the specific underwriting standards of the Government National Mortgage
Association (Ginny Mae), Federal National Mortgage Association (Fanny Mae),
and other such entities, which make such loans readily saleable in the
secondary market.
OPERATIONS
LOAN PROCESSING
Upon receipt of a loan request, the Company commences the loan
application and approval process. The Company undertakes a review of the
relevant information required of the Borrower regarding his, her, or its
financial condition, the purpose of the loan and the real property involved.
Such information may include, among other things, credit reports,
environmental reports and property appraisals. All loans originated by the
Company are first reviewed and approved by the loan committee to confirm that
all requirements have been satisfied, although the loan committee may waive
certain loan requirements based upon its overall review of the loan. Based
upon experience and expertise as well as review of any property appraisal,
the loan committee prepares a valuation of each property from which the
reserve for loan losses will be set according to the appropriate loan to
value ratio for the transaction. The loan committee consists of three or more
officers or loan managers of the Company authorized to approve loans. The
loan committee members have substantial experience in the real estate and
mortgage lending industries.
LOAN FUNDING
The Company funds its loans primarily through investors. Investors
provide funds by investing in all or portions of promissory notes secured by
deeds of trust. The investors receive monthly interest payments from the
promissory notes of the Company's loans. In addition, the deeds of trust
grant a security interest in the real property which serves as collateral for
the loan. Because of the low loan-to-value ratio required by the Company and
the borrower's equity in the properties, the secured notes offer substantial
protection of the investment while yielding a significant return.
<PAGE>
COMPETITION
Competition in the mortgage lending industry is intense. Many
institutional and other financial lenders are engaged in originating mortgage
loans. The Company considers its direct competitors to be the providers of
non-conventional mortgage loans; that is, lenders who offer short-term,
equity-based loans on an expedited basis for slightly higher fees and rates.
To a lesser extent, the Company also competes with traditional mortgage
lenders, such as banks and other financial institutions that offer
conventional mortgage loans. Competition in the Company's market niche
depends upon a number of factors, including price/rates of the loan, speed of
loan processing, cost of capital, reliability, quality of service and support
services.
The Company's principal competitors in its market niche as a
non-conventional mortgage lender in the Nevada market include: Consolidated
Mortgage Corp., and Interstate Mortgage Corp. Funding, both of which engage
in originating the same types of loans as Del Mar. In the broader market, the
Company's competitors consist of traditional mortgage lenders, which include
Bank of America, Bank One, Wells Fargo, Residential Funding, First Security
Bank, United Bank of Texas. Several of the companies against which Del Mar
competes have substantially greater financial, technical and other resources
than the Company.
REGULATION
The operations of the Company are conducted through its wholly owned
operating subsidiary, Capsource, and are subject to extensive regulation by
federal, state and local governmental authorities and are subject to various
laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of its operations. Capsource conducts its real
estate mortgage business pursuant to a "PRIVILEGED" license issued by the
Division. Pursuant to Nevada Revised Statutes ("NRS") Sections 645B.010
through 645B.230 (the "MORTGAGE ACT"), the Division has broad discretionary
regulatory authority over the Capsource's activities, including, without
limitation, the authority to conduct periodic regulatory audits with respect
to all aspects of the Capsource's operations. Because the Company's business
is highly regulated, the laws, rules and regulations applicable to the
Company are subject to regular modification and change. There can be no
assurance that laws, rules or regulations will not be adopted in the future
which could make compliance much more difficult or expensive, restrict the
Company's ability to originate, service or broker loans, further limit or
restrict the amount of commissions, interest and other charges earned on
loans originated or brokered by the Company, or otherwise adversely affect
the business or prospects of the Company.
The Company is routinely audited and subject to extensive regulatory
compliance supervision by the Nevada Division of Financial Institutions and, as
such, subject to a broad range of disciplinary actions ranging from informal
warnings to revocation of license. Pursuant to this authority, De. Mar Mortgage
and Michael V. Shustek have received both warnings and been subject to
disciplinary action, including the issuance of an Order by the Department under
which it took possession of the assets and appointed an overseer to conduct an
audit of the Company's activities. Upon completion of this audit, the overseer
reported that all deficiencies noted in the Division's report had been remedied,
that no investor assets had been in jeopardy, that all loans were fully in
trust, and that all of the investor's money had been properly accounted for.
Subsequently, by court ordered stipulation the Order was vacated and operational
control was returned to the licensee.
The Company is required to comply with the Equal Credit Opportunity Act
of 1974, as amended, which prohibits creditors from discriminating against loan
applicants on the basis of race, color, sex, age or marital status. Regulation B
promulgated under ECOA restricts creditors from obtaining certain types of
information from loan applicants. It also requires certain disclosures by the
lender regarding consumer rights and requires lenders to advise applicants of
the reasons for any credit denial. In instances where the applicant is denied
credit or the rate or charge for loans increase as a result of information
obtained from a consumer credit agency, another statute, the Fair Credit
<PAGE>
Reporting Act of 1970, as amended, requires the lenders to supply the
applicant with a name and address of the reporting agency.
The Company is also subject to various other federal and state laws
regulating the issuance and sale of securities, relationships with entities
regulated by the Employee Retirement Income Security Act of 1974, as amended,
and other aspects of its business.
The Company believes that it is in substantial compliance in all
material respects with applicable local, state and federal laws, rules and
regulations. There can be no assurance that laws, rules or regulations will
not be adopted in the future which could make compliance much more difficult
or expensive, restrict the Company's ability to originate or broker loans,
further limit or restrict the amount of fees, interest and other charges
earned on loans originated or brokered by the Company, or otherwise adversely
affect the business of the Company
EMPLOYEES
As of March 1, 1999, the Company employed 18 personnel, of whom 17
were full time and 1 was part-time. Of these employees, 3 were employed in
underwriting and 14 performed general and administrative functions.
Subsequent to that date, the Company entered into employment arrangements
with two (2) senior management personnel to fill the positions of Chief
Financial Officer and Vice-President of Regulatory Affairs. The Chief
Financial Officer has assumed his position; the Vice-President of Regulatory
Affairs will join the Company on or about May 14, 1999. None of the employees
are covered by collective bargaining agreements. The Company considers its
relationship with its employees to be excellent.
PROPERTY
The Company maintains its offices at 2901 El Camino Ave., Suite 206,
Las Vegas, Nevada. This facility contains approximately 7,000,square feet of
office space which houses the Company's marketing, loan processing and
administrative functions. The facility's current lease expires in March 2004
and the Company anticipates that it will renew the lease or enter into a new
lease for such facility upon the expiration of the current term. The Company
also presently rents another approximately 1,300 square feet of space under a
lease that expires in November 1999. It does not presently anticipate
renewing this lease upon expiration.
MANAGEMENT
The following sets forth the executive officers and the directors of
the Company, who will own and operate Capsource.
<TABLE>
<CAPTION>
TERM OF
NAME AGE OFFICE TITLE
- ----
<S> <C> <C> <C>
Michael V. Shustek ......................... 40 1993 Chairman and
Chief Executive
Officer
Stephen J. Byrne ........................... 41 1998 President
Lance Bradford ............................. 32 1999 Chief Financial Officer
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
and Corporate Secretary
Michael J. Whiteaker ....................... 49 1999 Vice-President of
Regulatory Affairs
Robert J. Aalberts ......................... 48 1999 Director
Robert W. Fine ............................. 63 1999 Director
</TABLE>
MR. MICHAEL V. SHUSTEK serves as Chairman of the Board of Directors
and Chief Executive Officer of the Company. Mr. Shustek founded Del Mar
Mortgage in 1993 and has been involved in various aspects of the real estate
industry in Nevada since 1990. In 1993, he founded Foreclosures of Nevada,
Inc., a company specializing in non-judicial foreclosures and has built it
into the second largest company of its kind in the state. During the same
year, he also established Goldell Development, Inc., a company that
specialized in residential and commercial construction. With the completion
of the existing projects in 1998 and the growth of Del Mar Mortgage, Goldell
Development ceased operations in 1998. In 1990, Mr. Shustek started Shustek
Investments, a company that originally specialized in property valuations for
lending or investment purposes by third parties and which continues today as
the primary vehicle for his private investment portfolio. Mr. Shustek is a
guest lecturer at the University of Nevada, Las Vegas, where he also teaches
a course in Real Estate Law and Ethics. Mr. Shustek earned a Bachelor of
Science degree in Finance at the University of Nevada, Las Vegas.
On February 11, 1999, the Nevada Division of Financial Institutions
(the "DIVISION") on an ex parte basis issued an administrative order (the
"ADMINISTRATIVE ORDER") against Del Mar Mortgage, Del Mar Holdings, Michael
V. Shustek, and certain other parties, alleging non-compliance with the
Mortgage Act, taking possession of the assets of Del Mar Mortgage, and
installing an interim overseer to conduct an audit of Del Mar Mortgage's
assets and operations. On February 16, 1999, Mr. Shustek filed a lawsuit in
the District Court of Clark County, Nevada, seeking, among other things, to
have the Administrative Order vacated. The interim overseer completed the
audit and reported that, all deficiencies noted in the Division's most recent
audit had been remedied, no investor's assets were ever in jeopardy, all
loans were fully in trust, and all of Del Mar investor's money was properly
accounted for . On March 29, 1999, pursuant to a court ordered stipulation
(the "STIPULATION"), the Administrative Order was vacated in its entirety.
MR. STEPHEN J. BYRNE serves as President and is a Director of the
Company. Mr. Byrne joined Del Mar Mortgage in June 1998 as its Senior Lending
Officer. Prior to joining Del Mar Mortgage, Mr. Byrne owned and operated
Capsource, Inc., which he founded in February 1997, and which is involved in
substantially the same asset lending activities as Del Mar Mortgage. Between
October 1991 and February 1997, Mr. Byrne served in Las Vegas as
Vice-President of Wells Fargo Bank and of its predecessor First Interstate
Bank of Nevada. In that capacity, he underwrote over $1.5 Billion in real
estate, commercial and gaming industry loans. Mr. Byrne served in various
capacities with First Interstate Bank, including management of the
Diversified Asset Group based in Las Vegas and heading-up the commercial
Diversified Asset Group in Houston, Texas. Mr. Byrne earned a Bachelor's
degree at Hastings College, Hastings, Nebraska, where he majored in Business
Administration.
MR. LANCE BRADFORD joined the Company in April of 1999 as Chief Financial
Officer, Corporate Secretary, and Director. Prior to joining the Company, Mr.
Bradford was, and continues to be, a partner in L. L. Bradford & Company, Las
Vegas, Nevada, a Certified Public Accounting firm that he founded in 1992. Mr.
Bradford commenced his accounting career with Ernst & Young International in
1988 and remained with that firm until 1991, when he departed to start his own
firm. Mr. Bradford earned his Bachelors degree at the University of Nevada,
Reno, majoring in Accounting.
<PAGE>
MR. MICHAEL J. WHITEAKER will join the Company on May 14, 1999 as
its Vice-President of Regulatory Affairs. Mr. Whiteaker is experienced in the
banking and finance regulatory field, having most recently served with the
State of Nevada as its Supervisory Examiner, responsible for the financial
and regulatory compliance audits of all financial institutions in Nevada. In
this capacity, he supervised the activities of the examiners and served as
the interface with management and/or board of directors of the regulated
financial institutions. During the period that he served Nevada - from 1982
to 1999 - Mr. Whiteaker worked extensively on matters pertaining to both
state and federal statutes, examination procedures and policy determination,
credit administration for commercial, real estate, and consumer loans
procedures, and all facets of operations management. From 1973 to 1982,
Mr. Whiteaker was Assistant Vice-President of the Nevada National Bank,
responsible for a variety of matters including loan reviews. Mr. Whiteaker
earned his Bachelor's degree from the University of Nevada, Reno, where he
majored in Management.
MR. ROBERT AALBERTS serves as a Director of the Company. Mr. Aalberts
is the Ernst Lied Professor of Legal Studies at the University of Nevada, Las
Vegas, a position he has held since 1991. From 1984 to 1991, Mr. Aalberts was
an Associate Professor of Business Law at Louisiana State University -
Shreveport. From 1982 through 1984, he served as an attorney for Gulf Oil
Company. Mr. Aalberts has either authored or co-authored books relating to
the regulatory environment, law and business. His work is either cited in,
and/or he is the author of, almost 100 legal articles, deal with various
aspects of real estate, business, and the practice of law. Mr. Aalberts
earned his law degree at Loyola University, New Orleans, Louisiana and
received a Master of Arts from the University of Missouri. He is a member of
the State Bar of Louisiana.
MR. ROBERT W. FINE serves as a Director of the Company. Since 1998,
Mr. Fine has been the President of Equisource Group Ltd., a company providing
investment-banking services to businesses seeking to raise capital or become
public companies. Mr. Fine has had extensive experience in executive capacity
in healthcare companies and providing advisory services with respect to
mergers and acquisitions. From 1993 to 1998, Mr. Fine was President of
Transworld Healthcare, a company providing home healthcare products and
services, during which period the company grow from less than $7 million in
revenues to over $80 million. From 1990 to 1993, the year of its sale, he
served as President of the Fortress Company, a manufacturer of healthcare
mobility devices. For the seven years prior to joining Fortress, Mr. Fine was
President of ConAc, a company that specialized in mergers and acquisitions.
During this period, the company provided assistance in over 100 mergers,
principally in the healthcare field. Mr. Fine earned his Bachelors degree at
Bentley College, Waltham, Mass., where he majored in Accounting.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN COMPANY'S CERTIFYING ACCOUNTANT
As a result of the Transactions and as of the date thereof, the
accountant to the Company was replaced with Hansen, Barnett, & Maxwell. The
financial statements for the Company since inception and prior to the change
in such accountants have not contained any adverse opinion or disclaimer or
were modified as to any uncertainty, audit scope or accounting principles and
there were not any disagreements or "reportable events" with such former
accountant.
ITEM 5. OTHER EVENTS
Not applicable.
<PAGE>
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Transactions, upon effectiveness of the
Transactions, the sole director and officer of Sunderland resigned and other
persons were designated to serve in the capacities indicated in the section
titled "Management" for the Company until the next annual meeting of
stockholders and until their respective successors are elected and qualified
or until their prior resignation or termination.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial statements
for the acquired business referred to in Item 2 above. The
registrant intends to file such financial statements as soon as
practicable but not later than 60 days after the report on Form
8-K must be filed with respect to such acquisition.
(b) Pro forma Financial Information.
It is not practicable to provide the pro forma financial
information required to be filed as a result of the transactions
referred to in Item 2 above. The registrant intends to file such
financial statements as soon as practicable but not later than 60
days after the report on Form 8-K must filed with respect to such
transactions.
(c) Exhibits.
There is attached hereto the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS.
- ----------- ------------------------
<S> <C>
1.1 Voting Trust Agreement among Sunderland Acquisition Corporation,
a Delaware corporation, Michael V. Shustek, and Stephen J.
Byrne, and his successors in trust, dated as of February 28,
1999.
2.1 Agreement and Plan of Reorganization between Sunderland
Acquisition Corporation, a Delaware corporation and Stephen J.
Byrne, dated as of April 9, 1999.
2.2 Asset Acquisition Agreement between Sunderland Acquisition
Corporation, a Delaware corporation and Del Mar Holdings, Inc.,
a Nevada corporation, dated as of April 9, 1999.
2.3 Asset Acquisition Agreement between Sunderland Acquisition
Corporation, a Delaware corporation and Del Mar Mortgage, Inc.,
a Nevada corporation, dated as of April 9, 1999.
16.1 Accountants Letter.
</TABLE>
ITEM 8. CHANGE IN FISCAL YEAR
<PAGE>
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not applicable.
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sunderland Acquisition Corporation
By: /s/ Michael V. Shustek
--------------------------------------
(Print name and title of signing officer)
Michael V. Shustek, CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Dated: May 4, 1999
<PAGE>
Exhibit 1.1
VOTING TRUST AGREEMENT
This VOTING TRUST AGREEMENT (the "AGREEMENT") is made as of this 28th
day of February, 1999, by and among Sunderland Acquisition Corporation, a
Delaware corporation (the "Company"), Michael V. Shustek, the majority
stockholder of the Company (the "STOCKHOLDER"), and Stephen J. Byrne, and his
successors in trust (the "Trustee").
WHEREAS, in order to secure continuity and stability of the Company's
policy and management, the Stockholder deems it advisable to deposit all of his
stock in the Company with the Trustee; and
WHEREAS, the Trustee has consented to act under this Agreement for the
purposes herein provided.
NOW, THEREFORE, it is agreed as follows:
1. AGREEMENT. Copies of this Agreement, and of every supplemental or
amendatory agreement, shall be filed in the Company's principal office in Las
Vegas, Nevada, and in the Cornpany's office in the State of Delaware. All such
copies shall be open to the inspection of the Company's stockholders daily
during business hours. All voting trust certificates issued as hereinafter
provided shall be issued, received, and held subject to all the terms of this
Agreement. Every person, firm, or corporation entitled to receive voting trust
certificates representing shares of capital stock, and their transferees and
assigns, upon accepting the voting trust certificates issued hereunder, shall be
bound by the provisions of this Agreement.
2. TRANSFER OF STOCK TO TRUSTEE. (a) The Stockholder shall deposit with
the Trustee a certificate or certificates for his Company stock as set forth
after his signature to this Agreement. No stock shall be deposited hereunder
except stock having general voting powers, as provided in the Certificate of
Incorporation. All such stock certificates shall be endorsed, or accompanied by
such instruments of transfer as to enable the Trustee to cause such certificates
to be transferred into the name of the Trustee, as hereinafter provided. On
receipt by the Trustee of the certificates for any such shares and their
transfer into the name of the Trustee, the Trustee shall hold them subject to
the terms of this Agreement, and shall thereupon issue and deliver to the
Stockholder a voting trust certificate or certificates for the shares so
deposited.
(b) All certificates for stock of the Company transferred and delivered
to the Trustee pursuant to this Agreement shall be surrendered by the Trustee to
the Company and canceled, and new certificates therefor shall be issued to and
held by the Trustee in the name of "Stephen J. Byrne, as Voting Trustee."
3. VOTING TRUST CERTIFICATES. The voting trust certificates shall be in
the following form:
"NO.______________________ SHARES__________________________
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
A DELAWARE CORPORATION
VOTING TRUST CERTIFICATE FOR CAPITAL STOCK
THIS CERTIFIES THAT___________________________ OR REGISTERED ASSIGNS IS
ENTITLED TO ALL THE BENEFITS ARISING FROM THE DEPOSIT WITH THE TRUSTEE UNDER THE
VOTING TRUST AGREEMENT HEREINAFTER MENTIONED, OF CERTIFICATES FOR_______________
SHARES OF THE CAPITAL STOCK OF SUNDERLAND ACQUISITION CORPORATION, A DELAWARE
CORPORATION (THE "COMPANY"), AS PROVIDED IN SUCH TRUST AGREEMENT AND SUBJECT TO
THE TERMS THEREOF. THE REGISTERED HOLDER HEREOF, OR ASSIGNS, IS ENTITLED TO
RECEIVE PAYMENT EQUAL TO THE AMOUNT OF CASH DIVIDENDS, IF ANY, RECEIVED BY THE
TRUSTEE UPON THE NUMBER OF SHARES OF CAPITAL STOCK OF THE COMPANY IN RESPECT OF
WHICH THIS CERTIFICATE IS ISSUED. DIVIDENDS RECEIVED BY THE TRUSTEE IN THE
COMPANY'S COMMON OR OTHER STOCK HAVING GENERAL VOTING POWERS SHALL BE PAYABLE IN
VOTING TRUST CERTIFICATES, IN FORM SIMILAR HERETO. UNTIL THE TRUSTEE HAS
DELIVERED THE STOCK HELD UNDER SUCH TRUST AGREEMENT TO THE HOLDERS OF THE TRUST
CERTIFICATES, OR TO THE COMPANY, AS SPECIFIED IN SUCH TRUST AGREEMENT, THE
TRUSTEE SHALL POSSESS AND BE ENTITLED TO EXERCISE ALL RIGHTS AND POWERS OF AN
ABSOLUTE OWNER OF SUCH STOCK, INCLUDING THE RIGHT TO VOTE THEREON FOR EVERY
PURPOSE, AND TO EXECUTE CONSENTS IN RESPECT THEREOF FOR EVERY PURPOSE, IT BEING
EXPRESSLY STIPULATED THAT NO VOTING RIGHT PASSES TO THE OWNER HEREOF, OR HIS
ASSIGNS, UNDER THIS CERTIFICATE OR ANY AGREEMENT, EXPRESSED OR IMPLIED.
THIS CERTIFICATE IS ISSUED, RECEIVED, AND HELD UNDER, AND THE RIGHTS OF
THE OWNER HEREOF ARE SUBJECT TO, THE TERMS OF A VOTING TRUST AGREEMENT DATED
FEBRUARY 28, 1999, BY AND BETWEEN THE COMPANY, MICHAEL V. SHUSTEK, AND STEPHEN
J. BYRNE, AND HIS SUCCESSORS IN TRUST. (COPIES OF THE VOTING TRUST AGREEMENT,
AND OF EVERY AGREEMENT AMENDING OR SUPPLEMENTING IT, ARE ON FILE IN THE
COMPANY'S PRINCIPAL OFFICE IN LAS VEGAS, NEVADA, AND IN THE COMPANY'S OFFICE IN
THE STATE OF DELAWARE, AND SHALL BE OPEN TO THE INSPECTION OF THE COMPANY'S
STOCKHOLDERS DAILY DURING BUSINESS HOURS.) THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE HEREOF, ASSENTS AND IS BOUND TO ALL THE PROVISIONS OF THE VOTING
TRUST AGREEMENT AS IF HE HAD SIGNED IT IN PERSON.
IN THE EVENT OF THE DISSOLUTION OR TOTAL OR PARTIAL LIQUIDATION OF THE
COMPANY, THE MONEYS, SECURITIES, OR PROPERTY RECEIVED BY THE TRUSTEE IN RESPECT
OF THE STOCK DEPOSITED UNDER SUCH TRUST AGREEMENT SHALL BE DISTRIBUTED AMONG THE
REGISTERED HOLDERS OF TRUST CERTIFICATES IN PROPORTION TO THEIR INTERESTS AS
SHOWN BY THE BOOKS OF THE TRUSTEE.
IN THE EVENT THAT THE TRUSTEE RECEIVES ANY DIVIDEND OR DISTRIBUTION
OTHER THAN IN COMPANY STOCK HAVING GENERAL VOTING POWERS, THE TRUSTEE SHALL
DISTRIBUTE THE SAME TO THE REGISTERED HOLDERS OF VOTING TRUST CERTIFICATES, ON
THE DATE OF SUCH DISTRIBUTION, OR TO THE REGISTERED CERTIFICATE HOLDERS AT THE
CLOSE OF BUSINESS ON THE DATE FIXED BY THE TRUSTEE FOR TAKING A RECORD TO
DETERMINE THE CERTIFICATE HOLDERS ENTITLED TO SUCH DISTRIBUTION, PURSUANT TO THE
PROVISIONS OF PARAGRAPH 7 OF THE TRUST AGREEMENT. SUCH DISTRIBUTION SHALL BE
MADE TO THE CERTIFICATE HOLDERS RATABLY IN ACCORDANCE WITH THE NUMBER OF SHARES
REPRESENTED BY THEIR RESPECTIVE VOTING TRUST CERTIFICATES.
STOCK CERTIFICATES FOR THE NUMBER OF SHARES OF CAPITAL STOCK THEN
REPRESENTED BY THIS CERTIFICATE, OR THE NET PROCEEDS IN CASH OR PROPERTY OF SUCH
SHARES, SHALL BE DUE AND DELIVERABLE
2
<PAGE>
HEREUNDER UPON THE TERMINATION OF SUCH TRUST AGREEMENT AS PROVIDED THEREIN.
THE VOTING TRUST AGREEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT
UNTIL FEBRUARY 8, 2000, UNLESS TERMINATED PRIOR THERETO, AS PROVIDED IN THE
AGREEMENT.
THIS CERTIFICATE IS TRANSFERABLE ON THE BOOKS OF THE TRUSTEE AT HIS
OFFICE IN LAS VEGAS, NEVADA (OR ELSEWHERE AS DESIGNATED BY THE TRUSTEE), BY THE
HOLDER HEREOF, EITHER IN PERSON OR BY ATTORNEY DULY AUTHORIZED, IN ACCORDANCE
WITH THE RULES ESTABLISHED FOR THAT PURPOSE BY THE TRUSTEE AND ON SURRENDER OF
THIS CERTIFICATE PROPERLY ENDORSED. TITLE TO THIS CERTIFICATE WHEN DULY ENDORSED
SHALL, TO THE EXTENT PERMITTED BY LAW, BE TRANSFERABLE WITH THE SAME EFFECT AS
IN THE CASE OF A NEGOTIABLE INSTRUMENT. EACH HOLDER HEREOF AGREES THAT DELIVERY
OF THIS CERTIFICATE, DULY ENDORSED BY ANY HOLDER HEREOF, SHALL VEST TITLE HERETO
AND ALL RIGHTS HEREUNDER IN THE TRANSFEREE; PROVIDED, HOWEVER, THAT THE TRUSTEE
MAY TREAT THE REGISTERED HOLDER HEREOF, OR WHEN PRESENTED DULY ENDORSED IN BLANK
THE BEARER HEREOF, AS THE ABSOLUTE OWNER HEREOF, AND OF ALL RIGHTS AND INTERESTS
REPRESENTED HEREBY, FOR ALL PURPOSES. THE TRUSTEE SHALL NOT BE BOUND OR AFFECTED
BY ANY NOTICE TO THE CONTRARY, OR BY ANY NOTICE OF ANY TRUST, WHETHER EXPRESS OR
IMPLIED, OR CONSTRUCTIVE, OR OF ANY CHARGE OR EQUITY RESPECTING THE TITLE OR
OWNERSHIP OF THIS CERTIFICATE, OR THE SHARES OF STOCK REPRESENTED HEREBY;
PROVIDED, HOWEVER, THAT NO DELIVERY OF STOCK CERTIFICATES HEREUNDER, OR THE
PROCEEDS THEREOF, SHALL BE MADE WITHOUT SURRENDER HEREOF PROPERLY ENDORSED.
THIS CERTIFICATE SHALL NOT BE VALID FOR ANY PURPOSE UNTIL DULY SIGNED
BY THE TRUSTEE.
THE WORD "TRUSTEE" AS USED IN THIS CERTIFICATE MEANS THE TRUSTEE OR THE
SUCCESSOR TRUSTEE ACTING UNDER SUCH VOTING TRUST AGREEMENT.
IN WITNESS WHEREOF THE TRUSTEE HAS SIGNED THIS CERTIFICATE ON 19__.
-----------------------------------
TRUSTEE
(FORM OF ASSIGNMENT):
FOR VALUE RECEIVED ____________________________________ HEREBY ASSIGNS
THE WITHIN CERTIFICATE, AND ALL RIGHTS AND INTERESTS REPRESENTED THEREBY, TO
AND APPOINTS ________________________________________ ATTORNEY TO TRANSFER THIS
CERTIFICATE ON THE BOOKS OF THE TRUSTEE MENTIONED THEREIN, WITH FULL POWER
OF SUBSTITUTION.
DATED:________________________________________
_______________________(S E A L)
IN PRESENCE OF
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_______________________________________________
_______________________________________________
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATEVER. ALL ENDORSEMENTS, IN THE
DISCRETION OF THE TRUSTEE, SHALL BE GUARANTEED BY A BANK OR TRUST COMPANY
SATISFACTORY TO THE TRUSTEE."
4. SUBSTITUTE CERTIFICATES TO STOCKHOLDER. Upon delivery to the Trustee
for surrender by the Stockholder of the original voting trust certificate, or
any additional or substitute certificates which may have been issued to the
Stockholder pursuant to Sections 7, 8, or 9 hereof, along with a written
statement by the Stockholder setting forth the number of shares of the Company's
stock which the Stockholder desires to convey to one or more persons or entities
pursuant to Section 5 hereof, the Trustee shall issue and deliver to the
Stockholder, in his name, for endorsement by him to such persons or entities,
substitute voting trust certificates representing those shares of the Company's
stock to be conveyed and those shares to be retained by the Stockholder, if any.
5. CONVEYANCE OF CERTIFICATES; RELEASE FROM VOTING TRUST. (a) Voting
trust certificates shall be conveyable at the Trustee's office in Las Vegas,
Nevada (and at such other place and by such other method of delivery as the
Trustee may designate by an instrument signed by him and sent by mail to the
registered holders of voting trust certificates), on the books of the Trustee,
by the Stockholder or other registered owner thereof, either in person or by
attorney thereto duly authorized, upon surrender thereof, according to the rules
established for that purpose by the Trustee. The Trustee may treat the
registered holder as owner thereof for all purposes, but he shall not be
required to deliver stock certificates hereunder without the surrender of such
voting trust certificates. Upon delivery to the Trustee of a voting trust
certificate or certificates, duly endorsed by the Stockholder to any person or
entity other than an affiliate of the Stockholder, the underlying shares of
stock in the Company represented by such voting trust certificates shall, in all
respects, be released from the voting trust created hereby. In the event of such
conveyance by the Stockholder, the Trustee shall cancel the voting trust
certificate(s) so endorsed and delivered, and shall, within thirty (30) days,
deliver to the transferee(s), a certificate or certificates for the number of
shares conveyed at the Trustee's office or at such other place and by such
method, including, without limitation, delivery via United States mail or
express delivery service, as the Trustee, in his discretion, may elect. In the
event of a conveyance by the Stockholder of voting trust certificate(s)
representing all of the shares of the Company held by him, this Agreement shall
terminate as provided in Section 6. For the purposes of this Agreement, the term
"affiliate" shall have the meaning ascribed to it in Rule 405, under the
Securities Act of 1933, as amended.
(b) LOST OR STOLEN CERTIFICATES. If a voting trust certificate is lost,
stolen, mutilated, or destroyed, the Trustee, in his discretion, may issue a
duplicate of such certificate upon receipt of. (1) evidence of such fact
satisfactory to him; (2) indemnity satisfactory to him; (3) the existing
certificate, if mutilated; and (4) his reasonable fees and expenses in
connection with the issuance of
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<PAGE>
a new trust certificate. The Trustee shall not be required to recognize any
transfer of a voting trust certificate not made in accordance with the
provisions hereof, unless the person claiming such ownership has produced
indicia of title satisfactory to the Trustee, and has in addition deposited with
the Trustee indemnity satisfactory to him.
6. TERMINATION. (a) This Agreement shall terminate on the earlier of:
(i) delivery to the Trustee of a voting trust certificate or certificates,
representing all of the stock of the Company held by the Stockholder, duly
endorsed by him to any person(s) or entity(ies) other than affiliates of the
Stockholder, or (ii) expiration of the term hereof, as provided in Section 13.
After termination of this Agreement, the voting trust certificates shall cease
to have any effect, and their holders shall have no further rights under this
Agreement other than to receive certificates for shares of the Company's stock
or other property distributable under the terms hereof and upon the surrender of
such voting trust certificates.
(b) Within 30 days after the termination of this Agreement, the Trustee
shall deliver, to the registered holders of all voting trust certificates, if
any, certificates for the number of shares of the Company's capital stock
represented thereby, upon the surrender thereof properly endorsed voting trust
certificates, such delivery to be made in each case at the Trustee's office or
at such other place and by such method, including, without limitation, delivery
via United States mail or express delivery service, as the Trustee, in his
discretion, may elect.
(c) At any time subsequent to 30 days after the termination of this
Agreement, the Trustee may deposit with the Company stock certificates
representing the number of shares of capital stock represented by the voting
trust certificates then outstanding, if any, with authority in writing to the
Company to deliver such stock certificates in exchange for voting trust
certificates representing a like number of shares of the capital stock of the
Company. Upon such deposit all further liability of the Trustee for the delivery
of such stock certificates and the delivery or payment of dividends upon
surrender of the voting trust certificates shall cease, and the Trustee shall
not be required to take any further action hereunder.
7. DIVIDENDS. (a) Prior to the termination of this Agreement, the
holder of each voting trust certificate shall be entitled to receive payments
equal to the cash dividends, if any, received by the Trustee upon a like number
and class of shares of the Company's capital stock as is called for by each such
voting trust certificate. If any dividend in respect of the stock deposited with
the Trustee is paid, in whole or in part, in the Company's stock having general
voting powers, the Trustee shall likewise hold, subject to the terms of this
Agreement, the certificates for stock which are received by him on account of
such dividend. The holder of each voting trust certificate representing stock on
which such stock dividend has been paid shall be entitled to receive a voting
trust certificate issued under this Agreement for the number of shares and class
of stock received as such dividend with respect to the shares represented by
such voting trust certificate. Holders entitled to receive the dividends
described above shall be those registered as such on the Trustee's transfer
books at the close of business on the day fixed by the Company for the taking of
a record to determine those holders of its stock entitled to receive such
dividends, or if the Trustee has fixed a date, as hereinafter
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<PAGE>
in this paragraph provided, for the purpose of determining the holders of voting
trust certificates entitled to receive such payment or distribution, then
registered as such at the close of business on the date so fixed by the Trustee.
(b) If any dividend in respect of the stock deposited with the Trustee
is paid other than in capital stock having general voting powers, then the
Trustee shall distribute the same among the holders of voting trust certificates
registered as such at the close of business on the day fixed by the Trustee for
taking a record to determine the holders of voting trust certificates entitled
to receive such distribution. Such distribution shall be made to such holders of
voting trust certificates ratably, in accordance with the number of shares
represented by their respective voting trust certificates.
(c) The Trustee may temporarily close its transfer books for a period
not exceeding 20 days preceding the date fixed for the payment or distribution
of dividends or the distribution of assets or rights, or at any other time in
the Trustee's discretion. In lieu of providing for the closing of the books
against the transfer of voting trust certificates, the Trustee may fix a date
not exceeding 20 days preceding any date fixed by the Company for the payment or
distribution of dividends, or for the distribution of assets or rights, as a
record date for the determination of the holders of voting trust certificates
entitled to receive such payment or distribution. The holders of voting trust
certificates of record at the close of business on such date shall exclusively
be entitled to participate in such payments or distribution.
(d) In lieu of receiving cash dividends upon the capital stock of the
Company and paying the same to the holders of voting trust certificates pursuant
to the provisions of this Agreement, the Trustee may instruct the Company in
writing to pay such dividends to the holders of the voting trust certificates.
Upon receipt of such written instructions, the Company shall pay such dividends
directly to the holders of the voting trust certificates. Upon such instructions
being given by the Trustee to the Company, and until revoked by the Trustee, all
liability of the Trustee with respect to such dividends shall cease. The Trustee
may at any time revoke such instructions and by written notice to the Company
direct it to make dividend payments to the Trustee.
8. SUBSCRIPTION RIGHTS. If any stock or other securities of the Company
are offered for subscription to the holders of its capital stock deposited
hereunder, the Trustee, promptly upon receipt of notice of such offer, shall
mail a copy thereof to each holder of the voting trust certificates. Upon
receipt by the Trustee, at least five days prior to the last day fixed by the
Company for subscription and payment, of a request from any such registered
holder of voting trust certificates to subscribe in his behalf, accompanied with
the sum of money required to pay for such stock or securities (not in excess of
the amount subject to subscription in respect of the shares represented by the
voting trust certificate held by such certificate holder), the Trustee shall
make such subscription and payment. Upon receiving from the Company the
certificates for shares or securities so subscribed for, the Trustee shall issue
to such holder a voting trust certificate in respect thereof if the shares or
securities received have general voting powers. If, however, the shares or
securities do not have general voting powers, the Trustee shall mail or deliver
such securities to the certificate holder in whose behalf the subscription was
made, or may instruct the Company to make delivery
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<PAGE>
directly to the certificate holder entitled thereto.
9. DISSOLUTION OF THE COMPANY. In the event of the dissolution or total
or partial liquidation of the Company, whether voluntary or involuntary, the
Trustee shall receive the moneys, securities, rights, or property to which the
holders of the Company's capital stock deposited hereunder are entitled, and
shall distribute the same among the registered holders of voting trust
certificates in proportion to their interests, as shown by the books of the
Trustee. Alternatively, the Trustee may in his discretion deposit such moneys,
securities, fights, or property with any Federally insured bank or trust company
doing business in Las Vegas, Nevada, with authority and instructions to
distribute the same as above provided, and upon such deposit all further
obligations or liabilities of the Trustee in respect of such moneys, securities,
fights, or property so deposited shall cease.
10. REORGANIZATION OF THE COMPANY. If the Company is merged into or
consolidated with another corporation, or all or substantially all of its assets
are transferred to another corporation, then in connection with such transfer
the term "Company" for all purposes of this Agreement shall be deemed to include
such successor corporation, and the Trustee shall receive and hold under this
Agreement any stock of such successor corporation received on account of the
ownership, as Trustee hereunder, of the stock held hereunder prior to such
merger, consolidation, and transfer. Voting trust certificates issued and
outstanding under this Agreement at the time of such merger, consolidation, or
transfer may remain outstanding, or the Trustee may, in his discretion,
substitute for such voting trust certificates new voting trust certificates in
appropriate form, and the terms "stock" and "capital stock" as used herein shall
be taken to include any stock which may be received by the Trustee in lieu of
all or any part of the Company's capital stock.
11. RIGHTS OF TRUSTEE. (a) During the term of this Agreement, the
Trustee shall have the right, subject to the provisions of this paragraph
hereinafter set forth, to exercise, in person or by his nominees or proxies, all
stockholders' voting rights and powers in respect of all stock deposited
hereunder, and to take part in or consent to any corporate or stockholders'
action of any kind whatsoever. The right to vote shall include the right to vote
for the election of directors, and in favor of or against any resolution or
proposed action of any character whatsoever, which may be presented at any
meeting or require the consent of the Company's stockholders. Without limiting
such general right, mortgaging, creating a security interest in, and pledging of
all or any part of the Company's property, the lease or sale of all or any part
of its property, for cash, securities, or other property, and the dissolution of
the Company, or its consolidation, merger, reorganization, or recapitalization.
(b) The Trustee shall vote the stock held by him either in person or by
his nominees or proxies, in direct proportion to the manner in which the voted
shares of stock of the Company not held by the Trustee are voted (e.g., if the
shares held by the Trustee number 60, and the shares held and voted by all other
shareholders of the Company number 40, and 10 of those 40 shares are voted in
favor of a particular question presented to the stockholders, and 30 of those 40
shares are voted against, the Trustee shall vote 15 of the shares held by him in
favor, and 45 against). The Trustee, however, shall not be personally liable for
any action taken pursuant to his vote or any act committed or omitted to be done
under this Agreement, provided that such commission or omission does not
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<PAGE>
amount to willful misconduct on his part and that he at all times exercise good
faith in such matters.
12. TRUSTEES. (a) The Trustee (and any successor Trustee) may at any
time resign by mailing to the registered holders of voting trust certificates a
written resignation, to take effect ten days thereafter or upon its prior
acceptance. Upon the death of Stephen J. Bryne or upon his resignation as
Trustee, a federal or state chartered banking institution designated by Stephen
J. Byrne shall become Trustee for the remainder of the term of this Agreement.
Upon the dissolution or resignation of such federal or state chartered banking
institution, another replacement Trustee under this Agreement shall be
designated by the registered holders of voting trust certificates issued and
outstanding under this Agreement representing a majority of the number of shares
of stock standing in the name of the Trustee hereunder.
(b) The rights, powers, and privileges of the Trustee named hereunder
shall be possessed by the successor Trustee(s), with the same effect as though
such successors had originally been parties to this Agreement. The word
"Trustee," as used in this Agreement, means the Trustee or any successor
Trustees acting hereunder.
13. TERM. This Agreement shall continue in effect for the minimum
holding period provided for under Rule 144(b)(1), under the Securities Act of
1933, as amended (i.e., for one year after the date and year first written
above).
14. COMPENSATION AND REIMBURSEMENT OF TRUSTEE. The Trustee shall serve
without compensation. The Trustee shall have the right to incur and pay such
reasonable expenses and charges, to employ and pay such agents, attorneys, and
counsel as he may deem necessary and proper to effectuate this Agreement. All
such expenses or charges incurred by and due to the Trustee may be deducted from
the dividends or other moneys or property received by him on the stock deposited
hereunder. Nothing herein contained shall disqualify the Trustee or any
successor Trustee, or incapacitate him or them from serving the Company or any
of its subsidiaries as officer or director, or in any other capacity, and in any
such capacity receiving compensation.
15. NOTICE. (a) Unless otherwise specifically provided herein, any
notice to or communication with the holders of the voting trust certificates
hereunder shall be deemed to be sufficiently given or made if enclosed in
postpaid envelopes (regular not registered mail) addressed to such holders at
their respective addresses appearing on the Trustee's transfer books, and
deposited in any post office or post office box. The addresses of the holders of
voting trust certificates, as shown on the Trustee's transfer books, shall in
all cases be deemed to be the addresses of voting trust certificate holders for
all purposes under this Agreement, without regard to what other or different
addresses the Trustee may have for any voting trust certificate holder on any
other books or records of the Trustee. Every notice so given shall be effective,
whether or not received, and the date of mailing shall be the date such notice
is deemed given for all purposes.
(b) Any notice to the Company hereunder shall be sufficient if enclosed
in a postpaid envelope and sent by registered mail to the Company addressed as
follows: Sunderland Acquisition
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Corporation, 1504 R Street, N.W. Washington, D.C. 20009, or to such other
address as the Company may designate by notice in writing to the Trustee.
(c) Any notice to the Trustee hereunder may be enclosed in a postpaid
envelope and sent by registered mail to the Trustee, addressed to him at such
addresses as he may from time to time furnish in writing to the Company, and if
no such address has been so furnished by the Trustee, then to him in care of the
Company.
(d) All distributions of cash, securities, or other property hereunder
by the Trustee to the holders of voting trust certificates may be made, in the
Trustee's discretion, by mail (regular or registered mail, as the Trustee may
deem advisable), in the same manner as hereinabove provided for the giving of
notices to the holders of voting trust certificates.
16. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements
between the parties relating to its subject matter. There are no other
understandings or agreements between them concerning the subject matter.
17. NON-WAIVER. No delay or failure by a party to exercise any right
under this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
18. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
19. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware, without regard to its principles of conflict
of laws.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
21. BINDING EFFECT. The provisions of this Agreement shall be binding
upon and inure to the benefit of each of the parties and their respective legal
representatives, successors and assigns.
In witness whereof the Company and the Trustee have executed this
Agreement, and the Stockholder has signed this Agreement and has stated the
number of shares of capital stock of the Company deposited by him.
[SIGNATURES ON NEXT PAGE]
9
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Sunderland Acquisition Corporation
By:
-------------------------------
Its:
------------------------
----------------------------------
Stephen J. Byrne, Trustee
Number of Shares:
- ------------------------------------- -----------------------------------
Michael V. Shustek
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Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") among SUNDERLAND
ACQUISITION CORPORATION, a Delaware corporation ("Sunderland"), CAPSOURCE,
INC., a Nevada corporation ("Capsource") and STEPHEN J. BYRNE (the
"Shareholder"), being the owner of record of all of the issued and
outstanding stock of Capsource.
Whereas, Sunderland wishes to acquire and the Shareholder wishes to
transfer all of the issued and outstanding securities of Capsource in a
transaction intended to qualify as a reorganization within the meaning of
section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Now, therefore, Sunderland, Capsource, and the Shareholder adopt
this plan of reorganization and agree as follows:
1. EXCHANGE OF STOCK
1.1 Number of Shares. The Shareholder agrees to transfer to
Sunderland at the Closing (defined below) the number of shares of common
stock of Capsource, no par value per share, shown opposite his name in
Exhibit A in exchange for an aggregate of 12,000 shares of voting common
stock of Sunderland, $.0001 par value per share, as provided in paragraph 1.5
below.
1.2 Exchange of Certificates. Each holder of an outstanding
certificate or certificates theretofore representing shares of Capsource
common stock shall surrender such certificate(s) for cancellation to
Sunderland, and shall receive in exchange a certificate or certificates
representing the number of full shares of Sunderland common stock into which
the shares of Capsource common stock represented by the certificate or
certificates so surrendered shall have been converted. The transfer of
Capsource shares by the Shareholder shall be effected by the delivery to
Sunderland at the Closing of certificates representing the transferred shares
endorsed in blank or accompanied by stock powers executed in blank.
1.3 Fractional Shares. Fractional shares of Sunderland common stock
shall not be issued, but in lieu thereof Sunderland shall round up fractional
shares to the next highest whole number.
1.4 Further Assurances. At the Closing and from time to time
thereafter, the Shareholder shall execute such additional instruments and
take such other action as may be required to sell, transfer, and assign the
transferred stock to Sunderland and to confirm Sunderland's title thereto.
1.5 Securities Exchanged. The securities of Capsource owned by the
Shareholder, and the relative securities of Sunderland for which they will be
exchanged, as well as the securities of Sunderland to be issued to Mr. Steve
Brockman ("Brockman") are set out in Exhibit A.
1.6 Securities Outstanding After Closing. Immediately following the
Closing, there will be issued and outstanding in Sunderland, 750,000 common
shares issued to TPG Capital Corporation, 2,874,762 common shares issued to
Del Mar Holdings, Inc., 60,000 common shares issued to Del Mar Mortgage,
Inc., 6,000 common shares issued to the Shareholder, and 6,000 common shares
issued to Brockman.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 2
- --------------------------------------------------------------------------------
2. EXCHANGE OF OTHER SECURITIES. All outstanding warrants, options,
stock rights and all other securities of Capsource owned by the Shareholder,
if any, shall be exchanged and adjusted, subject to the terms contained in
such warrants, options, stock rights or other securities, for similar
securities of Sunderland.
3. CLOSING
3.1 The Closing contemplated herein shall be held at the offices of
Sklar Warren Conway Williams & Rosenfeld LLP, Las Vegas, Nevada unless
another place or time is agreed upon in writing by the parties without
requiring the meeting of the parties hereof. All proceedings to be taken and
all documents to be executed at the Closing shall be deemed to have been
taken, delivered and executed simultaneously, and no proceeding shall be
deemed taken nor documents deemed executed or delivered until all have been
taken, delivered and executed. The date of Closing may be accelerated or
extended by agreement of the parties. The Closing shall take place on April
9, 1999, or as soon thereafter as practicable.
3.2 Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission required by this Agreement or any
signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original
could be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing
or transmission or original signature.
4. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate that prior to the Closing represented Capsource common stock
shall be deemed for all purposes, other than the payment of dividends or
other distributions, to evidence ownership of the number of shares of
Sunderland common stock into which it was converted. No dividend or other
distribution shall be paid to the holders of certificates of Capsource common
stock until presented for exchange at which time any outstanding dividends or
other distributions shall be paid.
5. REPRESENTATIONS AND WARRANTIES OF CAPSOURCE
Capsource represents and warrants as follows:
5.1 Corporate Status. Capsource is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada
and is licensed or qualified as a foreign corporation in all states in which
the nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary.
5.2 Capitalization. The authorized capital stock of Capsource
consists of 2,500 shares of common stock, no par value per share, of which
100 shares are outstanding, all duly authorized, validly issued, fully paid
and nonassessable. Capsource has not issued or granted, or agreed to issue or
grant, any warrants, options, stock rights or other securities.
5.3 Subsidiaries. Capsource has no subsidiaries.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 3
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5.4 Financial Statements. All financial statements of Capsource from
its inception to and including the close of the most recent fiscal quarter,
including audited financial statements if available, furnished to Sunderland
accurately and fairly present the financial position of Capsource as of the
respective dates of such financial statements, and the results of its
operations for the respective periods indicated computed on the basis used
for filing Capsource's federal tax returns, consistently applied. Capsource
will deliver to Sunderland within 30 days following the Closing unaudited
financial statements for the period January 1, 1999 through March 31, 1999.
5.5 Undisclosed Liabilities. Capsource has no liabilities of any
nature, except to the extent indicated on Exhibit E, whether accrued,
absolute, contingent, or otherwise, including, without limitation, tax
liabilities and interest due or to become due. The Shareholder shall assume,
pay and otherwise satisfy all liabilities of Capsource, including those shown
on Exhibit E, and shall indemnify and hold harmless Sunderland from all such
liabilities.
5.6 Litigation. There is no litigation or proceeding pending, or to
Capsource's knowledge threatened, against or relating to Capsource, its
properties or business, except as set forth in a list certified by the
president of Capsource and delivered to Sunderland.
5.7 Contracts. Capsource is not a party to any material contracts
other than those listed on Exhibit B. The Shareholder shall assume, pay and
otherwise satisfy all obligations of Capsource under all contracts, including
those shown on Exhibit B, and shall indemnify and hold harmless Sunderland
and from all such obligations of Capsource under all such contracts.
5.8 No Violation. Execution of this Agreement and performance by
Capsource hereunder has been duly authorized by all requisite corporate
action on the part of Capsource, and this Agreement constitutes a valid and
binding obligation of Capsource, performance hereunder will not violate any
provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or
any order, judgment, decree, law, or regulation to which any property of
Capsource is subject or by which Capsource is bound.
5.9 Taxes. Capsource has filed in correct form all federal, state,
and other tax returns of every nature required to be filed by it and has paid
all taxes as shown on such returns and all assessments, fees and charges
received by it to the extent that such taxes, assessments, fees and charges
have become due. Capsource has also paid all taxes which do not require the
filing of returns and which are required to be paid by it. To the extent that
tax liabilities have accrued, but have not become payable, they have been
adequately reflected as liabilities on the books of Capsource and are
reflected in the financial statements furnished hereto.
5.10 Corporate Authority. Capsource has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, and will deliver at the Closing a certified copy of resolutions of
its board of directors authorizing execution of this Agreement by its
officers and performance thereunder.
5.11 Access to Records. From the date of this Agreement to the
Closing, Capsource will (1) give to Sunderland and its representatives full
access during normal business hours to all of its offices, books, records,
contracts, and other corporate documents and properties so that Sunderland
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 4
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may inspect and audit them and (2) furnish such information concerning
Capsource's properties and affairs as Sunderland may reasonably request.
5.12 Confidentiality. Until the Closing (and permanently if there is
no Closing), Capsource and the Shareholder will keep confidential any
information which they obtain from Sunderland concerning its properties,
assets, and business. If the transactions contemplated by this Agreement are
not consummated, Capsource and the Shareholder will return to Sunderland all
written matter with respect to Sunderland obtained by them in connection with
the negotiation or consummation of this Agreement.
5.13 Mortgage Company License. The mortgage company license of
Capsource issued by the Nevada Department of Business and Industry, Division
of Financial Institutions ("Division") is in good standing, and Capsource has
never been the subject of any disciplinary action by the Division with
respect to such license.
6. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder, represents and warrants as follows:
6.1 Title to Shares. The Shareholder is the owner, free and clear of
any liens and encumbrances, of the number of Capsource shares which are
listed in Exhibit A and which he has contracted to exchange and which
represent all the issued and outstanding shares of Capsource.
6.2 Litigation. There is no litigation or proceeding pending, or to
the Shareholder's knowledge threatened, against or relating to shares of
Capsource held by the Shareholder.
7. REPRESENTATIONS AND WARRANTIES OF SUNDERLAND
The Sunderland represents and warrants as follows:
7.1 Corporate Status. Sunderland is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and is licensed or qualified as a foreign corporation in all states
in which the nature of its business or the character or ownership of its
properties makes such licensing or qualification necessary.
7.2 Capitalization. The authorized capital stock of Sunderland
consists of 100,000,000 shares of common stock, $.0001 par value per share,
of which 5,000,000 shares are issued and outstanding, all fully paid and
nonassessable and 20,000,000 shares of non-designated preferred stock, of
which there are no shares issued and outstanding.
7.3 Subsidiaries. Sunderland has no subsidiaries.
7.4 Public Company. Sunderland filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, a
registration statement on Form 10-SB on August 13, 1998, registering its
common stock.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 5
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7.5 Public Filings. Sunderland has timely filed all reports required
to be filed by it under Section 13 of the Securities Exchange Act of 1934.
7.6 Financial Statements. The audited financial statements of
Sunderland of December 31, 1998, or such other period as acceptable to
Capsource ("Sunderland's Financial Statements") furnished to Capsource are
correct and fairly present the financial condition of Sunderland as of the
dates and for the periods involved, and such statements were prepared in
accordance with generally accepted accounting principles consistently
applied. Sunderland will deliver to Capsource within 30 days following the
Closing unaudited financial statements for the period January 1, 1999 through
March 31, 1999.
7.7 Undisclosed Liabilities. Sunderland had no liabilities of any
nature except to the extent reflected or reserved against in Sunderland's
Financial Statements, whether accrued, absolute, contingent, or otherwise,
including, without limitation, tax liabilities and interest due or to become
due, and Sunderland's accounts receivable, if any, are collectible in
accordance with the terms of such accounts, except to the extent of the
reserve therefor in Sunderland's Financial Statements.
7.8 Absence of Material Changes. Between the date of Sunderland's
Financial Statements and the date of this Agreement, there have not been,
except as set forth in a list certified by the president of Sunderland and
delivered to Capsource, (1) any changes in Sunderland's financial condition,
assets, liabilities, or business which, in the aggregate, have been
materially adverse; (2) any damage, destruction, or loss of or to
Sunderland's property, whether or not covered by insurance; (3) any
declaration or payment of any dividend or other distribution in respect of
Sunderland's capital stock, or any direct or indirect redemption, purchase,
or other acquisition of any such stock; or (4) any increase paid or agreed to
in the compensation, retirement benefits, or other commitments to employees.
7.9 Litigation. There is no litigation or proceeding pending, or to
Sunderland's knowledge threatened, against or relating to Sunderland, its
properties or business, except as set forth in a list certified by the
president of Sunderland and delivered to Capsource.
7.10 Contracts. Sunderland is not a party to any material contract
other than those listed on Exhibit C attached hereto.
7.11 No Violation. Execution of this Agreement and performance by
Sunderland hereunder has been duly authorized by all requisite corporate
action on the part of Sunderland, and this Agreement constitutes a valid and
binding obligation of Sunderland, performance hereunder will not violate any
provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or
any order, judgment, decree, law, or regulation to which any property of
Sunderland is subject or by which Sunderland is bound.
7.12 Taxes. Sunderland has filed in correct form all federal, state,
and other tax returns of every nature required to be filed by it and has paid
all taxes as shown on such returns and all assessments, fees and charges
received by it to the extent that such taxes, assessments, fees and charges
have become due. Sunderland has also paid all taxes which do not require the
filing of returns and which are required to be paid by it. To the extent that
tax liabilities have accrued, but
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 6
- --------------------------------------------------------------------------------
have not become payable, they have been adequately reflected as liabilities
on the books of Sunderland and are reflected in the financial statements
furnished hereto.
7.13 Title to Property. Sunderland has good and marketable title to
all properties and assets, real and personal, reflected in Sunderland's
Financial Statements, except as since sold or otherwise disposed of in the
ordinary course of business, and Sunderland's properties and assets are
Subject to no mortgage, pledge, lien, or encumbrance, except for liens shown
therein, with respect to which no default exists.
7.14 Corporate Authority. Sunderland has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, and will deliver at the Closing a certified copy of resolutions of
its board of directors authorizing execution of this Agreement by its
officers and performance thereunder.
7.15 Confidentiality. Until the Closing (and permanently if there is
no Closing), Sunderland and its representatives will keep confidential any
information which they obtain from Capsource concerning its properties,
assets, and business. If the transactions contemplated by this Agreement are
not consummated, Sunderland will return to Capsource all written matter with
respect to Capsource obtained by it in connection with the negotiation or
consummation of this Agreement.
7.16 Investment Intent. Sunderland is acquiring the Capsource shares
to be transferred to it under this Agreement for investment and not with a
view to the sale or distribution thereof, and Sunderland has no commitment or
present intention to liquidate Capsource or to sell or otherwise dispose of
its stock.
7.17. Due Diligence. The responses of Sunderland to a certain due
diligence checklist furnished to Sklar Warren Conway Williams & Rosenfeld LLP
attached hereto as Exhibit D, and which are incorporated in this Agreement as
though set out in full, are and remain true and accurate.
8. CONDUCT PENDING THE CLOSING
Sunderland, Capsource and the Shareholder covenant that between the
date of this Agreement and the Closing as to each of them:
8.1 No change will be made in the charter documents, by-laws, or
other corporate documents of Sunderland or Capsource.
8.2 The Shareholder will not transfer, assign, hypothecate, lien, or
otherwise dispose or encumber the Capsource shares of common stock owned by
him.
8.3 It is acknowledged and agreed that, prior to the Closing,
Capsource shall distribute all remaining cash or funds in bank accounts of
the Capsource and all supplies, fixtures, furniture and equipment owned by
the Capsource, including, without limitation, computer equipment, and its
rights under the contracts listed on Exhibit B; provided, however that
Capsource shall take no action with respect to its mortgage company license,
which shall remain an asset of Capsource.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 7
- --------------------------------------------------------------------------------
9. CONDITIONS PRECEDENT TO OBLIGATION OF CAPSOURCE AND THE SHAREHOLDER
Capsource's and the Shareholder's obligation to consummate this
exchange shall be Subject to fulfillment on or before the Closing of each of
the following conditions, unless waived in writing by Capsource or the
Shareholder as appropriate:
9.1 Sunderland's Representations and Warranties. The representations
and warranties of Sunderland set forth herein shall be true and correct at
the Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
9.2 Sunderland's Covenants. Sunderland shall have performed all
covenants required to be performed by it on or before the Closing by this
Agreement and the following covenants pursuant to paragraph 2 of a certain
agreement with TPG Capital Corporation dated February 10, 1999:
9.2.1 TPG will provide, at its expense, a Delaware
corporation (Sunderland) with audited financial statements showing no assets
or liabilities, absolute or contingent, which is a reporting company under
ss.12(g) of the Securities Exchange Act of 1934.
9.2.2 Upon the effective date of this Agreement, the
existing shareholders, officers and directors of Sunderland will take all
actions to appoint and elect new officers and directors as selected by Del
Mar Mortgage, Inc., Del Mar Holdings, Inc. and Capsource (the "Del Mar
Entities"), and will resign as officers and directors themselves.
9.2.3 Sunderland will have authorized capital of
100,000,000 shares of common stock, $.0001 par value per share, and
20,000,000 shares of preferred stock, $.0001 par value per share.
9.2.4 Immediately prior to the effective date of this
Agreement, there will be issued and outstanding by Sunderland 5,000,000
common shares, of which 4,250,000 shares will have been issued pursuant to
Rule 506 and 750,000 shares pursuant to Rule 701.
9.2.5 TPG will deliver an opinion of counsel as to the
validity of the issuance of the outstanding common shares of Sunderland under
Rules 506 and 701 and that such shares are fully paid and nonassessable. The
Del Mar Entities understand and agree that such opinion may be issued by an
affiliate of TPG.
9.2.6 Incident to the business combinations (the "Business
Combinations") contemplated by this Agreement, by that certain Asset
Acquisition Agreement among Sunderland and Del Mar Mortgage, Inc., and by
that certain Asset Acquisition Agreement among Sunderland and Del Mar
Holdings, Inc. Sunderland shall retire all its outstanding shares issued
pursuant to Rule 506 which shall thereupon become treasury shares.
9.2.7 Incident to the Business Combinations TPG will cause the
name of Sunderland to be changed to "Sunderland Corporation" or such other name
as may be selected by the Del Mar Entities and be available.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 8
- --------------------------------------------------------------------------------
9.3 Board of Director Approval. This Agreement shall have been
approved by the board of directors of Sunderland.
9.4. Regulatory Approvals. Capsource or Sunderland shall have
received all Federal and state regulatory approvals required of them to
complete the transactions contemplated by this Agreement including, without
limitation, the approval of the change in control of Capsource by the
Division ("Financial Institutions Division Approval").
9.5 Supporting Documents of Sunderland. Sunderland shall have
delivered to Capsource and the Shareholder supporting documents in form and
substance reasonably satisfactory to Capsource and the Shareholder, to the
effect that:
(a) Sunderland is a corporation duly organized, validly
existing, and in good standing;
(b) Sunderland's authorized capital stock is as set forth
herein;
(c) Certified copies of the resolutions of the board of
directors of Sunderland authorizing the execution of
this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers
and directors of Sunderland;
(e) Sunderland's Financial Statement and unaudited
financial statement from December 31, 1998 to close
of most recent fiscal quarter; and
(f) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
10. CONDITIONS PRECEDENT TO OBLIGATION OF SUNDERLAND
Sunderland's obligation to consummate this merger shall be Subject
to fulfillment on or before the Closing of each of the following conditions,
unless waived in writing by Sunderland:
10.1 Capsource's and the Shareholder's Representations and
Warranties. The representations and warranties of Capsource and the
Shareholder set forth herein shall be true and correct at the Closing as
though made at and as of that date, except as affected by transactions
contemplated hereby.
10.2 Capsource's and the Shareholder's Covenants. Capsource and the
Shareholder shall have performed all covenants required by this Agreement to
be performed by them on or before the Closing.
10.3 Board of Director Approval. This Agreement shall have been
approved by the board of directors of Capsource.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 9
- --------------------------------------------------------------------------------
10.4 Shareholder Execution. This Agreement shall have been executed
by the required number of shareholders of Capsource.
10.5 Supporting Documents of Capsource. Capsource shall have
delivered to Sunderland supporting documents in form and Substance reasonably
satisfactory to Sunderland to the effect that:
(a) Capsource is a corporation duly organized, validly
existing, and in good standing;
(b) Capsource's capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of
directors of Capsource authorizing the execution of
this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers
and directors of Capsource;
(e) All financial statements of Capsource from its
inception to and including the close of the most
recent fiscal quarter, including audited financial
statements if available; and
(f) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
10.6. Regulatory Approvals. Sunderland or Capsource shall have
received all Federal and state regulatory approvals required of them to
complete the transactions contemplated by this Agreement including, without
limitation, the Financial Institutions Division Approval.
11. INDEMNIFICATION
11.1 Indemnification of Sunderland. Capsource and the Shareholder
severally (and not jointly) agree to indemnify Sunderland against any loss,
damage, or expense (including reasonable attorney fees) suffered by
Sunderland from (1) any breach by Capsource or the Shareholder of this
Agreement or (2) any inaccuracy in or breach of any of the representations,
warranties, or covenants by Capsource or the Shareholder herein; provided,
however, that (a) Sunderland shall be entitled to assert rights of
indemnification hereunder only if and to the extent that it suffers losses,
damages, and expenses (including reasonable attorney fees) exceeding $50,000
in the aggregate and (b) Sunderland shall give notice of any claims hereunder
within twenty-four months beginning on the date of the Closing. No loss,
damage, or expense shall be deemed to have been sustained by Sunderland to
the extent of insurance proceeds paid to, or tax benefits realizable by,
Sunderland as a result of the event giving rise to such right to
indemnification.
11.2 Proportionate Liability. The liability of the Shareholder under
this Section shall in no event exceed 25 percent of the value of the
Sunderland shares received by such Shareholder.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 10
- --------------------------------------------------------------------------------
11.3 Indemnification of Capsource and the Shareholder. Sunderland
agrees to indemnify Capsource and the Shareholder against any loss, damage,
or expense (including reasonable attorney fees) suffered by Capsource or by
the Shareholder from (1) any breach by Sunderland of this Agreement or (2)
any inaccuracy in or breach of any of Sunderland's representations,
warranties, or covenants herein.
11.4 Defense of Claims. Upon obtaining knowledge thereof, the
indemnified party shall promptly notify the indemnifying party of any claim
which has given or could give rise to a right of indemnification under this
Agreement. If the right of indemnification relates to a claim asserted by a
third party against the indemnified party, the indemnifying party shall have
the right to employ counsel acceptable to the indemnified party to cooperate
in the defense of any such claim. As long as the indemnifying party is
defending any such claim in good faith, the indemnified party will not settle
such claim. If the indemnifying party does not elect to defend any such
claim, the indemnified party shall have no obligation to do so.
12. TERMINATION. This Agreement may be terminated: (1) by mutual
consent in writing; or (2) by either Capsource, the Shareholder or Sunderland
if there has been a material misrepresentation or material breach of any
warranty or covenant by any other party.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to Paragraph
11 hereof, the representations and warranties of Capsource, the Shareholder
and Sunderland set out herein shall survive the Closing.
14. ARBITRATION
SCOPE. The parties hereby agree that any and all claims (except only
for requests for injunctive or other equitable relief) whether existing now,
in the past or in the future as to which the parties or any affiliates may be
adverse parties, and whether arising out of this agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association.
SITUS. The situs of arbitration shall be chosen by the party against
whom arbitration is sought, provided only that arbitration shall be held at a
place in the reasonable vicinity of such party's place of business or primary
residence and shall be within the United States. The situs of counterclaims
will be the same as the situs of the original arbitration. Any disputes
concerning situs will be decided by the American Arbitration Association.
APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Delaware, determined without regard
to its provisions which would otherwise apply to a question of conflict of
laws. Any dispute as to the applicable law shall be decided by the arbitrator.
DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to
any matters which are the Subject of the arbitration and to compel compliance
with such disclosure and discovery order. The arbitrator may order the
parties to comply with all or any of the disclosure and discovery provisions
of the Federal Rules of Civil Procedure, as they then exist, as may be
modified by the arbitrator consistent with the desire to simplify the conduct
and minimize the expense of the arbitration.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 11
- --------------------------------------------------------------------------------
FINALITY AND FEES. Any award or decision by the American Arbitration
Association shall be final, binding and non-appealable except as to errors of
law. The prevailing party in any such arbitration shall be entitled to the
payment by the losing party of its reasonable costs and attorneys' fees.
MEASURE OF DAMAGES. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and no claims shall be
made by any party or affiliate for lost profits, punitive or multiple damages.
COVENANT NOT TO SUE. The parties covenant that under no conditions
will any party or any affiliate file any action against the other (except
only requests for injunctive or other equitable relief) in any forum other
than before the American Arbitration Association, and the parties agree that
any such action, if filed, shall be dismissed upon application and shall be
referred for arbitration hereunder with costs and attorney's fees to the
prevailing party.
INTENTION. It is the intention of the parties and their affiliates
that all disputes of any nature between them, whenever arising, from whatever
cause, based on whatever law, rule or regulation, whether statutory or common
law, and however characterized, be decided by arbitration as provided herein
and that no party or affiliate be required to litigate in any other forum any
disputes or other matters except for requests for injunctive or equitable
relief. This agreement shall be interpreted in conformance with this stated
intent of the parties and their affiliates.
15. SECTION 1377(A) ELECTION.
Sunderland and Capsource agree to cause Capsource to close its books
and to file such elections and consents where and if necessary as of the
Closing to close the books of Capsource on the date of Closing pursuant to an
election under Section 1377(a) of the Internal Revenue Code of 1986, as
amended, and to execute and deliver any and all forms necessary in connection
with such election and consent.
16. GENERAL PROVISIONS
16.1 Further Assurances. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably
required to carry out the intent and purposes of this Agreement.
16.2 Waiver. Any failure on the part of either party hereto to
comply with any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is owed.
16.3 Brokers. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by
brokers or finders employed or alleged to have been employed by the
indemnifying party.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 12
- --------------------------------------------------------------------------------
16.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if delivered in person
or sent by prepaid first-class certified mail, return receipt requested, or
recognized commercial courier service, as follows:
If to Sunderland, to:
Sunderland Acquisition Corporation
1504 R Street, NW
Washington, DC 20009
If to Capsource, to
Capsource, Inc.
2901 El Camino Avenue
Suite 206
Las Vegas, Nevada 89102
If to the Shareholder, to
Stephen J. Byrne
2901 El Camino Avenue
Suite 206
Las Vegas, Nevada 89102
16.5 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
16.6 Assignment. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and assigns;
provided, however, that any assignment by either party of its rights under
this Agreement without the written consent of the other party shall be void.
16.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Signatures
sent by facsimile transmission shall be deemed to be evidence of the original
execution thereof.
16.8 Effective Date. The effective date of this Agreement shall be
April 9, 1999.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the effective date stated above.
SUNDERLAND ACQUISITION CORPORATION
By
--------------------------------
James M. Cassidy,
President and Secretary
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 13
- --------------------------------------------------------------------------------
CAPSOURCE, INC.
By /s/ Stephen J. Byrne
--------------------------------
Stephen J. Byrne
/s/ Stephen J. Byrne
--------------------------------
Stephen J. Byrne
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 14
- --------------------------------------------------------------------------------
EXHIBIT A
Exchange of Shares
<TABLE>
<CAPTION>
Number of Number of
Capsource Shares Sunderland
To Be Shares To Be Name of
Transferred Received Shareholder/Other Address
- ---------------- ------------ ----------------- -------
<S> <C> <C> <C>
100 6,000 Stephen J. Byrne 2901 El Camino Avenue
Suite 206
Las Vegas, NV 89102
0 6,000 Steve Brockman 6550 South Pecos Road
Las Vegas, Nevada 89120
</TABLE>
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 15
- --------------------------------------------------------------------------------
Exhibit B
Contracts of Capsource
1. Lease among Pecos-Sunset Executive Suites and Capsource, dated July 1, 1998.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 16
- --------------------------------------------------------------------------------
Exhibit C
Contracts of Sunderland
None.
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 17
- --------------------------------------------------------------------------------
Exhibit D
Due Diligence Checklist and Responses
<PAGE>
PLAN OF REORGANIZATION CAPSOURCE, INC. PAGE NUMBER 18
- --------------------------------------------------------------------------------
Exhibit E
Liabilities of Capsource
1. Any outstanding balance owed to Federal Express.
2. Any outstanding balance owed to Capsource's local and long distances
telephone service carriers.
3. See Exhibit "B".
<PAGE>
PROPOSED TAX-FREE EXCHANGE OF
SUBSTANTIALLY ALL OF THE ASSETS OF
DEL MAR MORTGAGE, INC. AND DEL MAR HOLDINGS, INC.
FOR SHARES OF STOCK OF TPG CAPITAL CORPORATION
DUE DILIGENCE CHECKLIST
Set forth below is a preliminary list of documents and information
which Del Mar Mortgage, Inc. and Del Mar Holdings, Inc. (jointly, "DEL MAR")
would like to review in connection with the proposed exchange of substantially
all of the assets of Del Mark for shares of stock of TPG Capital Corporation
("TPG"). Please provide the information requested in each item below, or if
there is no information or documentation which is responsive to that particular
request, please place the words "NONE" or "NOT APPLICABLE" opposite such
request. Whenever an inquiry is made with respect to an agreement, please
specify whether the agreement is oral or written and provide information
relating thereto. WE RECOGNIZE THAT SIGNIFICANT PORTIONS OF THIS CHECKLIST MAY
BE INAPPLICABLE TO TPG AND UNDERSTAND THAT THE RESPONSE TO ALL BUT A FEW ITEMS
MAY BE "NONE" OR "NOT APPLICABLE."
A. GENERAL CORPORATE MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Articles of Incorporation, as amended to date.
2 Bylaws (or similar document), as amended to date.
3 The last four years of minutes of shareholders' meetings,
including written consents to action without a meeting.
4 The last four years of minutes of board of directors'
meetings, including written consents to action without a
meeting.
5 The last four years of minutes of any committees of the board,
including written consents to action without a meeting.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
6 Shareholder and other lists setting forth the number of
shares, options, warrants, and other rights to acquire shares
of stock of TPG, listing the names and addresses, amounts, the
dates of grants, and the exercise price and vesting in each
case.
7 List of officers and directors.
8 Management structure organization chart.
9 Written documents pertaining to any material relationships
between (i) TPG and its officers and directors, (ii) officers
and directors of TPG and any of TPG's affiliates or
subsidiaries, and (iii) TPG and its affiliates and
subsidiaries.
10 Agreements related to partnerships or joint venture
affiliations, whether presently in effect or terminated.
11 Any purchase options or buyout obligations with respect to any
affiliate or subsidiary.
12 Agreements relating to mergers, acquisitions, sales, or
licenses of material assets or rights of TPG, or acquisition
of the shares or assets of any other business by TPG since the
date of incorporation.
13 List of all states in which TPG is qualified to do business or
is doing business and describe what sort of activities occur
in each such state.
14 Good Standing Certificate for each such state.
15 Tax status certificate for each such state.
16 Any other permits, licenses or other approvals necessary to
conduct such business, as well as information regarding any
such permit, licenses, etc., whether presently in effect,
expired, or terminated.
17 Agreements relating to the purchase, repurchase, sale, or
issuance of TPG's securities, including any options to
purchase stock.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
18 Agreements relating to the issuance of any warrants to
purchase capital stock of TPG.
19 Agreements relating to registration rights.
20 Agreements relating to the voting of TPG's securities and
restrictive share transfers or any other shareholder
agreements.
21 Agreements relating to preemptive or other preferential rights
to acquire TPG's securities and any waivers thereof.
22 Agreements relating to any redemption rights.
23 Agreements relating to any stock appreciation rights, rights
of first refusal, anti-dilution rights, take-along rights,
bring-along rights, or rights upon change in control of TPG.
24 All agreements restricting the payment of cash dividends.
25 Current stockholders' ledger showing all stockholders and
shares owned and a list showing any outstanding options,
warrants, or other rights to acquire securities of TPG.
</TABLE>
3
<PAGE>
B. GENERAL BUSINESS INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 List of all written contracts entered into by TPG.
2 List of all liabilities and/or obligations (including all
contingent liabilities) of TPG.
</TABLE>
4
<PAGE>
C. LITIGATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Description of all litigation, claims and proceedings settled
or concluded since the date of incorporation.
2 Description of all litigation, claims, and proceedings
threatened or pending, including potential litigation against
either TPG or TPG's employees as a result of their employment
with TPG. Please include potential litigation (e.g., employees
who may be in breach of noncompete agreements with former
employers.)
3 All consent decrees, judgments, settlement documents,
injunctions, or similar matters entered into by TPG in
connection with any litigation.
4 Description of all pending or threatened investigations or
governmental proceedings.
5 All attorneys' letters to auditors since formation.
</TABLE>
5
<PAGE>
D. COMPLIANCE WITH LAWS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All citations and notices received from government agencies
since formation or with continuing effect from an earlier
date.
2 All material reports to and correspondence with any government
entity, municipality or agency, including DOL, IRS, EPA and
OSHA, since formation.
3 All documents showing any certification or compliance with, or
any deficiency with respect to, regulatory standards of TPG
since formation.
4 Description of any problems with regulatory compliance,
including ERISA, labor and other federal, state and local
regulations.
5 All material governmental permits, licenses, etc. of TPG
presently in force, together with information regarding any
such permits, licenses, etc., whether presently in effect,
expired, canceled or terminated which are required to carry
out the business or operations of TPG or its subsidiaries or
affiliates.
6 Evidence of qualification or exemption under applicable
federal and state blue sky laws for the issuance or transfer
of TPG's securities.
</TABLE>
6
<PAGE>
E. MANAGEMENT AND EMPLOYEES
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All employment or similar agreements entered into with any
employee and independent contractor. including any officer or
director of TPG.
2 All consulting agreements, commissions to agents or
representatives, or similar arrangements between TPG and any
person, entity, or affiliate.
3 Loans to and guarantees for the benefit of any employee,
including directors, officers or shareholders.
4 Agreements or insurance policies providing for the
indemnification or any officers or directors of TPG.
5 Salary information for employees and independent contractors.
(The name of each employee may be deleted, but please provide
job titles.)
6 Schedule of accrued salaries, commissions, vacation time and
sick leave for employees.
7 Copies of any qualified defined benefit or defined
contribution retirement plans, related trusts and summary plan
descriptions of the same, including all affiliate's or
subsidiary's plans whether or not the affiliate's or
subsidiary's plan provides benefits to TPG employees or
consultants.
8 Copies of all employee welfare benefit plans, related trusts
and summary plan descriptions of the same, including all
affiliate's or subsidiary's plans whether or not the
affiliate's or subsidiary's plan provides benefits to TPG
employees or consultants.
9 Copies of any non-qualified executive compensation plans.
10 Copies of any bonus, commission or similar plan or arrangement
covering employees and consultants.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
11 Copies of any Voluntary Employee Benefit Associations
("VEBAs") or any related plans.
12 Copies of any plans relating to severance or termination pay,
vacation, sick leave, loans, or other extensions of credit,
loan guarantees, relocation assistance, educational
assistance, tuition payments, employee benefits, workers'
compensation, executive compensation, or fringe benefits
(including any plan exempted from ERISA by virtue of section
4(b) of ERISA).
13 copies of any actuarial reports for past three years.
14 Copies of all governmental filings relating to any of the
plans or benefits described in this category for the last
three years.
15 Copies of any investment management agreements.
16 Copies of other material documents related to employment and
labor matters or benefits such as, notices of ERISA Title IV
terminations or withdrawal liability, employee handbooks, and
other written or oral communications with employees,
consultants, affiliates, or subsidiaries.
</TABLE>
8
<PAGE>
F. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All debt instruments, credit agreements, and guarantees
entered into by TPG which are currently in effect, and all
mortgages, liens, pledges, indemnifications, security
agreements, charges or encumbrances of any nature whatsoever
to which any of the property or assets of TPG are subject.
2 All notices of default or noncompliance from lenders during
the last three years and all compliance reports submitted by
TPG or its accountants.
3 All loans and guarantees of third party obligations.
4 All loan agreements, guaranty agreements, and other documents
to which any officers, directors, shareholders or other third
persons have guaranteed obligations of TPG.
5 Annual financial reports for the last three years.
6 All agreements pursuant to which TPG is subject to any
obligation to provide funds to or to make investments in any
other person (in the form of a loan, capital contribution or
otherwise).
7 List of financial institutions and types of accounts, with
copies of all material correspondence to with and from lenders
in the past three years for TPG and any subsidiary.
8 All Uniform Commercial Code financing statements filed with
respect to the above.
9 Copies of notes payable to or notes receivable from any
employee, director, member, affiliate, agent, or shareholder
of TPG for the past three years.
</TABLE>
9
<PAGE>
G. PROPERTY
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All deeds and other instruments of legal title which relate to
any assets or properties of TPG.
2 All operating leases, real property leases and subleases to
which TPG is a party or has a beneficial interest thereunder.
3 Financing leases, sale and lease-back agreements, conditional
sale agreements, or similar agreements which relate to any
assets, properties, or interests of TPG.
</TABLE>
10
<PAGE>
H. MARKETING ARRANGEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All press releases concerning TPG since TPG's formation.
</TABLE>
11
<PAGE>
I. OTHER AGREEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All agreements, contracts or commitments limiting freedom of
TPG to engage in any line of business or to compete with any
other business or person.
2 A schedule of all insurance policies of TPG and associated
annual premiums and limits.
3 Principal documents relating to any acquisition or disposition
of businesses by TPG in the last three years.
4 All other agreements material to the business of TPG.
</TABLE>
12
<PAGE>
J. TAX MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Copies of all federal tax returns for years 1995, 1996 and
1997.
2 Copies of any correspondence or notice from any foreign,
federal, state or local taxing authority regarding any filed
tax return (or any failure to file) including copies of all
audit reports and descriptions of any pending tax audits by
the IRS or other applicable tax authorities.
</TABLE>
13
<PAGE>
Due Diligence Checklist
For Proposed Tax-Free Exchange of
Substantially all of the Assets of
Sel Mar Mmortgage, Inc. and Del Mar Holdings, Inc.
For Shares of Stock of Sunderland Acquisition Corporation
The items below correspond to the numbered paragraphs of the due
diligence checklist furnished in regard to the proposed exchange of
substantially all of the assets of Del Mar Mortgage, Inc. and Del Mar
Holdings, Inc. for shares of stock of Sunderland Acquisition Corporation.
A.1 Attached
A.2 Attached
A.3 None
A.4 Attached
A.5 None
A.6 See Form F-10/A attached
A.7 See Form F-10/A attached
A.8 See Form F-10/A attached
A.9 See Form F-10/A attached
A.10 None
A.11 None
A.12 None
A.13 Delaware
A.14 Ordered
A.15 Ordered
A.16 NA
<PAGE>
A.17 None
A.18 None
A.19 None
A.20 Attached lock-up agreements
A.21 None
A.22 None
A.23 5-year warrant to be granted to TPG Capital Corporation
A.24 None
A.25 See Form F-10/A attached
B.1 Lock-up agreements with its shareholders
B.2 See financials contained in the Form F-10/A attached
C.1 None
C.2 None
C.3 None
C.4 None
C.5 None
D.1 None
D.2 None except with the Securities and Exchange Commission in registration
of securities
D.3 None
D.4 None
D.5 None
<PAGE>
D.6 The National Securities Market Improvement Act of 1996 ("NMSIA") limits
the authority of states to impose restrictions upon sales of securities
made pursuant to Sections 4(1) and 4(3) of the Securities Act of 1933,
as amended (the "Securities Act") of companies which file reports under
Sections 13 or 15(d) of the Securities Exchange Act, Sunderland files
such reports. Sales of the common stock in the secondary trading market
by securityholders are expected to be made pursuant to Section 4(1)
(sales other than by an issuer, underwriter or broker) and therefore not
subject to state restrictions.
E.1 None
E.2 None
E.3 None
E.4 The by-laws provide for indemnification of officers and directors to
the fullest extent allowed by Delaware law.
E.5 NA
E.6 NA
E.7 None
E.8 None
E.9 None
E.10 None
E.11 None
E.12 None
E.13 None
E.14 None
E.16 None
F.1 None
<PAGE>
F.2 None
F.3 None
F.4 None
F.5 See Form F-10/A attached
F.6 None
F.7 Checking account maintained at Riggs Bank, N.A., Dupont Circle Branch,
Washington, DC 20036
F.8 None
F.9 None
G.1 None
G.2 None
G.3 None
H.1 None
I.1 See Form F-10/A attached for scope of business
I.2 None
I.3 None
I.4 None
J.1 Corporation was incorporated in 1998 and no tax return has yet been
filed
J.2 None
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "SUNDERLAND ACQUISITION CORPORATION", FILED IN THIS OFFICE
ON THE SECOND DAY OF JUNE, A.D. 1998, AT 9:01 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
SEAL -----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 9115393
DATE: 06-02-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 06/02/1998
981210158 - 2902945
CERTIFICATE OF INCORPORATION
OF
SUNDERLAND ACQUISITION CORPORATION
ARTICLE ONE
NAME
The name of the Corporation is Sunderland Acquisition Corporation.
ARTICLE TWO
DURATION
The Corporation shall have perpetual existence.
ARTICLE THREE
PURPOSE
The purpose for which this Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE FOUR
SHARES
The total number of shares of stock which the Corporation shall have
authority to issue is 120,000,000 shares, consisting of 100,000,000 shares of
Common Stock having a par value of $.0001 per share and 20,000,000 shares of
Preferred Stock having a par value of $.0001 per share.
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock in series and, by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations of restrictions thereof.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 2
- -----------------------------------------------------------------------------
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
A. The number of shares constituting that series and the distinctive
designation of that series;
B. The dividend rate of the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on share of that series;
C. Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
E. Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
F. Whether that series shall have sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
H. Any other relative rights, preferences and limitations of that
series.
ARTICLE FIVE
COMMENCEMENT OF BUSINESS
The Corporation is authorized to commence business as soon as its
certificate of Incorporation has been filed.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 3
- -----------------------------------------------------------------------------
ARTICLE SIX
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the initial registered office of the
Corporation and the name of its initial registered agent and its business
address is
The Prentice-Hall Corporation System, Inc.
1013 Centre Road
Wilmington, Delaware 19805 (County of New Castle)
The initial registered agent is a resident of the State of Delaware.
ARTICLE SEVEN
INCORPORATOR
Lee W. Cassidy, 1504 R Street, N.W., Washington, D.C. 20009
ARTICLE EIGHT
PRE-EXEMPTIVE RIGHTS
No Shareholder or other person shall have any pre-emptive rights
whatsoever.
ARTICLE NINE
BY-LAWS
The initial by-laws shall be adopted by the Shareholders or the Board of
Directors. The power to alter, amend, or repeal the by-laws or adopt new
by-laws is vested in the Board of Directors, subject to repeal or change by
action of the Shareholders.
ARTICLE TEN
NUMBER OF VOTES
Each share of Common Stock has one vote on each matter on which the
share is entitled to vote.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 4
- -----------------------------------------------------------------------------
ARTICLE ELEVEN
MAJORITY VOTES
A majority vote of a quorum of Shareholders (consisting of the holders
of a majority of the shares entitled to vote, represented in person or by
proxy) is sufficient for any action which requires the vote or concurrence of
Shareholders, unless otherwise required or permitted by law or the by-laws of
the Corporation.
ARTICLE TWELVE
NON-CUMULATIVE VOTING
Directors shall be elected by majority vote. Cumulative voting shall not
be permitted.
ARTICLE THIRTEEN
INTERESTED DIRECTORS, OFFICERS AND SECURITYHOLDERS
A. VALIDITY. If Paragraph (B) is satisfied, no contract or other
transaction between the Corporation and any of its directors, officers or
securityholders, or any corporation or firm in which any of them are directly
or indirectly interested, shall be invalid solely because of this
relationship or because of the presence of the director, officer or
securityholder at the meeting of the Board of Directors or committee
authorizing the contract or transaction, or his participation or vote in the
meeting or authorization.
B. DISCLOSURE, APPROVAL, FAIRNESS. Paragraph (A) shall apply only if:
(1) The material facts of the relationship or interest of each such
director, officer or securityholder are known or disclosed:
(a) to the Board of Directors or the committee and it nevertheless
authorizes or ratifies the contract or transaction by a majority of the
directors present, each such interest director to be counted in determining
whether a quorum is present but not in calculating the majority necessary to
carry the vote; or
(b) to the Shareholders and they nevertheless authorize or ratify the
contract or transaction by a majority of the shares present, each such
interested person to be counted for quorum and voting purposes; or
(2) the contract or transaction is fair to the Corporation as of the
time it is authorized or ratified by the Board of Directors, the committee or
the Shareholders.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 5
- ------------------------------------------------------------------------------
ARTICLE FOURTEEN
INDEMNIFICATION AND INSURANCE
A. PERSONS. The Corporation shall indemnify, to the extent provided in
Paragraphs (B), (D) or (F) and to the extent permitted from time to time by
law;
(1) any person who is or was director, officer, agent or employee of
the Corporation, and
(2) any person who serves or served at the Corporation's request as a
director, officer, agent, employee, partner or trustee of another corporation
or of a partnership, joint venture, trust or other enterprise.
B. EXTENT--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation against a person named in Paragraph (A) by reason of his
holding a position named in Paragraph (A), the Corporation shall indemnify
him. If he satisfies the standard in Paragraph (C), for expenses (including
attorney's fees but excluding amounts paid in settlement) actually and
reasonably incurred by him in connection with the defense or settlement of
the suit.
C. STANDARD--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation, a person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the suit, and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation. However, he shall not be indemnified
in respect of any claim, issue or matter as to which he has been adjudged
liable for negligence or misconduct in the performance of his duty to the
Corporation unless (and only to the extent that) the court in which the suit
was brought shall determine, upon application, that despite the adjudication
but in view of all the circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. EXTENT--NONDERIVATIVE SUITS. In case of a suit, action or
proceeding (whether civil, criminal, administrative or investigative), other
than a suit by or in the right of the Corporation against a person named in
Paragraph (A) by reason of his holding a position named in Paragraph (A), the
Corporation shall indemnify him, if he satisfies the standard in
Paragraph (E), for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the suit as
(1) expenses (including attorneys' fees),
(2) amounts paid in settlement
(3) judgments, and
(4) fines.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 6
- ------------------------------------------------------------------------------
E. STANDARD--NONDERIVATIVE SUITS. In case of a nonderivative suit, a
person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the nonderivative suit, and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to
any criminal action or proceeding, he had no reason to believe his conduct
was unlawful. The termination of a nonderivative suit by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person failed to satisfy
this Paragraph (E) (2).
F. DETERMINATION THAT STANDARD HAS BEEN MET. A determination that the
standard of Paragraph (C) or (E) has been satisfied may be made by a court of
law or equity or the determination may be made by:
(1) a majority of the directors of the Corporation (whether or not a
quorum) who were not parties to the action, suit or proceeding, or
(2) independent legal counsel (appointed by a majority of the directors
of the Corporation, whether or not a quorum, or elected by the Shareholders
of the Corporation) in a written opinion, or
(3) the Shareholders of the Corporation.
G. PRORATION. Anyone making a determination under Paragraph (F) may
determine that a person has met the standard as to some of the matters but
not as to others, and may reasonably prorate amounts to be indemnified.
H. ADVANCE PAYMENT. The Corporation may pay in advance any expenses
(including attorney's fees) which may become subject to indemnification under
paragraphs (A)-(G) if:
(1) the Board of Directors authorizes the specific payment and
(2) the person receiving the payment undertakes in writing to repay
unless it is ultimately determined that he is entitled to indemnification by
the Corporation under Paragraphs (A)-(G).
L. NONEXCLUSIVE. The indemnification provided by Paragraphs (A)-(G)
shall not be exclusive of any other rights to which a person may be entitled
by law or by by-law, agreement, vote of Shareholders or disinterested
directors, or otherwise.
J. CONTINUATION. The indemnification and advance payment provided by
Paragraphs (A)-(H) shall continue as to a person who has ceased to hold a
position named in paragraph (A) and shall inure to his heirs, executors and
administrators.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 7
- ------------------------------------------------------------------------------
K. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position named in
Paragraph (A) against any liability incurred by him in any such positions or
arising out of this status as such, whether or not the Corporation would have
power to indemnify him against such liability under Paragraphs (A)-(H).
L. REPORTS. Indemnification payments, advance payments, and insurance
purchases and payments made under Paragraphs (A)-(K) shall be reported in
writing to the Shareholders of the Corporation with the next notice of
annual meeting, or within six months, whichever is sooner.
M. AMENDMENT OF ARTICLE. Any changes in the General Corporation Law of
Delaware increasing, decreasing, amending, changing or otherwise effecting
the indemnification of directors, officers, agents, or employees of the
Corporation shall be incorporated by reference in this Article as of the date
of such changes without further action by the Corporation, its Board of
Directors, of Shareholders, it being the intention of this Article that
directors, officers, agents and employees of the Corporation shall be
indemnified to the maximum degree allowed by the General Corporation Law of
the State of Delaware at all times.
ARTICLE FIFTEEN
Limitation On Director Liability
A. SCOPE OF LIMITATION. No person, by virtue of being or having been a
director of the Corporation, shall have any personal liability for monetary
damages to the Corporation or any of its Shareholders for any breach of
fiduciary duty except as to the extent provided in Paragraph (B).
B. EXTENT OF LIMITATION. The limitation provided for in this Article
shall not eliminate or limit the liability of a director to the director to
the Corporation or its Shareholder (i) for any breach of the director's duty
of loyalty to the Corporation or its Shareholders (ii) for any acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) for any unlawful payment of dividends or
unlawful stock purchases or redemptions in violation of Section 174 of the
General Corporation Law of Delaware or (iv) for any transaction for which the
director derived an improper personal benefit.
IN WITNESS WHEREOF, the incorporator hereunto has executed this
certificate of incorporation on this 1st day of June, 1998.
/s/ Lee W. Cassidy
-----------------------------------
Lee W. Cassidy, Incorporator
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
BY-LAWS
ARTICLE I
The Stockholders
Section 1.1. ANNUAL MEETING. The annual meeting of the stockholders of
Sunderland Acquisition Corporation (the "Corporation") shall be held on the
third Thursday in May of each year at 10:30 a.m. local time, or at such other
date or time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, for the election of
directors and for the transaction of such other business as may come before
the meeting.
Section 1.2. SPECIAL MEETINGS. A special meeting of the stockholders
may be called at any time by the written resolution or request of two-thirds
or more of the members of the Board of Directors, the president, or any
executive vice president and shall be called upon the written request of the
holders of two-thirds or more in amount, of each class or series of the
capital stock of the Corporation entitled to vote at such meeting on the
matters(s) that are the subject of the proposed meeting, such written
request in each case to specify the purpose or purposes for which such
meeting shall be called, and with respect to stockholders proposals, shall
further comply with the requirements of this Article.
Section 1.3. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, whether annual or special, stating the date, hour and place
where it is to be held, shall be served either personally or by mail, not
less than fifteen nor more than sixty days before the meeting, upon each
stockholder of record entitled to vote at such meeting, and to any other
stockholder to whom the giving of notice may be required by law. Notice of a
special meeting shall also state the purpose or purposes for which the
meeting is called and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would, if taken, entitle stockholders to
receive payment for their stock, the notice of such meeting shall include a
statement of that purpose and to that effect. If mailed, notice shall be
deemed to be delivered when deposited in the United States mail or with any
private express mail service, postage or delivery fee prepaid, and shall be
directed to each such stockholder at his address, as it appears on the
records of the stockholders of the Corporation, unless he shall have
previously filed with the secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated, in such request.
Section 1.4. FIXING DATE OF RECORD. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than
ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders
<PAGE>
entitled to notice of, or to vote at, a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting (to the
extent that such action by written consent is permitted by law, the
Certificate of Incorporation or these By-Laws), the Board of Directors may
fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by law, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in its state of
incorporation, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 1.5 INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed and the proxies and ballots shall be received and
be taken in charge. All questions touching on the qualification of voters and
the validity of proxies and the acceptance or rejection of votes, shall be
decided by one or more inspectors. Such inspectors shall be appointed by the
Board of Directors before or at the meeting, or, if no such appointment shall
have been made, then by the presiding officer at the meeting. If for any
reason any of the inspectors previously appointed shall fail to attend or
refuse or be unable to serve, inspectors in place of any so failing to attend
or refusing or unable to serve shall be appointed in like manner.
<PAGE>
SECTION 1.6 QUORUM. At any meeting of the stockholders, the holders of a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number shall be required by law, and, in that
case, the representation of the number so required shall constitute a quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed in
accordance with these By-Laws for an annual or special meeting, a majority in
interest of the stockholders present in person or by proxy may adjourn, from
time to time, without notice other than by announcement at the meeting, until
holders of the amount of stock requisite to constitute a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 1.7 BUSINESS. The chairman of the Board, if any, the president,
or in his absence the vice-chairman, if any, or an executive vice president,
in the order named, shall call meetings of the stockholders to order, and
shall act as chairman of such meeting; provided, however, that the Board of
Directors or executive committee may appoint any stockholder to act as
chairman of any meeting in the absence of the chairman of the Board. The
secretary of the Corporation shall act as secretary at all meetings of the
stockholders, but in the absence of the secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as
secretary of the meeting.
SECTION 1.8 STOCKHOLDER PROPOSALS. No proposal by a stockholder shall be
presented for vote at a special or annual meeting of stockholders unless such
stockholder shall, not later than the close of business on the fifth day
following the date on which notice of the meeting is first given to
stockholders, provide the Board of Directors or the secretary of the
Corporation with written notice of intention to present a proposal for action
at the forthcoming meeting of stockholders, which notice shall include the
name and address of such stockholder, the number of voting securities that he
holds of record and that he holds beneficially, the text of the proposal to
be presented to the meeting and a statement in support of the proposal.
Any stockholder who was a stockholder of record on the applicable record
date may make any other proposal at an annual meeting or special meeting of
stockholders and the same may be discussed and considered, but unless stated
in writing and filed with the Board of Directors or the secretary prior to
the date set forth herein above, such proposal shall be laid over for action
at an adjourned, special, or annual meeting of the stockholders taking place
sixty days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees, but in connection with such reports, no
new business proposed by a stockholder, QUA stockholder, shall be acted upon
at such annual meeting unless stated and filed as herein provided.
Notwithstanding any other provision of these By-Laws, the Corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at
a special or annual meeting of stockholders if the Board of Directors
reasonably believes the proponents thereof have not complied with Sections 13
or 14 of
<PAGE>
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder; nor shall the Corporation be required to include any
stockholder proposal not required to be included in its proxy materials to
stockholders in accordance with any such section, rule or regulation.
SECTION 1.9 PROXIES. At all meetings of stockholders, a stockholder
entitled to vote may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact. Such proxy shall
be filed with the secretary before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 1.10 VOTING BY BALLOT. The votes for directors, and upon the
demand of any stockholder or when required by law, the votes upon any
question before the meeting, shall be by ballot.
SECTION 1.11 VOTING LISTS. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares of stock registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
SECTION 1.12 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or any special meeting called by the Board of
Directors. If no designation is made or if a special meeting is otherwise
called, the place of meeting shall be the principal office of the Corporation.
SECTION 1.13 VOTING OF STOCK OF CERTAIN HOLDERS. Shares of capital stock
of the Corporation standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the by-laws of such
corporation may prescribe, or in the absence of such provision, as the board
of directors of such corporation may determine.
Shares of capital stock of the Corporation standing in the name of a
deceased person, a minor ward or an incompetent person may be voted by his
administrator, executor, court-appointed guardian or conservator, either in
person or by proxy, without a transfer of such stock into the name of such
administrator, executor, court-appointed guardian or conservator. Shares of
capital stock of the Corporation standing in the name of a trustee may be
voted by him, either in person or by proxy.
Shares of capital stock of the Corporation standing in the name of a
receiver may be voted, either in person or by proxy, by such receiver, and
stock held by or under the control of a receiver
<PAGE>
may be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in any appropriate order of the court by
which such receiver was appointed.
A stockholder whose stock is pledged shall be entitled to vote such
stock, either in person or by proxy, until the stock has been transferred
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote, either in person or by proxy, the stock so transferred.
Shares of its own capital stock belonging to this Corporation shall not
be voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding stock at any given time, but
shares of its own stock held by it in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding stock at any
given time.
ARTICLE II
Board of Directors
SECTION 2.1. GENERAL POWERS. The business, affairs, and the property
of the Corporation shall be managed and controlled by the Board of Directors
(the "Board"), and, except as otherwise expressly provided by law, the
Certificate of Incorporation or these By-Laws, all of the powers of the
Corporation shall be vested in the Board.
SECTION 2.2. NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole Board shall be no fewer than one nor more than five.
Within the limits above specified, the number of directors shall be
determined by the Board of Directors pursuant to a resolution adopted by a
majority of the directors then in office.
SECTION 2.3. ELECTION, TERM AND REMOVAL. Directors shall be elected at
the annual meeting of stockholders to succeed those directors whose terms
have expired. Each director shall hold office for the term for which elected
and until his or her successor shall be elected and qualified. Directors
need not be stockholders. A director may be removed from office at a meeting
expressly called for that purpose by the vote of not less than a majority of
the outstanding capital stock entitled to vote an election of directors.
SECTION 2.4. VACANCIES. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by the affirmative vote of a majority of the remaining directors then in
office, though less than a quorum; except that vacancies resulting from
removal from office by a vote of the stockholders may be filled by the
stockholders at the same meeting at which such removal occurs provided that
the holders of not less than a majority of the outstanding capital stock of
the Corporation (assessed upon the basis of votes and not on the basis of
number of shares) entitled to vote for the election of directors, voting
together as a single class, shall vote for each replacement director. All
directors elected to fill vacancies shall hold office for a term expiring at
the time of the next annual meeting of stockholders and upon election and
qualification of his successor. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of an incumbent
director.
<PAGE>
SECTION 2.5. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the president or to the secretary of the
Corporation. The resignation of any director shall take effect at the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 2.6. PLACE OF MEETINGS, ETC. The Board of Directors may hold
its meetings, and may have an office and keep the books of the Corporation
(except as otherwise may be provided for by law), in such place or places in
or outside the state of incorporation as the Board from time to time may
determine.
SECTION 2.7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held as soon as practicable after adjournment of the
annual meeting of stockholders at such time and place as the Board of
Directors may fix. No notice shall be required for any such regular meeting
of the Board.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at places and times fixed by resolution of the Board
of Directors, or upon call of the chairman of the Board, if any, or
vice-chairman of the Board, if any, the president, an executive vice
president or two-thirds of the directors then in office.
The secretary or officer performing the secretary's duties shall give
not less than twenty-four hours' notice by letter, telegraph or telephone (or
in person) of all special meetings of the Board of Directors, provided that
notice need not given of the annual meeting or of regular meetings held at
times and places fixed by resolution of the Board. Meetings may be held at
any time without notice if all of the directors are present, or if those not
present waive notice in writing either before or after the meeting. The
notice of meetings of the Board need not state the purpose of the meeting.
SECTION 2.9. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board
of Directors of the Corporation, or any committee thereof, may participate in
a regular or special or any other meeting of the Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meetings.
SECTION 2.10. ACTION BY WRITTEN CONSENT. 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 prior or subsequent to such action
all the members of the Board or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
SECTION 2.11. QUORUM. A majority of the total number of directors then
in office shall constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time.
<PAGE>
SECTION 2.12. BUSINESS. Business shall be transacted at meetings of
the Board of Directors in such order as the Board may determine. At all
meetings of the Board of Directors, the chairman of the Board, if any, the
president, or in his absence the vice-chairman, if any, or an executive vice
president, in the order named, shall preside.
SECTION 2.13. INTEREST OF DIRECTORS IN CONTRACTS. (a) No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one ore more of the Corporation's
directors or officers, are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum: or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders;
or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors or the
stockholders.
(b) Interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
SECTION 2.14. COMPENSATION OF DIRECTORS. Each director of the
Corporation who is not a salaried officer or employee of the Corporation, or
of a subsidiary of the Corporation, shall receive such allowances for serving
as a director and such fees for attendance at meetings of the Board of
Directors or the executive committee or any other committee appointed by the
Board as the Board may from time to time determine.
SECTION 2.15. LOANS TO OFFICERS OR EMPLOYEES. The Board of Directors
may lend money to, guarantee any obligation of, or otherwise assist, any
officer or other employee of the Corporation or of any subsidiary, whether or
not such officer or employee is also a director of the Corporation, whenever,
in the judgment of the directors, such loan, guarantee, or assistance may
reasonably be expected to benefit the Corporation; provided, however, that
any such loan, guarantee, or other assistance given to an officer or employee
who is also a director of the Corporation must be authorized by a majority of
the entire Board of Directors. Any such loan, guarantee, or other assistance
may be made with or without interest and may be unsecured or
<PAGE>
secured in such manner as the Board of Directors shall approve, including,
but not limited to, a pledge of shares of the Corporation, and may be made
upon such other terms and conditions as the Board of Directors may determine.
SECTION 2.16 NOMINATION. Subject to the rights of holders of any class
or series of stock having a preference over the common stock as to dividends
or upon liquidation, nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors at a meeting only if written notice of such stockholder's intent
to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders the close of business on the last day of the
eighth month after the immediately preceding annual meeting of stockholders,
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the
fifth day following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such
other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors, and;
(e) the consent of each nominee to serve as a director of the Corporation if
so elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
ARTICLE III
Committees
SECTION 3.1. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the number of directors then fixed by these By-Laws or
resolution thereto, may establish such standing or special committees of the
Board as it may deem advisable, and the members, terms, and authority of such
committees shall be set forth in the resolutions establishing such committee.
SECTION 3.2. EXECUTIVE COMMITTEE NUMBER AND TERM OF OFFICE. The Board
of Directors may, at any meeting, by majority vote of the Board of Directors,
elect from the directors an executive committee. The executive committee
shall consist of such number of members as may be fixed from time to time by
resolution of the Board of Directors. The Board of Directors may designate a
chairman of the committee who shall preside at all meetings thereof, and the
committee shall designate a member thereof to preside in the absence of the
chairman.
<PAGE>
SECTION 3.3. EXECUTIVE COMMITTEE POWERS. The executive committee may,
while the Board of Directors is not in session, exercise all or any of the
powers of the Board of Directors in all cases in which specific directions
shall not have been given by the Board of Directors; except that the
executive committee shall not have the power or authority of the Board of
Directors to (i) amend the Certificate of Incorporation or the By-Laws of
the Corporation, (ii) fill vacancies on the Board of Directors, (iii) adopt
an agreement or certification of ownership, merger or consolidation, (iv)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or a dissolution
of the Corporation or a revocation of a dissolution, (v) declare a dividend,
or (vi) authorize the issuance of stock.
SECTION 3.4. EXECUTIVE COMMITTEE MEETINGS. Regular and special meetings
of the executive committee may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
By-Laws for regular and special meetings of the Board of Directors. Special
meetings of the executive committee may be called by any member thereof.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special or regular meeting of the executive meeting if a
quorum is present. At any meeting at which every member of the executive
committee shall be present, in person or by telephone, even though without
any notice, any business may be transacted. All action by the executive
committee shall be reported to the Board of Directors at its meeting next
succeeding such action.
The executive committee shall fix its own rules of procedure, and shall
meet where and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority of the total number
of members of the executive committee shall be necessary to constitute a
quorum. In every case, the affirmative vote of a quorum shall be necessary
for the adoption of any resolution.
SECTION 3.5 EXECUTIVE COMMITTEE VACANCIES. The Board of Directors, by
majority vote of the Board of Directors then in office, shall fill vacancies
in the executive committee by election from the directors.
ARTICLE IV
THE OFFICERS
SECTION 4.1. NUMBER AND TERM OF OFFICE. The officers of the Corporation
shall consist of, as the Board of Directors may determine and appoint from
time to time, a chief executive officer, a president, one or more executive
vice-presidents, a secretary, a treasurer, a controller, and/or such other
officers as may from time to time be elected or appointed by the Board of
Directors, including such additional vice-presidents with such designations,
if any, as may be determined by the Board of Directors and such assistant
secretaries and assistant treasurers. In addition, the Board of Directors may
elect a chairman of the Board and may also elect a vice-chairman as officers
of the Corporation. Any two or more offices may be held by the same person.
In its discretion, the Board of Directors may leave unfilled any office
except as may be required by law.
<PAGE>
The officers of the Corporation shall be elected or appointed from time
to time by the Board of Directors. Each officer shall hold office until his
successor shall have been duly elected or appointed or until his death or
until he shall resign or shall have been removed by the Board of Directors.
Each of the salaried officers of the Corporation shall devote his entire
time, skill and energy to the business of the Corporation, unless the
contrary is expressly consented to by the Board of Directors or the executive
committee.
SECTION 4.2. REMOVAL. Any officer may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation
would be served thereby.
SECTION 4.3. THE CHAIRMAN OF THE BOARD. The chairman of the Board, if
any, shall preside at all meetings of stockholders and of the Board of
Directors and shall have such other authority and perform such other duties
as are prescribed by law, by these By-Laws and by the Board of Directors. The
Board of Directors may designate the chairman of the Board as chief executive
officer, in which case he shall have such authority and perform such duties
as are prescribed by these By-Laws and the Board of Directors for the chief
executive officer.
SECTION 4.4. THE VICE-CHAIRMAN. The vice-chairman, if any, shall have
such authority and perform such other duties as are prescribed by these
By-Laws and by the Board of Directors. In the absence or inability to act of
the chairman of the Board and the president, he shall preside at the meetings
of the stockholders and of the Board of Directors and shall have and exercise
all of the powers and duties of the chairman of the Board. The Board of
Directors may designate the vice-chairman as chief executive officer, in which
case he shall have such authority and perform such duties as are prescribed
by these By-Laws and the Board of Directors for the chief executive officer.
SECTION 4.5. THE PRESIDENT. The president shall have such authority and
perform such duties as are prescribed by law, by these By-Laws, by the Board
of Directors and by the chief executive officer (if the president is not the
chief executive officer). The president, if there is no chairman of the
Board, or in the absence or the inability to act of the chairman of the
Board, shall preside at all meetings of stockholders and of the Board of
Directors. Unless the Board of Directors designates the chairman of the Board
or the vice-chairman as chief executive officer, the president shall be the
chief executive officer, in which case he shall have such authority and
perform such duties as are prescribed by these By-Laws and the Board of
Directors for the chief executive officer.
SECTION 4.6. THE CHIEF EXECUTIVE OFFICER. Unless the Board of Directors
designates the chairman of the Board or the vice-chairman as chief executive
officer, the president shall be the chief executive officer. The chief
executive officer of the Corporation shall have, subject to the supervision
and direction of the Board of Directors, general supervision of the business,
property and affairs of the Corporation, including the power to appoint and
discharge agents and employees, and the powers vested in him by the Board of
Directors, by law or by these By-Laws or which usually attach or pertain to
such office.
<PAGE>
SECTION 4.7. THE EXECUTIVE VICE-PRESIDENTS. In the absence of the
chairman of the Board, if any, the president and the vice-chairman, if any,
or in the event of their inability or refusal to act, the executive
vice-president (or in the event there is more than one executive vice-
president, the executive vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall
perform the duties of the chairman of the Board, of the president and of the
vice-chairman, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the chairman of the Board, the president
and the vice-chairman. Any executive vice-president may sign, with the
secretary or an authorized assistant secretary, certificates for stock of the
Corporation and shall perform such other duties as from time to time may be
assigned to him by the chairman of the Board, the president, the
vice-chairman, the Board of Directors or these By-Laws.
SECTION 4.8. THE VICE-PRESIDENTS. The vice-presidents, if any, shall
perform such duties as may be assigned to them from time to time by the
chairman of the Board, the president, the vice-chairman, the Board of
Directors, or these By-Laws.
SECTION 4.9. THE TREASURER. Subject to the direction of chief executive
officer and the Board of Directors, the treasurer shall have charge and
custody of all the funds and securities of the Corporation; when necessary or
proper he shall endorse for collection, or cause to be endorsed, on behalf of
the Corporation, checks, notes and other obligations, and shall cause the
deposit of the same to the credit of the Corporation in such bank or banks or
depositary as the Board of Directors may designate or as the Board of
Directors by resolution may authorize; he shall sign all receipts and
vouchers for payments made to the Corporation other than routine receipts and
vouchers, the signing of which he may delegate; he shall sign all checks made
by the Corporation (provided, however, that the Board of Directors may
authorize and prescribe by resolution the manner in which checks drawn on
banks or depositories shall be signed, including the use of facsimile
signatures, and the manner in which officers, agents or employees shall be
authorized to sign); unless otherwise provided by resolution of the Board of
Directors, he shall sign with an officer-director all bills of exchange and
promissory notes of the Corporation; whenever required by the Board of
Directors, he shall render a statement of his cash account; he shall enter
regularly full and accurate account of the Corporation in books of the
Corporation to be kept by him for that purpose; he shall, at all reasonable
times, exhibit his books and accounts to any director of the Corporation upon
application at his office during business hours; and he shall perform all
acts incident to the position of treasurer. If required by the Board of
Directors, the treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such sure ties as the Board of Directors may
require.
SECTION 4.10. THE SECRETARY. The secretary shall keep the minutes of
all meetings of the Board of Directors, the minutes of all meetings of the
stockholders and (unless otherwise directed by the Board of Directors) the
minutes of all committees, in books provided for that purpose; he shall
attend to the giving and serving all notices of the Corporation; he may sign
with an officer-director or any other duly authorized person, in the name of
the Corporation, all contracts authorized by the Board of Directors or by the
executive committee, and, when so ordered by the Board of Directors or the
executive committee, he shall affix the seal of the Corporation thereto; he
may sign with the president or an executive vice-president all certificates
of shares of the capital
<PAGE>
stock; he shall have charge of the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors or
the executive committee may direct, all of which shall, at all reasonable
times, be open to the examination of any director, upon application at the
secretary's office during business hours; and he shall in general perform all
the duties incident to the office of the secretary, subject to the control of
the chief executive officer and the Board of Directors.
SECTION 4.11. THE CONTROLLER. The controller shall be the chief
accounting officer of the Corporation. Subject to the supervision of the
Board of Directors, the chief executive officer and the treasurer, the
controller shall provide for and maintain adequate records of all assets,
liabilities and transactions of the Corporation, shall see that accurate
audits of the Corporation's affairs are currently and adequately made and
shall perform such other duties as from time to time may be assigned to him.
SECTION 4.12. THE ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors may determine. The assistant
secretaries as thereunto authorized by the Board of Directors may sign with
the chairman of the Board, the president, the vice-chairman or an executive
vice-president, certificates for stock of the Corporation, the issue of which
shall have been authorized by a resolution of the Board of Directors. The
assistant treasurers and assistant secretaries, in general, shall perform
such duties as shall be assigned to them by the treasurer or the secretary,
respectively, or chief executive officer, the Board of Directors, or these
By-Laws.
SECTION 4.13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director
of the Corporation.
SECTION 4.14. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors or by the executive committee, any officer, director or any
person or persons appointed in writing by any of them, shall have full power
and authority in behalf of the Corporation to attend and to act and to vote
at any meetings of stockholders of any corporation in which the Corporation
may hold stock, and at any such meeting shall possess and may exercise any
and all the rights and powers incident to the ownership of such stock, and
which, as the owner thereof, the Corporation might have possessed and
exercised if present. The Board of Directors may confer like powers upon any
other person or persons.
ARTICLE V
Contracts and Loans
SECTION 5.1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of
<PAGE>
and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 5.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
ARTICLES VI
Certificates for Stock and Their Transfer
SECTION 6.1. CERTIFICATES FOR STOCK. Certificates representing stock of
the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the chairman of the Board,
the president, the vice-chairman or an executive vice-president and/or by the
secretary or an authorized assistant secretary and shall be sealed with the
seal of the Corporation. The seal may be a facsimile. If a stock certificate
is countersigned (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee,
any other signature on the certificate may be a facsimile. In the event that
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. All certificates
for stock shall be consecutively numbered or otherwise identified. The name
of the person to whom the shares of stock represented thereby are issued,
with the number of shares of stock and date of issue, shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares of stock shall have been
surrendered and canceled, except that, in the event of a lost, destroyed or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 6.2. TRANSFER OF STOCK. Transfers of stock of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation, and
on surrender for cancellation of the certificate for such stock. The person
in whose name stock stands on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
<PAGE>
ARTICLE VII
Fiscal Year
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January in each year and end on the last day of
December in each year.
ARTICLE VIII
Seal
SECTION 8.1. SEAL. The Board of Directors shall approve a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the Corporation.
ARTICLE IX
Waiver of Notice
SECTION 9.1. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of these By-Laws or under the provisions of the
Certificate of Incorporation or under the provisions of the corporation law
of the state of incorporation, waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance
of any person at a meeting for which any notice is required to be given under
the provisions of these By-Laws, the Certificate of Incorporation or the
corporation law of the state of incorporation shall constitute a waiver of
notice of such meeting except when the person attends for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE X
Amendments
SECTION 10.1. AMENDMENTS. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted at any meeting of the Board of
Directors of the Corporation by the affirmative vote of a majority of the
members of the Board, or by the affirmative vote of a majority of the
outstanding capital stock of the Corporation (assessed upon the basis of
votes and not on the basis of number of shares) entitled to vote generally in
the election of directors, voting together as a single class.
<PAGE>
ARTICLE XI
Indemnification
SECTION 11.1. INDEMNIFICATION. The Corporation shall indemnify its
officers, directors, employees and agents to the fullest extent permitted by
the General Corporation Law of Delaware, as amended from time to time.
[END]
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
CONSENT OF DIRECTOR
IN LIEU OF ORGANIZATION MEETING
AS OF JUNE 9, 1998
The undersigned, being the sole director of Sunderland Acquisition
Corporation (the "Corporation") does hereby consent to the taking of the
following action in lieu of an organizational meeting and hereby waives any
notice required to be given therewith:
RESOLVED by the Board of Directors of the Corporation that;
1. ELECTION OF OFFICERS. The following persons be, and hereby are,
elected to the respective offices indicated to serve until further action of
the Board.
President James M. Cassidy
2. ADOPTION OF BY-LAWS. The by-laws attached hereto be, and hereby are,
adopted by the Corporation, and the Secretary is directed to file a
certified copy thereof in the minute book of the Corporation.
3. CORPORATE RECORDS. The President or Secretary be, and hereby is,
authorized and directed: to procure all corporate books, books of account and
stock books required by the statutes of the place of incorporation or
necessary or appropriate in connection with the business of the Corporation;
to obtain a seal of the Corporation bearing the words and figures.
"SUNDERLAND ACQUISITION CORPORATION, 1998"
which is hereby approved and adopted as and for the corporate seal of the
Corporation, provided that at any time the Secretary or designee may use a
facsimile of such seal; and to obtain certificates for the shares of the
Corporation, which shall be effective upon the endorsement of such
certificates by the authentic or facsimile signature of the President and
specimens of which certificates shall be annexed to this consent, and, which
shall be adopted as the form of certificate for the Corporation.
4. FISCAL YEAR. The fiscal year of the Corporation be, and hereby is,
shall be January 1 to December 31.
5. ISSUANCE OF STOCK. The President be, and hereby is, authorized and
directed to accept from time to time the subscription(s) for the stock of
the Corporation and upon receipts of payment for such stock, the designated
shares of the stock of the Corporation shall be issued to such subscriber(s),
as fully paid and nonassessable, in the full amount of the subscription.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 2
- ------------------------------------------------------------------------------
The Corporation hereby issues to Pierce Mill Associates, Inc. 4,250,000
shares of its Common Stock pursuant to Rule 506 of Regulation D of the
General Rules and Regulations of the Securities and Exchange Commission at
par for a purchase price of $425. The Corporation hereby issues 750,000 shares
of its Common Stock to Cassidy & Associates pursuant to Rule 701 for services.
<TABLE>
<CAPTION>
Subscriber Number of Shares Payment
- ---------- ---------------- -------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 -0-
</TABLE>
6. BANK ACCOUNTS. The President or his designee be and hereby is,
authorized to designate any bank or banks as he shall deem appropriate as a
depositary or depositaries for the funds of the Corporation; that the banking
resolutions required by such bank or banks in order to open an ordinary
checking account and such other accounts as the President of the Corporation
shall deem appropriate be, and they hereby are, adopted as the resolutions of
the Board of Directors as if fully set forth herein; and that the President
be, and hereby is, authorized to designate signatories to execute checks and
other documents on behalf of the Corporation with respect to such accounts;
and that the officers of the Corporation be, and hereby are, authorized and
directed to execute and deliver, in the name and on behalf of the Corporation
and under its corporate seal or otherwise, any and all certificates,
agreements, undertakings, authorizations, and other instruments or documents
as such bank or banks may require and as shall be necessary or appropriate to
carry out the intent and accomplish the purposes of this resolution; and that
copies of any banking resolutions so executed shall be inserted in the minute
book of the Corporation.
7. APPOINTMENT OF AGENTS. For the purpose of authorizing the
Corporation to do business in any state, territory, or possession of the
United States or any foreign country in which it is necessary or expedient
for the Corporation to do business, the officers of the Corporation be, and
hereby are, authorized to appoint and substitute all necessary agents or
attorneys for service of process, to designate and change the location of all
necessary statutory offices, and to make and file all necessary certificates,
reports, powers of attorney, and other instruments as may be required by the
laws of such state, territory, possession, or country to authorize the
Corporation to do business therein, and whenever it is expedient for the
Corporation to cease doing business therein and withdraw therefrom to revoke
any appointment of agent or attorney for services of process and to file any
necessary certificate, report, revocation of appointment, or
surrender of authority of the Corporation to do business therein.
8. EXECUTIVE COMMITTEE. Pursuant to the by-laws of the Corporation,
the President be, and hereby is, designated and constitutes an Executive
Committee of the Corporation.
9. RATIFICATION OF PRIOR ACTIONS. All actions heretofore taken or
authorized by the incorporators with respect to the organization or business
of the Corporation including filings and amendments thereto be, and hereby
are, ratified, approved and confirmed in all aspects.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 3
- ------------------------------------------------------------------------------
10. GENERAL AUTHORITY. The officers of the Corporation be, and hereby
are, authorized to take any and all other actions which they shall deem
necessary or appropriate to complete the organization of the Corporation and
to permit the Corporation legally to commence business within the state of
its jurisdiction.
Effective as of the date hereinabove written.
/s/James M. Cassidy
--------------------------
James M. Cassidy, director
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A#2
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
SUNDERLAND ACQUISITION CORPORATION
------------------
(Name of Small Business Issuer)
Delaware 52-2102142
------------------- --------------------
(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
1504 R Street, N.W., Washington, D.C. 20009
-------------------------------------------
(Address of Principal Executive Offices including Zip Code)
202/387-5400
------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act:
Common Stock, $.0001 Par Value
(Title of Class)
<PAGE>
PART I
ITEM 1. BUSINESS.
Sunderland Acquisition Corporation (the "Company"), was incorporated on
June 2, 1998 under the laws of the State of Delaware to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date other than issuing shares to its original
shareholders.
The Company will attempt to locate and negotiate with a business entity
for the merger of that target company into the Company. In certain instances,
a target company may wish to become a subsidiary of the Company or may wish
to contribute assets to the Company rather than merge. No assurances can be
given that the Company will be successful in locating or negotiating with any
target company.
The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company whose
securities are qualified for trading in the United States secondary market.
PERCEIVED BENEFITS
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. These are commonly thought to include
the following:
* the ability to use registered securities to make acquisitions of
assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
* a presence in the United States capital market.
POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for which a primary purpose of becoming public is the use
of its securities for the acquisition of assets or businesses;
* a company which is unable to find an Underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
<PAGE>
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public mark
to satisfy redemption requirements under a qualified Employee Stock
Option Plan:
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of
its own management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, as to the terms of a business combination, or as to the
nature of the target company.
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement affirming that such
shareholders will not sell or otherwise transfer their shares of the
Company's common stock except in connection with or following completion of a
merger or acquisition resulting in the Company no longer being classified as
a blank check company. The shareholders have deposited their stock
certificates with the Company's management, who will not release the
certificates except in connection with or following the completion of a
merger or acquisition.
The Company is voluntarily filing this Registration Statement with the
Securities and Exchange Commission and is under no obligation to do so under
the Securities Exchange Act of 1934.
RISK FACTORS
The Company's business is subject to numerous risk factors, including
the following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had
no operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company will,
in all likelihood, sustain operating expenses without corresponding revenues,
at least until the consummation of a business combination. This may result in
the Company incurring a net operating loss which will increase continuously
until the Company can consummate a business combination with a target
company. There is no assurance that the Company can identify such a target
company and consummate such a business combination.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of
the Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target
company. While management will prefer business combinations with entities
having established operating histories, there can be no assurance that the
Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be
no assurance, the success of the Company's operations will be dependent upon
management of the target company and numerous other factors beyond the
Company's control.
<PAGE>
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A
large number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies which may
be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources, technical expertise
and managerial capabilities than the Company and, consequently, the Company
will be at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover,
the Company will also compete with numerous other small public companies in
seeking merger or acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION--NO STANDARDS
FOR BUSINESS COMBINATION. The Company has no current arrangement, agreement
or understanding with respect to engaging in a merger with or acquisition of
a specific business entity. There can be no assurance that the Company will
be successful in identifying and evaluating suitable business opportunities
or in concluding a business combination. Management has not identified any
particular industry or specific business within an industry for evaluation by
the Company. There is no assurance that the Company will be able to negotiate
a business combination. Management has not identified any particular industry
or specific business within an industry for evaluation by the Company THere is
no assurance that the Company will be able to negotiate a business
combination on terms favorable to the Company. The Company has not
established a specific length of operating history or a specified level of
earnings, assets, net worth or other criteria which it will require a target
company to have achieved, or without which the Company would not consider a
business combination with such business entity. Accordingly, the Company may
enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential form immediate
earnings limited assets, negative net worth or other negative characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking
a business combination, management anticipates devoting only a limited amount
of time per month to the business of the Company. The Company's sole officer
has not entered into a written employment agreement with the Company and he
is not expected to do so in the foreseeable future. The Company has not
obtained key man life insurance on its officer and director. Notwithstanding
the combined limited experience and time commitment of management, loss of
services and of this individual would adversely affect development of the
Company's business and its likelihood of continuing operations.
CONFLICTS OF INTEREST--GENERAL. The Company's officer and director and
director participates in other business ventures which may compete directly
with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future. Management has adopted a policy
that the Company will not seek a merger with, or acquisition of, any entity
in which any member of management serves as an officer, director or partner,
or in which they or their family members own or hold any ownership interest.
See "ITEM 5, DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS--Conflicts of Interest."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Section 13 of
the Securities Exchange Act of 1934 (the "Exchange Act") requires companies
subject thereto to provide certain information about significant acquisitions
including certified financial statements for the company acquired covering
one or two years, depending on the relative size of the acquisition. The time
and additional costs that may be incurred by some target companies to prepare
such financial statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by the
Company. Even in the event demand exists for a merger or acquisition of the
type contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
LACK OF DIVERSIFICATION. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a
business combination with only one business entity. Consequently, the
Company's activities will be limited to those engaged in by the businesses
entity which the Company merges with or
<PAGE>
acquires. The Company's inability to diversify its activities into a number
of areas may subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
Company's operations.
REGULATION UNDER INVESTMENT COMPANY ACT. Although the Company will be
subject to regulation under the Exchange Act, management believes the Company
will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of target company obtaining a controlling interest in
the Company. Any such business combination may require shareholders of the
Company to sell or transfer all or a portion of the Company's common stock
held by them. The resulting change in control of the Company will likely
result in removal of the present officer and director of the Company and a
corresponding reduction in or elimination of his participation in the future
affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION.
The Company's primary plan of operation is based upon a business combination
with a business entity which, in all likelihood, will result in the Company
issuing securities to shareholders of such business entity. The issuance of
previously authorized and unissued common stock of the Company would result
in reduction in percentage of shares owned by the present shareholders of the
Company and would most likely result in a change of control or management of
the Company.
TAXATION. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the Company may
undertake. Currently, such transactions may be structured so as to result in
tax-free treatment to both companies, pursuant to various federal and state
tax provisions. The Company intends to structure any business combination so
as to minimize the federal and state tax consequences to both the Company and
the target company; however, there can be no assurance that such business
combination will meet the statutory requirements of a tax-free reorganization
or that the parties will obtain the intended tax-free treatment upon a
transfer of stock or assets. A non-qualifying reorganization could result in
the imposition of both federal and state taxes which may have an adverse
effect on both parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management of the Company will request that any potential
business opportunity provide audited financial statements. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company rather than incur the expenses
associated with preparing audited financial statements. In such case, the
Company may choose to obtain certain assurances as to the target company's
assets, liabilities, revenues and expenses prior to consummating a business
combination, with further assurances that an audited financial statement
would be provided after closing of such a transaction. Closing documents
relative thereto may include representations that the audited financial
statements will not materially differ from the representations included in
such closing documents.
ITEM 2. PLAN OF OPERATION
The Company intends to merge with or acquire a business entity in
exchange for the Company's securities. The Company has no particular
acquisition in mind and has not entered into any negotiations regarding such
an acquisition. Neither the Company's officer and director nor any affiliate
has engaged in any negotiations with any representative of any company
regarding the possibility of an acquisition or merger between the Company and
such other company.
<PAGE>
Management anticipates seeking out a target company through
solicitation. Such solicitation may include newspaper or magazine
advertisements, mailings and other distributions to law firms, accounting
firms, investment bankers, financial advisors and similar persons, the use of
one or more World Wide Web sites and similar methods. No estimate can be made
as to the number of persons who will be contacted or solicited. Management
may engage in such solicitation directly or may employ one ore more other
entities to conduct or assist in such solicitation. Management and its
affiliates pay referral fees to consultants and others who refer target
businesses for mergers into public companies in which management and its
affiliates have an interest. Payments are made if a business combination
occurs, and may consist of cash or a portion of the stock in the Company
retained by management and its affiliates, or both.
The Company has no full time employees. The Company's president has
agreed to allocate a portion of his time to the activities of the Company,
without compensation. The president anticipates that the business plan of the
Company can be implemented by his devotion no more than 10 hours per month to
the business affairs of the Company and, consequently, conflicts of interest
may arise with respect to the limited time commitment by such officer.
Management is currently involved with other blank check companies, and
is involved in creating additional blank check companies similar to this one.
A conflict may arise in the event that another blank check company with which
management is affiliated is formed and actively seeks a target company.
Management anticipates that target companies will be located for the Company
and other blank check companies in chronological order of the date of
formation of such blank check companies or by lot. However, other blank check
companies that may be formed may differ from the Company in certain items
such as place of incorporation, number of shares and shareholders, working
capital, types of authorized securities, or other items. It may be that a
target company may be more suitable for or may prefer a certain blank check
company formed after the Company. In such case, a business combination might
be negotiated on behalf of the more suitable or preferred blank check company
regardless of date of formation or choice by lot. See "ITEM 5, DIRECTORS,
EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS--Current Blank Check
Companies."
The Certificate of Incorporation of the Company provides that the
Company may indemnify officers and/or directors of the Company for
liabilities, which can include liabilities arising under the securities laws.
Therefore, assets of the Company could be used or attached to satisfy any
liabilities subject to such indemnification.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business equity which desires to seek the
perceived advantages of a corporation which has a class of securities
registered under the Exchange Act. The Company will not restrict its search
to any specific business, industry, or geographical location and the Company
may participate in a business venture of virtually any kind of nature.
Management anticipates that it will be able to participate in only one
potential business venture because the Company has nominal assets and limited
financial resources. See ITEMS F/S, "FINANCIAL STATEMENTS." This lack of
diversification should be considered a substantial risk to the shareholders
of the Company because it will not permit the Company to offset potential
losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate
purposes. The Company may acquire assets and establish wholly-owned
subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business
entities seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for
<PAGE>
incentive stock options or similar benefits to key employees, increasing the
opportunity to use securities for acquisitions, providing liquidity for
shareholders and other factors. Business opportunities may be available in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a public company without incurring the cost and time required to
conduct an initial public offering. Management has not conducted market
research and is not aware of statistical data to support the perceived
benefits of a merger or acquisition transaction for the owners of a business
opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officer and director of the Company, who is not
a professional business analyst. In analyzing prospective business
opportunities, management will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and
experience of management services which may be available and the depth of
that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential
for growth or expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. This discussion of the proposed
criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Exchange Agent requires that any merger or acquisition candidate
comply with certain reporting requirements, which include providing audited
financial statements to be included in the reporting filings made under the
Exchange Act. The Company will not acquire or merge with any company for
which audited financial statements cannot be obtained at or within a
reasonable period of time after closing of the proposed transaction.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with
the Company. Such consequences may include, but are not limited to, time
delays of the registration process, significant expenses to be incurred in
such an offering, loss of voting control to public shareholders or the
inability to obtain an underwriter or to obtain an underwriter on
satisfactory terms.
The Company will not restrict its search for any specific kind of
business entities, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially any stage
of its business life. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business
may need to seek additional capital, may desire to have its shares publicly
traded, or may seek other perceived advantages which the Company may offer.
Management of the Company, which in all likelihood will not be
experienced in matters relating to the business of a target company, will
rely upon its own efforts in accomplishing the business purposes of the
Company. Outside consultants or advisors may be utilized by the Company to
assist in the search for qualified target companies. If the Company does
retain such an outside consultant or advisor, any cash fee earned by such
person will need to be assumed by the target company, as the Company has
limited cash assets with which to pay such obligation.
Following a business combination the Company may benefit from the
services of others in regard to accounting, legal services, underwritings and
corporate public relations. If requested by a target company, management may
recommend one ore more underwriters, financial advisors, accountants, public
relations firms or other consultants to provide such services.
<PAGE>
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued
after any business combination. Additionally, a target company may be
presented o the Company only on the condition that the services of a
consultant or advisor be continued after a merger or acquisition. Such
preexisting agreements of target companies for the continuation of the
services of attorneys, accountants, advisors or consultants could be a factor
in the selection of a target company.
ACQUISITION OPPORTUNITIES
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may
also acquire stock or assets of an existing business. On the consummation of
a transaction, it is likely that the present management and shareholders of
the Company will no longer be in control of the Company. In addition, it is
likely that the Company's officer and director will, as part of the terms of
the acquisition transaction, resign and be replaced by one or more new
officers and directors.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated
or at specified times thereafter. If such registration occurs, of which there
can be no assurance, it will be undertaken by the surviving entity after the
Company has entered into an agreement for a business combination or has
consummated a business combination and the Company is no longer considered a
blank check company. Until such time as this occurs, the Company will not
register any additional securities. The issuance of additional securities and
their potential sale into any trading market which may develop in the
Company's securities may depress the market value of the Company's securities
in the future if such a market develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351
or 368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings
in the target company. Depending upon, among other things, the target
company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage of ownership may
be subject to significant reduction in the event the Company acquires a
target company with substantial assets. Any merger or acquisition effected by
the Company can be expected to have a significant dilutive effect on the
percentage of shares held by the Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of
such agreements cannot be predicted, generally such agreements will require
certain representations and warranties of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by the parties prior to and after such closing, will
outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, and will include miscellaneous other
terms.
The Company will not acquire or merger with any entity which cannot
provide audited financial statements at or within a reasonable period of time
after closing of the proposed transaction. The Company is subject to all of
the reporting requirements including the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements
as part of or within 60 days following its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial
<PAGE>
statements included in its annual report on Form 10-K (or 10-KSB, as
applicable). If such audited financial statements are not available at
closing, or within time parameters necessary to insure the Company's
compliance with the requirements of the Exchange Act, or if the audited
financial statements provided do not conform to the representations made by
the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of
the Company.
Pierce Mill Associates, Inc. the principal shareholder of the Company,
has agreed that it will advance to the Company any additional funds which the
Company needs for operating capital and for costs in connection with
searching for or completing an acquisition or merger. Such advances will be
made without expectation of repayment unless the owners of the business which
the Company acquires or mergers with agree to repay all or a portion of such
advances. There is no minimum or maximum amount Pierce Mill will advance to
the Company. The Company will not borrow any funds to make any payments to
the Company's promoters, management or their affilites or associates.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek an acquisition or merger with any entity in
which the Company's officer, director, and shareholders or any affiliate or
associate serves as an officer or director or holds any ownership interest.
COMPETITION
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial
resources and limited management availability, the Company will continue to
be at a significant competitive disadvantage compared to the Company's
competitors.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company has no properties and at this time has no agreements to
acquire any properties. The Company currently uses the offices of Pierce Mill
Associates at no cost to the Company. Pierce Mill Associates has agreed to
continue this arrangement until the Company completes an acquisition or
merger.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of June 25, 1998, each person known
by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all directors individually and all directors and
officers of the Company as a group. Except as noted, each person has sole
voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial
of Beneficial Owner Ownership Percentage of Class
- ------------------- -------------------- -------------------
<S> <C> <C>
Pierce Mill Associates, Inc. (1)(2) 4,250,000 85%
1504 R Street, N.W.
Washington, D.C. 20009
Cassidy & Associates (2) 750,000 15%
1504 R Street, N.W.
Washington, D.C. 20009
James M. Cassidy (2) 5,000,000 100%
1504 R Street, N.W.
Washington, D.C. 20009
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
All Executive Officers and
Directors as a Group (1 Person) 5,000,000 100%
</TABLE>
(1) Pierce Mill Associates, Inc. is an affiliate of Cassidy &
Associates, the law firm prepared this registration statement and of which
James M. Cassidy is a principal. James Cassidy is the sole shareholder of
Pierce Mill Associates. Pierce Mill Associates provides services for Cassidy
& Associates, particularly in regard to locating private companies which may
wish to go public, and acts as an initial shareholder in certain companies
formed by Cassidy & Associates. Since Pierce Mill Associates has fewer than
100 shareholders and is not making and does not intend to make a public
offering of its securities, management believes that it is not deemed to be
an investment company by virtue of an exemption provided under the Investment
Company Act of 1940, as amended.
(2) Mr. Cassidy owns 100% of Pierce Mill Associates and is principal of
Cassidy & Associates, a Washington, D.C. securities law firm, and is
considered the beneficial owner of the shares of common stock of the Company
issued to them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS.
The Company has one Director and Officer as follows:
<TABLE>
<CAPTION>
Name Age Positions and Offices Held
---------------- --- --------------------------
<S> <C> <S>
James M. Cassidy 63 President, Secretary,
Director
</TABLE>
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officer and
director is not acting on behalf of nor will act at the direction of any
other person.
Set forth below is the name of the director and officer of the Company,
all positions and offices with the Company held, the period during which he
has served as such, and the business experience during at least the last five
years:
James Michael Cassidy, Esq., J.D., LL.M., received a Bachelor of Science
in Languages and Linguistics from Georgetown University in 1960, a Bachelor
of Laws from The Catholic University School of Law in 1963, and a Master of
Laws in Taxation from The Georgetown University School of Law in 1968. From
1963-1964, Mr. Cassidy was law clerk to the Honorable Inzer B. Wyatt of the
United States District Court for the Southern District of New York. From
1964-1965, Mr. Cassidy was law clerk to the Honorable Wilbur K. Miller of the
United States Court of Appeals for the District of Columbia. From 1969-1975,
Mr. Cassidy was an associate of the law firm of Kieffer & Moroney and a
principal in the law firm of Kieffer & Cassidy, Washington, D.C. From 1975 to
date, Mr. Cassidy has been a principal in the law firm of Cassidy &
Associates, Washington, D.C. and its predecessors, specializing in securities
law and related corporate and federal taxation matters. Mr. Cassidy is a
member of the bar of the District of Columbia and is admitted to practice
before the United States Tax Court and the United States Supreme Court.
PREVIOUS BLANK CHECK COMPANIES
In 1988, management was involved in two blank check offerings. Mr.
Cassidy was vice president, a director and a shareholder of First Agate
Capital Corporation and Consolidated Financial Corporation. In August, 1988,
First Agate Capital Corporation offered 50,000 units at $10.00 for an
aggregate of $500,000 in an underwritten offering of its common stock and
warrants. First Agate Capital is no longer a public company and has had no
activity since 1991. In November, 1988, Consolidated Financial Corporation
offered 50,000 units at $10.00 for an aggregate of
<PAGE>
$500,000 in an underwritten offering of its common stock and warrants. In
1990, in connection with the change in control of Consolidated Financial
Corporation. Mr. Cassidy transferred all his shares of Consolidated Financial
Corporation common stock without compensation or any financial benefit and
resigned as an officer and director of that company. Mr. Cassidy has had no
further relationship or transactions with Consolidated Financial Corporation
since 1990. As described in public filings made by the company, in June,
1991, the new management of Consolidated Financial Corporation effected its
merger with A.B.E Industrial Holdings.
CURRENT BLANK CHECK COMPANIES
Mr. Cassidy is the president, sole director and a beneficial shareholder
of Sheffield Acquisitions, Inc., Tunlaw International Corporation, Chatsworth
Acquisition Corporation and Aberdeen Acquisition Corporation. Until
December 30, 1997, Mr. Cassidy was the sole director and beneficial shareholder
of Corcoran Technologies Corporation. Sheffield Acquisitions, Inc. has filed
a registration statement on Form S-1 under the Securities Act which has not
yet been declared effective. Tunlaw International Corporation, Corcoran
Technologies Corporation, Chatsworth Acquisition Corporation and Aberdeen
Acquisition Corporation have filed registration statements on Forms 10-SB
under the Exchange Act which have become effective and each files periodic
reports under the Exchange Act. The initial business purpose of each of these
companies was to engage in a merger or acquisition with an unidentified
company or companies and each will be classified as a blank check company
until completion of a business acquisition. Mr. Cassidy is the sole director
and beneficial shareholder of Barhill Acquisition Corporation and Westford
Acquisition Corporation for which registration statements on Form 10-SB have
been filed with the Commission on August 13, 1998 and August 27, 1998,
respectively. The initial business purpose of these two companies is to
engage in a merger or acquisition with an unidentified company or companies
and each will be classified as a blank check company until completion of a
business acquisition.
Mr. Cassidy anticipates being involved with additional blank check
companies filed under the Securities Act or under the Exchange Act.
RECENT TRANSACTIONS BY BLANK CHECK COMPANIES
On December 30, 1997, Prime Management, Inc., a California corporation,
merged with and into Corcoran Technologies Corporation. Corcoran Technologies
Corporation was formed on March 27, 1997 to engage in a merger or acquisition
with an unidentified company or companies and was structured substantially
identically to the Company, including identical management and shareholders.
Prime Management, Inc. is an operating transportation company which has two
wholly-owned subsidiaries, Mid-Cal Express, a long-haul trucking company
hauling shipments of general commodities, including temperature-sensitive
goods, in both intrastate and interstate commerce and Mid-Cal Logistics, a
freight brokerage company. Pursuant to the merger, Corcoran Technologies
Corporation changed its name to Prime Companies, Inc., and Corcoran
Technologies Corporation filed a Form 8-K with the Securities and Exchange
Commission describing the merger. The Common stock of Prime Companies, Inc.
trades on the NASD OTC Bulletin Board under the symbol PRMC. Detailed
information concerning Prime Companies, Inc. may be obtained from its filings
under the Exchange Act which are found the EDGAR archives page of the
Securities and Exchange Commission's Website at WWW.SEC.GOV.
CONFLICTS OF INTEREST
The Company's officer and director has organized and expects to organize
other companies of a similar nature and with similar purpose as the Company.
Consequently, there are potential inherent conflicts of interest in acting as
an officer and director of the Company. Insofar as the officer and director
is engaged in other business activities, management anticipates that it will
devote only a minor amount of time to the Company's affairs. The Company does
not have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the
Company's proposed business operations.
<PAGE>
A conflict may arise in the event that another blank check company with
which management is affiliated is formed and actively seeks a target company.
It is anticipated that target companies will be located for the Company and
other blank check companies in chronological order of the date of formation
of such blank check companies or by lot. However, any blank check companies
that may be formed may differ from the Company in certain items such as place
of incorporation, number of shares and shareholders, working capital, types
of authorized securities, or other items. It may be that a target company may
be more suitable for or may prefer a certain blank check company formed after
the Company. In such case, a business combination might be negotiated on
behalf of the more suitable or preferred blank check company regardless of
date of formation or choice by lot. Mr. Cassidy will be responsible for
seeking, evaluating, negotiating and consummating a business combination with
a target company which may result in terms providing benefits to Mr. Cassidy.
Mr. Cassidy is the principal of Cassidy & Associates, a securities law
firm located in Washington, D.C. As such, demands may be placed on the time
of Mr. Cassidy which will detract from the amount of time he is able to
devote to the Company. Mr. Cassidy intends to devote as much time to the
activities of the company as required. However, should such a conflict
arise, there is no assurance that Mr. Cassidy would not attend to other
matters prior to those of the Company. Mr. Cassidy projects that initially up
to ten hours per month of his time may be spent locating a target company
which amount of time would increase when the analysis of, and negotiations
and consummation with, a target company are conducted.
Mr. Cassidy owns 100% of Pierce Mill Associates which, in turn, owns
4,250,000 shares of common stock of the Company and is a principal of
Cassidy & Associates, a securities law firm, which owns 750,000 shares of the
Company's common stock. No other securities, or rights to securities, of the
Company will be issued to management or promoters, or their affiliates or
associates, prior to the completion of a business combination. At the time of
a business combination, management expects that some or all of the shares of
Common Stock owned by Cassidy & Associates will be purchased by the target
company. The amount of Common Stock sold or continued to be owned by Pierce
Mill Associates or Cassidy & Associates cannot be determined at this time.
The terms of business combination may include such terms as Mr. Cassidy
remaining a director or officer of the Company and/or the continuing
securities or other legal work of the Company being handled by the law firm
of which Mr. Cassidy is the principal. The terms of a business combination
may provide for a payment by cash or otherwise to Pierce Mill Associates or
Cassidy & Associates for the purchase of all or part of their common stock of
the Company by a target company. Mr. Cassidy would directly benefit from such
employment or payment. Such benefits may influence Mr. Cassidy's choice of a
target company.
The Company may agree to pay finder's fees, as appropriate and allowed,
to unaffiliated persons who may bring a target company to the Company where
that reference results in a business combination. The amount of any finder's
fee will be subject to negotiation, and cannot be estimated at this time. No
finder's fee of any kind will be paid to management or promoters of the
Company or to their associates or affiliates. No loans of any type have, or
will be, made to management or promoters of the Company or to any of their
associates or affiliates.
The Company's officer and director, its promoter and their affiliates or
associates have not had any negotiations with and there are no present
arrangements or understandings with any representatives of the owners of any
business or company regarding the possibility of a business combination with
the Company.
The Company will not enter into a business combination, or acquire any
assets of any kind for its securities, in which management or promoters of
the Company or any affiliates or associates have any interest, direct or
indirect.
Management has adopted certain policies involving possible conflicts of
interest, including prohibiting any of the following transactions involving
management, promoters, shareholders or their affiliates:
(i) Any lending by the company to such persons;
<PAGE>
(ii) The issuance of any additional securities to such persons prior to
a business combination;
(iii) The entering into any business combination or acquisition of
assets in which such persons have any interest, direct or indirect;
or
(iv) The payment of any finder's fees to such persons.
These policies have been adopted by the Board of Directors of the
Company, and any changes in these provisions require the approval of the
Board of Directors. Management does not intend to propose any such action and
does not anticipate that any such action will occur.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest
in favor of the Company could result in liability of management to the
Company. However, any attempt by shareholders to enforce a liability of
management to the Company would most likely be prohibitively expensive and
time consuming.
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Securities
Act of 1933 and the Securities Exchange Act of 1934, management believes the
Company will not be subject to regulation under the Investment Company Act of
1940 insofar as the Company will not be engaged in the business of investing
or trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940. Any violation
of such Act would subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
The Company's officer and director does not receive any compensation for
his services rendered to the Company, has not received such compensation in
the past, and is not accruing any compensation pursuant to any agreement with
the Company.
The officer and director of the Company will not receive any finder's
fee, either directly or indirectly, as a result of his efforts to implement
the Company's business plan outlined herein. However, the officer and
director of the Company anticipates receiving benefits as a beneficial
shareholder of the Company. See "ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has issued a total of 5,000,000 shares of Common Stock to
the following persons for a total of $500 in cash:
<TABLE>
<CAPTION>
NAME NUMBER OF TOTAL SHARES CONSIDERATION
- ------------------------ ----------------------- -------------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 $75
</TABLE>
<PAGE>
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement, affirming that such
shareholders shall not sell their shares of the Company's common stock except
in connection with or following completion of a merger or acquisition
resulting in the Company no longer being classified as a blank check company.
The shareholders have deposited their stock certificates with the Company's
management, who will not release the certificates except in connection with
or following the completion of a merger or acquisition.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, par value $.0001 per share, and 20,000,000 shares of
Preferred Stock, par value $.0001 per share. The following statements
relating to the capital stock set forth the material terms of the Company's
securities, however, reference is made to the more detailed provisions of,
and such statements are qualified in their entirety by reference to, the
Certificate of Incorporation and the By-laws, copies of which are filed as
exhibits to this registration statement.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock do not have cumulative voting rights. Holders of common stock are
entitled to share ratably in dividends, if any, as may be declared from time
to time by the Board of Directors in its discretion from funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of the Company, the holders of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. All of the
outstanding shares of common stock are fully paid and non-assessable.
Holders of common stock have no pre-emptive rights to purchase the
Company's common stock. There are no conversion or redemption rights or
sinking fund provisions with respect to the common stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of preferred stock, $.0001 par value per share, of which no
shares have been issued. The Board of Directors is authorized to provide for
the issuance of shares of preferred stock in series and, by filing a
certificate pursuant to the applicable law of Delaware, to establish from
time to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions thereof
without any further vote or action by the shareholders. Any shares of
preferred stock so issued would have priority over the common stock with
respect to dividend or liquidation rights. Any future issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the shareholders and may
adversely affect the voting and other rights of the holders of common stock.
At present, the Company has no plans to issue any preferred stock nor adopt
any series, preferences or other classification of preferred stock.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain
circumstances, the issuance of Preferred Stock could adversely affect the
voting power of the holders of the Common Stock. Although the Board of
Directors is required to make my determination to issue such stock based on
its judgment as to the best interests of the stockholders of the
<PAGE>
Company, the Board of Directors could act in a manner that would discourage
an acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or stock exchange rules. The Company
has no present plans to issue any Preferred Stock.
Dividends
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment
of dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for
use in its business operations and accordingly, the Board of Directors does
not anticipate declaring any dividends prior to a business combination.
Glossary
<TABLE>
<S> <C>
"Blank Check" COMPANY As defined in Section 7(b)(3) of the Securities Act, a "blank check" company is a
development stage company that has no specific business plan or purpose or has indicated
that its business plan is to engage in a merger or acquisition with an unidentified company
or companies and is issuing "penny stock" securities as defined in Rule 3a51-1 of the
Exchange Act.
The Company Sunderland Acquisition Corporation, the company whose common stock is subject of this
registration statement.
Exchange Act The Securities Act of 1934, as amended.
"Penny Stock" Security As defined in Rule 3a51-1 of the Exchange Act, a "penny stock" security is any equity
security other than a security (i) that is a reported security (ii) that is issued by an
investment company (iii) that is a put or call issued by the Option Clearing Corporation
(iv) that has a price of $5.00 or more (except for purposes of Rule 419 of the Securities
Act) (v) that is registered on a national securities exchange (vi) that is authorized for
quotation of the Nasdaq Stock Market, unless other provisions of Rule 3a51-1 are not
satisfied, or (vii) that is issued by an issuer with (a) net tangible assets in excess of
$2,000,000, if in continuous operation for more than three years or $5,000,000 if in
operation for less than three years or (b) average revenue of at least $6,000,000 for the
last three years.
Pierce Mill Associates Pierce Mill Associates, Inc., a private company owned by management of the Company. Pierce
Mill Associates provides services for Cassidy & Associates, particularly in regard to
locating private companies which may wish to go public, and acts as an initial shareholder
in certain companies formed by Cassidy & Associates.
Securities Act The Securities Act of 1933, as amended.
Small Business Issuer As defined in Rule 12b-2 of the Exchange Act, a "Small Business Issuer" is an entity (i)
which has revenues of less than $25,000,000 (ii) whose public float (the outstanding
securities not held by affiliates) has a value of less than $25,000,000 (iii) which is a
United States or Canadian issuer (iv) which is not an Investment Company and (v) if a
majority-owned subsidiary, whose parent corporation is also a small business issuer.
</TABLE>
<PAGE>
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET PRICE. There is no trading market for the Company's Common
Stock at present and there has been no trading market to date. There is no
assurance that a trading market will ever develop or, if such a market does
develop, that it will continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure
schedule prepared by the Commission relating to the penny stock market,
which, in highlight form, (i) sets forth the basis on which the broker or
dealer made the suitability determination and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
In order to qualify for listing on the Nasdaq SmallCap Market, a company
must have at lease (i) net tangible assets of $4,000,000 or market
capitalization of $50,000,000 or net income for two of the last three years
of $750,000; (ii) public float of 1,000,000 shares with a market value of
$5,000,000; (iii) a bid price of $4.00; (iv) three market makers; (v) 300
shareholders and (vi) an operating history of one year or, if less than one
year, $50,000,000 in market capitalization. For continued listing on the
Nasdaq SmallCap Markets, a company must have at least (i) net tangible assets
of $2,000,000 or market capitalization of $35,000,000 or net income for two
of the last three years of $500,000; (ii) a public float of 500,000 shares
with a market value of $1,000,000; (iii) a bid price of $1.00 (iv) two market
makers; and (v) 300 shareholders.
If, after a merger or acquisition, the Company does not meet the
qualifications for listing on the Nasdaq SmallCap Market, the Company's
securities may be traded in the over-the-counter ("OTC") market. The OTC
market differs from national and regional stock exchanges in that it (1) is
not sited in a single location but operates through communication of bids,
offers and confirmations between broker-dealers and (2) securities admitted
to quotation are offered by one or more broker-dealers rather than the
"specialist" common to stock exchanges. The Company may apply for listing on
the NASD OTC Bulletin Board or may offer its securities in what are commonly
referred to as the "pink sheets" of the National Quotation Bureau, Inc. To
qualify for listing on the NASD OTC Bulletin Board, an equity security must
have one registered broker-dealer, known as the market maker, willing to list
bid or sale quotations and to sponsor the company for listing on the Bulletin
Board.
If the Company is unable initially to satisfy the requirements for
quotation on the Nasdaq SmallCap Market or becomes unable to satisfy the
requirements for continued quotation thereon, and trading, if any, is
conducted in the OTC market, a shareholder may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities.
<PAGE>
(b) HOLDERS. There are two holders of the Company's Common Stock. On
June 9, 1998, the Company issued 5,000,000 of its Common Shares to these
shareholders for cash at $.0001 per share for a total price of $500. The
issued and outstanding shares of the Company's Common Stock were issued in
accordance with the exemptions from registration afforded by Sections 3(b)
and 4(2) of the Securities Act of 1933 and Rules 506 and 701 promulgated
thereunder.
(c) DIVIDENDS. The Company has not paid any dividends to date, and has
no plans to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AN ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed accountants since its formation and there
are no disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold securities which were
not registered as follows:
<TABLE>
<CAPTION>
Date Name Number of Shares Consideration
- ----------- ------- ---------------- -------------
<S> <C> <C> <C>
June 9, 1998 Pierce Mill 4,250,000 $425
Associates, Inc.(1)
June 9, 1998 Cassidy & Associates(2) 750,000 $75
</TABLE>
- -------------------
(1) Mr. Cassidy, the president and sole director of the Company, is the
sole director and shareholder of Pierce Mill Associates, Inc. and is therefore
considered to be the beneficial owner of the common stock of the Company
issued to Pierce Mill Associates, Inc. With respect to the sales made to
Pierce Mill Associates, Inc., the Company relied on Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated thereunder.
(2) Mr. Cassidy is a principal of Cassidy & Associates, a Washington,
D.C. securities law firm, and is therefore considered to be the beneficial
owner of the common stock of the Company issued to Cassidy & Associates. With
respect to the sales made to Cassidy & Associates, the Company relied
upon Section 3(b) of the Securities Act of 1933, as amended and Rule 701
promulgated thereunder.
The shareholders of the Company have executed and delivered a "lock-up"
letter agreement which provides that such shareholders shall not sell the
securities except in connection with or following the consummation of a
merger or acquisition. Further, each shareholder has placed its stock
certificates with the Company until such time. Any liquidation by the current
shareholders after the release from the "lock-up" selling limitation period
may have a depressive effect upon the trading price of the Company's
securities in any future market which may develop.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents,
against expenses incurred in any action, suit or proceeding. The Certificate
of Incorporation and the By-laws of the Company
<PAGE>
provide for indemnification of directors and officers to the fullest extent
permitted by the General Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation
contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE
UNENFORCEABLE.
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
Attached are audited financial statements for the Company for the period
ended June 10, 1998. The following financial statements are attached to this
report and filed as a part thereof.
1) Table of Contents - Financial Statements
2) Independent Auditors' Report
3) Balance Sheet as of June 10, 1998
4) Notes to Balance Sheet as of June 10, 1998
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheet as of June 10, 1998 F-2
Notes to Balance Sheet as of June 10, 1998 F-3, F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Sunderland Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Sunderland Acquisition
Corporation (a development stage company) as of June 10, 1998. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly in all
material respects, the financial position of Sunderland Acquisition
Corporation (a development state company) as of June 10, 1998, in conformity
with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 12, 1998
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10, 1998
----------------------------------
ASSETS
------
<TABLE>
<S> <C>
Cash $ 500
Organization cost 75
-----
TOTAL ASSETS $ 575
------------ -----
-----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES $ --
-----
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par value, 20 million
shares authorized, zero issued and outstanding --
Common Stock, $.0001 par value, 100 million
shares authorized 5,000,000 issued and
outstanding 500
Capital in excess of par 75
-----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 575
------------------------------------------ -----
-----
</TABLE>
See accompanying notes to balance sheet.
F-2
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10,1998
----------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND BUSINESS OPERATIONS
Sunderland Acquisition Corporation (a development stage
company)(the "Company") was incorporated in Delaware on June 2, 1998
to serve as a vehicle to effect a merger, exchange of capital stock,
asset acquisition or other business combination with a domestic of
foreign private business. At June 10, 1998, the Company had not yet
commenced any formal business operations, and all activity to date
relates to the Company's formation and proposed fund raising. The
Company's fiscal year end is December 31.
The Company's ability to commence operations is contingent upon its
ability to identify a prospective target business and raise the
capital it will require through the issuance of equity securities,
debt securities, bank borrowings or a combination thereof.
B. USE OF ESTIMATES
The preparation of the 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.
NOTE 2. STOCKHOLDERS' EQUITY
A. PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of preferred
stock at $.0001 par value, with such designations, voting and other
rights and preferences as may be determined from time to time by the
Board of Directors.
B. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common
stock at $.0001 par value. The Company issued 4,250,000 and 750,000
shares to Pierce Mill Associates, Inc. and Cassidy & Associates,
respectively.
NOTE 3. RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of the
Company who also owns 100% of the outstanding stock of Pierce Mill
Associates, Inc. The same party is also the controlling owner of
Cassidy & Associates.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
2.1** Certificate of Incorporation
2.2** By-Laws
(3) Instruments Defining the Rights of Holders
3.1** Lock-Up Agreement with Pierce Mill Associates
3.2** Lock-Up Agreement with Cassidy & Associates
(10)(a) Consents-Experts
10.1** Consent of Accountants
- --------------
**Previously Filed
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized.
SUNDERLAND ACQUISITION CORPORATION
By: /s/ James M. Cassidy
James M. Cassidy, Director and President
September 24, 1998
<PAGE>
ASSET ACQUISITION AGREEMENT
ASSET ACQUISITION AGREEMENT between SUNDERLAND ACQUISITION CORPORATION,
a Delaware Corporation ("Sunderland") and DEL MAR HOLDINGS, INC., a Nevada
corporation ("Del Mar Holdings"), Sunderland and Del Mar Holdings being
sometimes referred to herein as the "Constituent Corporations".
WHEREAS, Del Mar Holdings wishes to transfer all its assets to
Sunderland in exchange for voting stock of Sunderland in a transaction intended
to qualify as a reorganization within the meaning of ss.368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (this "Transaction").
NOW, THEREFORE, Sunderland and Del Mar Holdings adopt this Agreement
and agree as follows:
1. TRANSFER OF ASSETS. At the Closing (as defined hereinafter), Del Mar
Holdings shall transfer and deliver to Sunderland all properties and assets then
owned by Del Mar Holdings without limitation except (i) such books, records and
other documents that Del Mar Holdings is required by law to retain (provided,
however, that in such case Sunderland shall have access to review and copy any
such materials), (ii) any rights which cannot lawfully be transferred (provided,
however, that such rights shall be held by Del Mar Holdings for the benefit of
Sunderland),(iii) Del Mar Holdings's rights under this Agreement, and (iv) cash
and shareholder receivable set forth on Schedule 1. None of the liabilities of
Del Mar Holdings shall transfer to Sunderland except (i) those which by their
nature attach to any of the assets which are transferred and (ii) those which
are set out on Exhibit A.
2. TRANSFER OF SUNDERLAND SHARES.
2.1 At the Closing, Sunderland shall deliver to Del Mar Holdings one or
more certificates aggregating 2,874,762 shares of the voting common stock of
Sunderland, $.0001 par value per share, fully paid and nonassessable, as payment
in full for the transfer of assets by Del Mar Holdings under this Agreement.
2.2 Immediately following the Closing, there will be issued and
outstanding in Sunderland, 750,000 common shares issued to TPG Capital
Corporation, 2,874,762 common shares issued to Del Mar Holdings, Inc., 60,000
common shares issued to Del Mar Mortgage, Inc., 6,000 common shares issued to
Stephen J. Byrne, and 6,000 common shares issued to Steve Brockman.
3. APPROVAL OF SHAREHOLDERS. This Agreement shall be adopted by the
shareholders of Del Mar Holdings at a meeting of its shareholders called for
that purpose or by written consent pursuant to the laws applicable thereto.
There shall be required for the adoption of this Agreement the affirmative vote
of the holders of at least a majority of the holders of all the shares of the
Common Stock issued and outstanding and entitled to vote thereon.
4. REPRESENTATIONS AND WARRANTIES OF DEL MAR HOLDINGS. Del Mar Holdings
represents and warrants that:
4.1 Corporate Organization and Good Standing. Del Mar Holdings is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, and is
<PAGE>
qualified to do business as a foreign corporation in each jurisdiction, if any,
in which its property or business requires such qualification.
4.2 Capitalization. Del Mar Holdings's authorized capital stock
consists of 15,000,000 shares of Common Stock, .001 par value, of which
2,874,762 shares are issued and outstanding, and 10,000,000 shares of preferred
stock, .001 par value, of which no shares are issued and outstanding.
4.3 Issued Stock. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and nonassessable.
4.4 Corporate Authority. Del Mar Holdings has all requisite corporate
power and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this Agreement.
4.5 Authorization. Execution of this Agreement has been duly authorized
and approved by Del Mar Holdings's board of directors.
4.6 Subsidiaries. Del Mar Holdings has no subsidiaries.
4.7 Financial Statements. Del Mar Holdings's audited balance sheets of
December 31, 1997 and December 31, 1996, and Del Mar Holdings's unaudited
balance sheets and the related statements of income and retained earnings dated
June 30, 1998, copies of which will have been delivered by Del Mar Holdings to
Sunderland prior to the Closing Date ("Del Mar Holdings Financial Statements"),
fairly present the financial condition of Del Mar Holdings as of the date
therein and the results of its operations for the periods then ended in
conformity with generally accepted accounting principles consistently applied.
Del Mar Holdings will deliver to Sunderland within 30 days following the Closing
unaudited financial statements for the period January 1, 1999 through March 31,
1999.
4.8 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in Del Mar Holdings Financial Statements, Del Mar Holdings
did not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
4.9 No Material Changes. Intentionally omitted.
4.10 Litigation. There is not, to the knowledge of Del Mar Holdings,
any pending, threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against Del
Mar Holdings or against any of its officers.
4.11 Contracts. Del Mar Holdings is not a party to any material
contract not in the ordinary course of business that is to be performed in whole
or in part at or after the date of this Agreement.
4.12 Title. Del Mar Holdings has good and marketable title to all the
real property and good and valid title to all other property included in Del Mar
Holdings Financial Statements. Except as set out in the balance sheet thereof,
the properties of Del Mar Holdings are not subject to any
<PAGE>
mortgage, encumbrance, or lien of any kind except minor encumbrances that do not
materially interfere with the use of the property in the conduct of the business
of Del Mar Holdings.
4.13 Tax Returns. All federal, state, county, municipal, local, foreign
and other taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts, have been properly prepared and
filed by Del Mar Holdings for all years to and including the taxable year ending
December 31, 1997. The provisions for federal and state taxes reflected in Del
Mar Holdings Financial Statements are adequate to cover any such taxes that may
be assessed against Del Mar Holdings in respect of its business and its
operations during the periods covered by Del Mar Holdings Financial Statements
and all prior periods.
4.14 No Violation. Consummation of the transactions contemplated by
this Agreement will not constitute or result in a breach or default under any
provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or
any order, judgment, decree, law, or regulation to which any property of Del Mar
Holdings is subject or by which Del Mar Holdings is bound.
5. REPRESENTATIONS AND WARRANTIES OF SUNDERLAND. Sunderland represents
and warrants that:
5.1 Corporate Organization and Good Standing. Sunderland is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
5.2 Reporting Company. Sunderland has filed with the Securities and
Exchange Commission a registration statement on Form 10-SB which was declared
effective pursuant to the Securities Exchange Act of 1934 and is a reporting
company pursuant to ss.12 thereunder.
5.3 Reporting Company Status. Sunderland has timely filed and is
current on all reports required to be filed by it pursuant to ss.12(g) of the
Securities Exchange Act of 1934.
5.4 Capitalization. Sunderland's authorized capital stock consists of
100,000,000 shares of Common Stock, $.0001 par value, of which 5,000,000 shares
are issued and outstanding (of which 4,250,000 shares have been issued pursuant
to Rule 506 and 750,000 shares pursuant to Rule 701 of the General Rules and
Regulations of the Securities and Exchange Commission), and 20,000,000 shares of
non-designated preferred stock of which no shares are outstanding. Incident to
the transactions contemplated by this Agreement, Sunderland shall retire all its
outstanding shares issued pursuant to Rule 506 which shall thereupon become
treasury shares.
5.5 Stock Rights. There are no stock grants, options, rights, warrants
or other rights to purchase or obtain the Sunderland Common or Preferred Stock
issued or committed to be issued.
5.6 Issued Stock. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and non-assessable.
5.7 Corporate Authority. Sunderland has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its business
as it is now being conducted and to
<PAGE>
execute, deliver, perform and conclude the transactions contemplated by this
Agreement and all other agreements and instruments related to this Agreement.
5.8 Authorization. Execution of this Agreement and the performance of
all obligations hereunder has been duly authorized and approved by all required
corporate action of Sunderland.
5.9 Subsidiaries. Sunderland has no subsidiaries.
5.10 Financial Statements. Sunderland's audited balance sheets and the
related statements of income and retained earnings, dated as of December 31,
1998, copies of which will have been delivered by Sunderland to Del Mar Holdings
by the Closing Date (the "Sunderland Financial Statements"), fairly present the
financial condition of Sunderland as of the date therein and the results of its
operations for the periods then ended in conformity with generally accepted
accounting principles consistently applied. Sunderland will deliver to Del Mar
Holdings within 30 days following the Closing unaudited financial statements for
the period January 1, 1999 through March 31, 1999.
5.11 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in the Sunderland Financial Statements, Sunderland did not
have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
5.12 No Material Changes. Intentionally omitted.
5.13 Litigation. There is not, to the knowledge of Sunderland, any
pending, threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against
Sunderland or against any of its officers.
5.14 Contracts. Sunderland is not a party to any material contract not
in the ordinary course of business that is to be performed in whole or in part
at or after the date of this Agreement.
5.15 Title. Sunderland has good and marketable title to all the real
property and good and valid title to all other property included in the
Sunderland Financial Statements. Except as set out in the balance sheet thereof,
the properties of Sunderland are not subject to any mortgage, encumbrance, or
lien of any kind except minor encumbrances that do not materially interfere with
the use of the property in the conduct of the business of Sunderland.
5.16 Tax Returns. All federal, state, county, municipal, local, foreign
and other taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts, have been properly prepared and
filed by Sunderland for all years to and including the taxable year ending
December 31, 1998. The provisions for federal and state taxes reflected in the
Sunderland Financial Statements are adequate to cover any such taxes that may be
assessed against Sunderland in respect of its business and its operations during
the periods covered by the Sunderland Financial Statements and all prior
periods.
5.17 No Violation. Consummation of the transactions contemplated hereby
will not constitute or result in a breach or default under any provision of any
charter, bylaw, indenture,
<PAGE>
mortgage, lease, or agreement, or any order, judgment, decree, law, or
regulation to which any property of Sunderland is subject or by which Sunderland
is bound.
5.18 Due Diligence. The responses of Sunderland to a certain due
diligence checklist furnished to Sklar Warren Conway Williams & Rosenfeld LLP,
attached hereto as Exhibit B, which are incorporated in this Agreement as though
set out in full, are and remain true and accurate.
6. CONDUCT OF DEL MAR HOLDINGS PENDING THE CLOSING DATE. Del Mar
Holdings covenants that between the date of this Agreement and the Closing Date:
6.1 No change will be made in Del Mar Holdings's articles of
incorporation or bylaws.
6.2 Del Mar Holdings will not make any change in its authorized or
issued capital stock, declare or pay any dividend or other distribution or
issue, encumber, purchase, or otherwise acquire any of its capital stock other
than as provided herein, except to the extent that any such action is not
inconsistent with the provisions of this Agreement.
6.3 Del Mar Holdings will submit this Agreement for its shareholders'
approval with a favorable recommendation by its board of directors and will use
its best efforts to obtain the requisite shareholder approval.
6.4 Del Mar Holdings will use its best efforts to maintain and preserve
its business organization, employee relationships, and goodwill intact, and will
not enter into any material commitment except in the ordinary course of business
or to the extent that any such material commitment is not inconsistent with the
provisions of this Agreement.
7. CONDUCT OF SUNDERLAND PENDING THE CLOSING DATE. Sunderland covenants
that between the date of this Agreement and the Closing Date:
7.1 No change will be made in Sunderland's certificate of incorporation
or bylaws.
7.2 Sunderland will not make any change in its authorized or issued
capital stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock otherwise than
as provided herein.
7.3 Sunderland will submit this Agreement for its shareholders'
approval with a favorable recommendation by its board of directors and will use
its best efforts to obtain the requisite shareholder approval.
7.4 Sunderland will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8. CONDITIONS PRECEDENT TO OBLIGATION OF DEL MAR HOLDINGS. Del Mar
Holdings's obligation to consummate the transactions contemplated hereby shall
be subject to fulfillment on or before the Closing Date of each of the following
conditions, unless waived in writing by Del Mar Holdings:
<PAGE>
8.1 Sunderland's Representations and Warranties. The representations
and warranties of Sunderland set forth herein shall be true and correct at the
Closing Date as though made at and as of that date, except as affected by the
transactions contemplated hereby.
8.2 Sunderland's Covenants. Sunderland shall have performed all
covenants required to be performed by it on or before the Closing Date by this
Agreement and and the following covenants pursuant to paragraph 2 of a certain
agreement with TPG Capital Corporation dated February 10, 1999:
8.2.1 TPG will provide, at its expense, a Delaware corporation
(Sunderland) with audited financial statements showing no assets or liabilities,
absolute or contingent, which is a reporting company under ss.12(g) of the
Securities Exchange Act of 1934.
8.2.2 Upon the effective date of this Agreement, the existing
shareholders, officers and directors of Sunderland will take all actions to
appoint and elect new officers and directors as selected by Del Mar Mortgage,
Inc., Del Mar Holdings and Capsource, Inc., ("Capsource") (collectively, the
"Del Mar Entities"), and will resign as officers and directors themselves.
8.2.3 Sunderland will have authorized capital of 100,000,000
shares of common stock, $.0001 par value per share, and 20,000,000 shares of
preferred stock, $.0001 par value per share.
8.2.4 Immediately prior to the effective date of this
Agreement, there will be issued and outstanding by Sunderland 5,000,000 common
shares, of which 4,250,000 shares will have been issued pursuant to Rule 506 and
750,000 shares pursuant to Rule 701.
8.2.5 TPG will deliver an opinion of counsel as to the
validity of the issuance of the outstanding common shares of Sunderland under
Rules 506 and 701 and that such shares are fully paid and nonassessable. The Del
Mar Entities understand and agree that such opinion may be issued by an
affiliate of TPG.
8.2.6 Incident to the business combinations (the "Business
Combinations") contemplated by this Agreement, by that certain Asset Acquisition
Agreement among Sunderland and Del Mar Mortgage, Inc., and by that certain
Agreement and Plan of Reorganization among Sunderland, Capsource and Stephen J.
Byrne, Sunderland shall retire all its outstanding shares issued pursuant to
Rule 506 which shall thereupon become treasury shares.
8.2.7 Incident to the Business Combinations TPG will cause the
name of Sunderland to be changed to "Sunderland Corporation" or such other name
as may be selected by the Del Mar Entities and be available.
8.3 Shareholder Approval. This Agreement shall have been approved by
the required number of shareholders of the Constituent Corporations.
8.4. Regulatory Approvals. Sunderland shall have received all Federal
and state regulatory approvals required of it to complete the transactions
contemplated by this Agreement.
<PAGE>
8.5 Supporting Documents of Sunderland. Sunderland shall have delivered
to Del Mar Holdings supporting documents in form and substance satisfactory to
Del Mar Holdings, to the effect that:
(i) Sunderland is a corporation duly organized, validly
existing, and in good standing.
(ii) Sunderland's authorized and issued capital stock is
as set forth herein.
(iii) The execution and consummation of this Agreement have
been duly authorized and approved by Sunderland's
board of directors.
8.6 Affiliated Transactions. Simultaneously with this Transaction,
Sunderland is entering into an Agreement and Plan of Reorganization among
Sunderland, Capsource, Inc., a Nevada corporation ("Capsource") and Stephen J.
Bryne (the "Affiliated Transaction") whereby, Sunderland will acquire all of the
issued and outstanding securities of Capsource in a transaction intended to
qualify as a reorganization within the meaning of ss.368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. It is expressly acknowledged and
agreed that this Transaction and the Affiliated Transaction will close
simultaneously, or not at all. The Affiliated Transaction closing (the
"Affiliated Closing") is expressly conditioned upon the approval of the change
in control of Capsource by the Nevada Department of Business and Industry,
Division of Financial Institutions ("Financial Institutions Division Approval"),
accordingly, the effectiveness of this Transaction is expressly subject to the
Financial Institutions Division Approval.
9. CONDITIONS PRECEDENT TO OBLIGATION OF SUNDERLAND. Sunderland's
obligation to consummate the transactions contemplated hereby shall be subject
to fulfillment on or before the Closing Date of each of the following
conditions, unless waived in writing by Sunderland:
9.1 Del Mar Holdings's Representations and Warranties. The
representations and warranties of Del Mar Holdings set forth herein shall be
true and correct at the Closing Date as though made at and as of that date,
except as affected by the transactions contemplated hereby.
9.2 Del Mar Holdings's Covenants. Del Mar Holdings shall have performed
all covenants required by this Agreement to be performed by it on or before the
Closing Date.
9.3 Shareholder Approval. This Agreement shall have been approved by
the required number of shareholders of the Constituent Corporations.
9.4 Supporting Documents of Del Mar Holdings. Del Mar Holdings shall
have delivered to Sunderland supporting documents in form and substance
satisfactory to Sunderland to the effect that:
(i) Del Mar Holdings is a corporation duly organized,
validly existing, and in good standing.
(ii) Del Mar Holdings's authorized and issued capital
stock is as set forth herein.
<PAGE>
(iii) The execution and consummation of this Agreement have
been duly authorized and approved by Del Mar
Holdings's board of directors.
10. ACCESS. From the date hereof to the Closing Date, Sunderland and
Del Mar Holdings shall provide each other with such information and permit each
other's officers and representatives such access to its properties and books and
records as the other may from time to time reasonably request. If the
transactions contemplated by this Agreement are not consummated, all documents
received in connection with this Agreement shall be returned to the party
furnishing such documents, and all information so received shall be treated as
confidential.
11. CLOSING
11.1 The transfers and deliveries to be made pursuant to this Agreement
(the "Closing") shall be made by and take place at the offices of the Exchange
Agent or other location designated by the Constituent Corporations without
requiring the meeting of the parties hereof. All proceedings to be taken and all
documents to be executed at the Closing shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed. The Constituent Corporations shall use reasonable best efforts to
cause the Closing and the Affiliated Closing to be consummated on April 9, 1999
or as soon thereafter as reasonably practicable.
11.2 Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission required by this Agreement or any
signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission or original signature.
11.3 At the Closing, Del Mar Holdings shall deliver to the Exchange
Agent in satisfactory form, if not already delivered to Sunderland:
(i) A list of the holders of the shares of Del Mar
Holdings Common Stock being exchanged with an
itemization of the number of shares held by each, the
address of each holder, and the aggregate number of
shares of Sunderland Common Stock to be issued to
each holder;
(ii) Evidence of the consent of shareholders of Del Mar
Holdings to this Agreement;
(iii) Certificate of the Secretary of State of Nevada as of
a recent date as to the good standing of Del Mar
Holdings;
(iv) Certified copies of the resolutions of the board of
directors of Del Mar Holdings authorizing the
execution of this Agreement and the consummation of
this Transaction;
(v) Del Mar Holdings Financial Statements;
<PAGE>
(vi) Secretary's certificate of incumbency of the officers
and directors of Del Mar Holdings; and
(vii) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
11.4 At the Closing, Sunderland shall deliver to the Exchange Agent in
satisfactory form, if not already delivered to Del Mar Holdings:
(i) A list of the shareholders of record of Sunderland,
including, wherever available, addresses and
telephone numbers;
(ii) Evidence of the consent of shareholders of Sunderland
to this Agreement;
(iii) Certificate of the Secretary of State of Delaware as
of a recent date as to the good standing of
Sunderland;
(iv) Certified copies of the resolutions of the board of
directors of Sunderland authorizing the execution of
this Agreement and the consummation this Transaction;
(v) The Sunderland Financial Statements;
(vi) Secretary's certificate of incumbency of the officers
and directors of Sunderland; and
(vii) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Constituent Corporations set out herein shall survive the
Closing Date for a period of one (1) year.
13. ARBITRATION
13.1 Scope. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether existing
now, in the past or in the future as to which the parties or any affiliates may
be adverse parties, and whether arising out of this Agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association.
13.2 Situs. The parties hereby irrevocably consent to the jurisdiction
of the American Arbitration Association and the situs of the arbitration at a
time and place chosen by American Arbitration Association. Any award in
arbitration may be entered in any domestic or foreign court having jurisdiction
over the enforcement of such awards.
13.3 Applicable Law. The law applicable to the arbitration and this
Agreement shall be that of the State of Delaware, determined without regard to
its provisions which would otherwise apply
<PAGE>
to a question of conflict of laws. Any dispute as to the applicable law shall be
decided by the arbitrator.
13.4 Disclosure and Discovery. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the Federal
Rules of Civil Procedure, as they then exist, as may be modified by the
arbitrator consistent with the desire to simplify the conduct and minimize the
expense of the arbitration.
13.5 Rule of Law. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much as possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
13.6 Finality and Fees. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except as to
errors of law. Each party to the arbitration shall pay its own costs and counsel
fees.
13.7 Measure of Damages. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and no claims shall be
made by any party or affiliate for lost profits, punitive or multiple damages.
13.8 Covenant Not to Sue. The parties covenant that under no conditions
will any party or any affiliate file any action against the other (except only
requests for injunctive or other equitable relief) in any forum other than
before the American Arbitration Association, and the parties agree that any such
action, if filed, shall be dismissed upon application and shall be referred for
arbitration hereunder with costs and attorney's fees to the prevailing party.
13.9 Intention. It is the intention of the parties and their affiliates
that all disputes of any nature between them, whenever arising, from whatever
cause, based on whatever law, rule or regulation, whether statutory or common
law, and however characterized, be decided by arbitration as provided herein and
that no party or affiliate be required to litigate in any other forum any
disputes or other matters except for requests for injunctive or equitable
relief. This Agreement shall be interpreted in conformance with this stated
intent of the parties and their affiliates.
14. TERMINATION. This Agreement may be terminated (1) by mutual consent
in writing, or (2) by either Del Mar Holdings, the Shareholders or Sunderland if
there has been a material misrepresentation or material breach of any warranty
or covenant by any other party.
15. GENERAL PROVISIONS.
15.1 Further Assurances. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably required
to carry out the intent and purposes of this Agreement.
<PAGE>
15.2 Waiver. Any failure on the part of either party hereto to comply
with any of its obligations, Agreements, or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
15.3 Brokers. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by brokers
or finders employed or alleged to have been employed by the indemnifying party.
15.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
If to Sunderland, to:
Sunderland Acquisition Corporation
1504 R Street, N.W.
Washington, D.C. 20009
If to Del Mar Holdings, to
Del Mar Holdings, Inc.
2901 El Camino Avenue
Suite 206
Las Vegas, Nevada 89102
15.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
15.6 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this Agreement
without the written consent of the other party shall be void.
15.7 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
15.8 Exchange Agent. The exchange agent is Sklar Warren Conway Williams
& Rosenfeld LLP, Las Vegas, Nevada.
15.9 Effective Date. This effective date of this Agreement shall be
April 9, 1999.
<PAGE>
SIGNATURE PAGE TO ASSET ACQUISITION AGREEMENT
BETWEEN SUNDERLAND ACQUISITION CORPORATION AND
DEL MAR HOLDINGS, INC., DATED APRIL 9, 1999
IN WITNESS WHEREOF, the parties have executed this Agreement.
SUNDERLAND ACQUISITION CORPORATION
By
------------------------------------
James M. Cassidy,
President and Secretary
DEL MAR HOLDINGS, INC.
By /s/ Michael V. Shustek
------------------------------------
Michael V. Shustek, President
<PAGE>
ASSET ACQUISITION AGREEMENT
BETWEEN SUNDERLAND ACQUISITION CORPORATION
AND DEL MAR HOLDINGS, INC.
DATED APRIL 9, 1999
EXHIBIT A
Liabilities of Del Mar Holdings Assumed by Sunderland
All assets of Del Mar Holdings, Inc., a Nevada corporation, of
whatsoever type or nature (and all liabilities of whatsoever type or nature with
respect to or in any way related to all of the foregoing).
<PAGE>
Exhibit B
Due Diligence Responses
<PAGE>
PROPOSED TAX-FREE EXCHANGE OF
SUBSTANTIALLY ALL OF THE ASSETS OF
DEL MAR MORTGAGE, INC. AND DEL MAR HOLDINGS, INC.
FOR SHARES OF STOCK OF TPG CAPITAL CORPORATION
DUE DILIGENCE CHECKLIST
Set forth below is a preliminary list of documents and information
which Del Mar Mortgage, Inc. and Del Mar Holdings, Inc. (jointly, "DEL MAR")
would like to review in connection with the proposed exchange of substantially
all of the assets of Del Mark for shares of stock of TPG Capital Corporation
("TPG"). Please provide the information requested in each item below, or if
there is no information or documentation which is responsive to that particular
request, please place the words "NONE" or "NOT APPLICABLE" opposite such
request. Whenever an inquiry is made with respect to an agreement, please
specify whether the agreement is oral or written and provide information
relating thereto. WE RECOGNIZE THAT SIGNIFICANT PORTIONS OF THIS CHECKLIST MAY
BE INAPPLICABLE TO TPG AND UNDERSTAND THAT THE RESPONSE TO ALL BUT A FEW ITEMS
MAY BE "NONE" OR "NOT APPLICABLE."
A. GENERAL CORPORATE MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Articles of Incorporation, as amended to date.
2 Bylaws (or similar document), as amended to date.
3 The last four years of minutes of shareholders' meetings,
including written consents to action without a meeting.
4 The last four years of minutes of board of directors'
meetings, including written consents to action without a
meeting.
5 The last four years of minutes of any committees of the board,
including written consents to action without a meeting.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
6 Shareholder and other lists setting forth the number of
shares, options, warrants, and other rights to acquire shares
of stock of TPG, listing the names and addresses, amounts, the
dates of grants, and the exercise price and vesting in each
case.
7 List of officers and directors.
8 Management structure organization chart.
9 Written documents pertaining to any material relationships
between (i) TPG and its officers and directors, (ii) officers
and directors of TPG and any of TPG's affiliates or
subsidiaries, and (iii) TPG and its affiliates and
subsidiaries.
10 Agreements related to partnerships or joint venture
affiliations, whether presently in effect or terminated.
11 Any purchase options or buyout obligations with respect to any
affiliate or subsidiary.
12 Agreements relating to mergers, acquisitions, sales, or
licenses of material assets or rights of TPG, or acquisition
of the shares or assets of any other business by TPG since the
date of incorporation.
13 List of all states in which TPG is qualified to do business or
is doing business and describe what sort of activities occur
in each such state.
14 Good Standing Certificate for each such state.
15 Tax status certificate for each such state.
16 Any other permits, licenses or other approvals necessary to
conduct such business, as well as information regarding any
such permit, licenses, etc., whether presently in effect,
expired, or terminated.
17 Agreements relating to the purchase, repurchase, sale, or
issuance of TPG's securities, including any options to
purchase stock.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
18 Agreements relating to the issuance of any warrants to
purchase capital stock of TPG.
19 Agreements relating to registration rights.
20 Agreements relating to the voting of TPG's securities and
restrictive share transfers or any other shareholder
agreements.
21 Agreements relating to preemptive or other preferential rights
to acquire TPG's securities and any waivers thereof.
22 Agreements relating to any redemption rights.
23 Agreements relating to any stock appreciation rights, rights
of first refusal, anti-dilution rights, take-along rights,
bring-along rights, or rights upon change in control of TPG.
24 All agreements restricting the payment of cash dividends.
25 Current stockholders' ledger showing all stockholders and
shares owned and a list showing any outstanding options,
warrants, or other rights to acquire securities of TPG.
</TABLE>
3
<PAGE>
B. GENERAL BUSINESS INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 List of all written contracts entered into by TPG.
2 List of all liabilities and/or obligations (including all
contingent liabilities) of TPG.
</TABLE>
4
<PAGE>
C. LITIGATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Description of all litigation, claims and proceedings settled
or concluded since the date of incorporation.
2 Description of all litigation, claims, and proceedings
threatened or pending, including potential litigation against
either TPG or TPG's employees as a result of their employment
with TPG. Please include potential litigation (e.g., employees
who may be in breach of noncompete agreements with former
employers.)
3 All consent decrees, judgments, settlement documents,
injunctions, or similar matters entered into by TPG in
connection with any litigation.
4 Description of all pending or threatened investigations or
governmental proceedings.
5 All attorneys' letters to auditors since formation.
</TABLE>
5
<PAGE>
D. COMPLIANCE WITH LAWS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All citations and notices received from government agencies
since formation or with continuing effect from an earlier
date.
2 All material reports to and correspondence with any government
entity, municipality or agency, including DOL, IRS, EPA and
OSHA, since formation.
3 All documents showing any certification or compliance with, or
any deficiency with respect to, regulatory standards of TPG
since formation.
4 Description of any problems with regulatory compliance,
including ERISA, labor and other federal, state and local
regulations.
5 All material governmental permits, licenses, etc. of TPG
presently in force, together with information regarding any
such permits, licenses, etc., whether presently in effect,
expired, canceled or terminated which are required to carry
out the business or operations of TPG or its subsidiaries or
affiliates.
6 Evidence of qualification or exemption under applicable
federal and state blue sky laws for the issuance or transfer
of TPG's securities.
</TABLE>
6
<PAGE>
E. MANAGEMENT AND EMPLOYEES
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All employment or similar agreements entered into with any
employee and independent contractor. including any officer or
director of TPG.
2 All consulting agreements, commissions to agents or
representatives, or similar arrangements between TPG and any
person, entity, or affiliate.
3 Loans to and guarantees for the benefit of any employee,
including directors, officers or shareholders.
4 Agreements or insurance policies providing for the
indemnification or any officers or directors of TPG.
5 Salary information for employees and independent contractors.
(The name of each employee may be deleted, but please provide
job titles.)
6 Schedule of accrued salaries, commissions, vacation time and
sick leave for employees.
7 Copies of any qualified defined benefit or defined
contribution retirement plans, related trusts and summary plan
descriptions of the same, including all affiliate's or
subsidiary's plans whether or not the affiliate's or
subsidiary's plan provides benefits to TPG employees or
consultants.
8 Copies of all employee welfare benefit plans, related trusts
and summary plan descriptions of the same, including all
affiliate's or subsidiary's plans whether or not the
affiliate's or subsidiary's plan provides benefits to TPG
employees or consultants.
9 Copies of any non-qualified executive compensation plans.
10 Copies of any bonus, commission or similar plan or arrangement
covering employees and consultants.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
11 Copies of any Voluntary Employee Benefit Associations
("VEBAs") or any related plans.
12 Copies of any plans relating to severance or termination pay,
vacation, sick leave, loans, or other extensions of credit,
loan guarantees, relocation assistance, educational
assistance, tuition payments, employee benefits, workers'
compensation, executive compensation, or fringe benefits
(including any plan exempted from ERISA by virtue of section
4(b) of ERISA).
13 copies of any actuarial reports for past three years.
14 Copies of all governmental filings relating to any of the
plans or benefits described in this category for the last
three years.
15 Copies of any investment management agreements.
16 Copies of other material documents related to employment and
labor matters or benefits such as, notices of ERISA Title IV
terminations or withdrawal liability, employee handbooks, and
other written or oral communications with employees,
consultants, affiliates, or subsidiaries.
</TABLE>
8
<PAGE>
F. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All debt instruments, credit agreements, and guarantees
entered into by TPG which are currently in effect, and all
mortgages, liens, pledges, indemnifications, security
agreements, charges or encumbrances of any nature whatsoever
to which any of the property or assets of TPG are subject.
2 All notices of default or noncompliance from lenders during
the last three years and all compliance reports submitted by
TPG or its accountants.
3 All loans and guarantees of third party obligations.
4 All loan agreements, guaranty agreements, and other documents
to which any officers, directors, shareholders or other third
persons have guaranteed obligations of TPG.
5 Annual financial reports for the last three years.
6 All agreements pursuant to which TPG is subject to any
obligation to provide funds to or to make investments in any
other person (in the form of a loan, capital contribution or
otherwise).
7 List of financial institutions and types of accounts, with
copies of all material correspondence to with and from lenders
in the past three years for TPG and any subsidiary.
8 All Uniform Commercial Code financing statements filed with
respect to the above.
9 Copies of notes payable to or notes receivable from any
employee, director, member, affiliate, agent, or shareholder
of TPG for the past three years.
</TABLE>
9
<PAGE>
G. PROPERTY
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All deeds and other instruments of legal title which relate to
any assets or properties of TPG.
2 All operating leases, real property leases and subleases to
which TPG is a party or has a beneficial interest thereunder.
3 Financing leases, sale and lease-back agreements, conditional
sale agreements, or similar agreements which relate to any
assets, properties, or interests of TPG.
</TABLE>
10
<PAGE>
H. MARKETING ARRANGEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All press releases concerning TPG since TPG's formation.
</TABLE>
11
<PAGE>
I. OTHER AGREEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All agreements, contracts or commitments limiting freedom of
TPG to engage in any line of business or to compete with any
other business or person.
2 A schedule of all insurance policies of TPG and associated
annual premiums and limits.
3 Principal documents relating to any acquisition or disposition
of businesses by TPG in the last three years.
4 All other agreements material to the business of TPG.
</TABLE>
12
<PAGE>
J. TAX MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Copies of all federal tax returns for years 1995, 1996 and
1997.
2 Copies of any correspondence or notice from any foreign,
federal, state or local taxing authority regarding any filed
tax return (or any failure to file) including copies of all
audit reports and descriptions of any pending tax audits by
the IRS or other applicable tax authorities.
</TABLE>
13
<PAGE>
Due Diligence Checklist
For Proposed Tax-Free Exchange of
Substantially all of the Assets of
Sel Mar Mmortgage, Inc. and Del Mar Holdings, Inc.
For Shares of Stock of Sunderland Acquisition Corporation
The items below correspond to the numbered paragraphs of the due
diligence checklist furnished in regard to the proposed exchange of
substantially all of the assets of Del Mar Mortgage, Inc. and Del Mar
Holdings, Inc. for shares of stock of Sunderland Acquisition Corporation.
A.1 Attached
A.2 Attached
A.3 None
A.4 Attached
A.5 None
A.6 See Form F-10/A attached
A.7 See Form F-10/A attached
A.8 See Form F-10/A attached
A.9 See Form F-10/A attached
A.10 None
A.11 None
A.12 None
A.13 Delaware
A.14 Ordered
A.15 Ordered
A.16 NA
<PAGE>
A.17 None
A.18 None
A.19 None
A.20 Attached lock-up agreements
A.21 None
A.22 None
A.23 5-year warrant to be granted to TPG Capital Corporation
A.24 None
A.25 See Form F-10/A attached
B.1 Lock-up agreements with its shareholders
B.2 See financials contained in the Form F-10/A attached
C.1 None
C.2 None
C.3 None
C.4 None
C.5 None
D.1 None
D.2 None except with the Securities and Exchange Commission in registration
of securities
D.3 None
D.4 None
D.5 None
<PAGE>
D.6 The National Securities Market Improvement Act of 1996 ("NMSIA") limits
the authority of states to impose restrictions upon sales of securities
made pursuant to Sections 4(1) and 4(3) of the Securities Act of 1933,
as amended (the "Securities Act") of companies which file reports under
Sections 13 or 15(d) of the Securities Exchange Act, Sunderland files
such reports. Sales of the common stock in the secondary trading market
by securityholders are expected to be made pursuant to Section 4(1)
(sales other than by an issuer, underwriter or broker) and therefore not
subject to state restrictions.
E.1 None
E.2 None
E.3 None
E.4 The by-laws provide for indemnification of officers and directors to
the fullest extent allowed by Delaware law.
E.5 NA
E.6 NA
E.7 None
E.8 None
E.9 None
E.10 None
E.11 None
E.12 None
E.13 None
E.14 None
E.16 None
F.1 None
<PAGE>
F.2 None
F.3 None
F.4 None
F.5 See Form F-10/A attached
F.6 None
F.7 Checking account maintained at Riggs Bank, N.A., Dupont Circle Branch,
Washington, DC 20036
F.8 None
F.9 None
G.1 None
G.2 None
G.3 None
H.1 None
I.1 See Form F-10/A attached for scope of business
I.2 None
I.3 None
I.4 None
J.1 Corporation was incorporated in 1998 and no tax return has yet been
filed
J.2 None
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "SUNDERLAND ACQUISITION CORPORATION", FILED IN THIS OFFICE
ON THE SECOND DAY OF JUNE, A.D. 1998, AT 9:01 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
SEAL -----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 9115393
DATE: 06-02-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 06/02/1998
981210158 - 2902945
CERTIFICATE OF INCORPORATION
OF
SUNDERLAND ACQUISITION CORPORATION
ARTICLE ONE
NAME
The name of the Corporation is Sunderland Acquisition Corporation.
ARTICLE TWO
DURATION
The Corporation shall have perpetual existence.
ARTICLE THREE
PURPOSE
The purpose for which this Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE FOUR
SHARES
The total number of shares of stock which the Corporation shall have
authority to issue is 120,000,000 shares, consisting of 100,000,000 shares of
Common Stock having a par value of $.0001 per share and 20,000,000 shares of
Preferred Stock having a par value of $.0001 per share.
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock in series and, by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations of restrictions thereof.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 2
- -----------------------------------------------------------------------------
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
A. The number of shares constituting that series and the distinctive
designation of that series;
B. The dividend rate of the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on share of that series;
C. Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
E. Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
F. Whether that series shall have sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
H. Any other relative rights, preferences and limitations of that
series.
ARTICLE FIVE
COMMENCEMENT OF BUSINESS
The Corporation is authorized to commence business as soon as its
certificate of Incorporation has been filed.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 3
- -----------------------------------------------------------------------------
ARTICLE SIX
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the initial registered office of the
Corporation and the name of its initial registered agent and its business
address is
The Prentice-Hall Corporation System, Inc.
1013 Centre Road
Wilmington, Delaware 19805 (County of New Castle)
The initial registered agent is a resident of the State of Delaware.
ARTICLE SEVEN
INCORPORATOR
Lee W. Cassidy, 1504 R Street, N.W., Washington, D.C. 20009
ARTICLE EIGHT
PRE-EXEMPTIVE RIGHTS
No Shareholder or other person shall have any pre-emptive rights
whatsoever.
ARTICLE NINE
BY-LAWS
The initial by-laws shall be adopted by the Shareholders or the Board of
Directors. The power to alter, amend, or repeal the by-laws or adopt new
by-laws is vested in the Board of Directors, subject to repeal or change by
action of the Shareholders.
ARTICLE TEN
NUMBER OF VOTES
Each share of Common Stock has one vote on each matter on which the
share is entitled to vote.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 4
- -----------------------------------------------------------------------------
ARTICLE ELEVEN
MAJORITY VOTES
A majority vote of a quorum of Shareholders (consisting of the holders
of a majority of the shares entitled to vote, represented in person or by
proxy) is sufficient for any action which requires the vote or concurrence of
Shareholders, unless otherwise required or permitted by law or the by-laws of
the Corporation.
ARTICLE TWELVE
NON-CUMULATIVE VOTING
Directors shall be elected by majority vote. Cumulative voting shall not
be permitted.
ARTICLE THIRTEEN
INTERESTED DIRECTORS, OFFICERS AND SECURITYHOLDERS
A. VALIDITY. If Paragraph (B) is satisfied, no contract or other
transaction between the Corporation and any of its directors, officers or
securityholders, or any corporation or firm in which any of them are directly
or indirectly interested, shall be invalid solely because of this
relationship or because of the presence of the director, officer or
securityholder at the meeting of the Board of Directors or committee
authorizing the contract or transaction, or his participation or vote in the
meeting or authorization.
B. DISCLOSURE, APPROVAL, FAIRNESS. Paragraph (A) shall apply only if:
(1) The material facts of the relationship or interest of each such
director, officer or securityholder are known or disclosed:
(a) to the Board of Directors or the committee and it nevertheless
authorizes or ratifies the contract or transaction by a majority of the
directors present, each such interest director to be counted in determining
whether a quorum is present but not in calculating the majority necessary to
carry the vote; or
(b) to the Shareholders and they nevertheless authorize or ratify the
contract or transaction by a majority of the shares present, each such
interested person to be counted for quorum and voting purposes; or
(2) the contract or transaction is fair to the Corporation as of the
time it is authorized or ratified by the Board of Directors, the committee or
the Shareholders.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 5
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ARTICLE FOURTEEN
INDEMNIFICATION AND INSURANCE
A. PERSONS. The Corporation shall indemnify, to the extent provided in
Paragraphs (B), (D) or (F) and to the extent permitted from time to time by
law;
(1) any person who is or was director, officer, agent or employee of
the Corporation, and
(2) any person who serves or served at the Corporation's request as a
director, officer, agent, employee, partner or trustee of another corporation
or of a partnership, joint venture, trust or other enterprise.
B. EXTENT--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation against a person named in Paragraph (A) by reason of his
holding a position named in Paragraph (A), the Corporation shall indemnify
him. If he satisfies the standard in Paragraph (C), for expenses (including
attorney's fees but excluding amounts paid in settlement) actually and
reasonably incurred by him in connection with the defense or settlement of
the suit.
C. STANDARD--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation, a person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the suit, and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation. However, he shall not be indemnified
in respect of any claim, issue or matter as to which he has been adjudged
liable for negligence or misconduct in the performance of his duty to the
Corporation unless (and only to the extent that) the court in which the suit
was brought shall determine, upon application, that despite the adjudication
but in view of all the circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. EXTENT--NONDERIVATIVE SUITS. In case of a suit, action or
proceeding (whether civil, criminal, administrative or investigative), other
than a suit by or in the right of the Corporation against a person named in
Paragraph (A) by reason of his holding a position named in Paragraph (A), the
Corporation shall indemnify him, if he satisfies the standard in
Paragraph (E), for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the suit as
(1) expenses (including attorneys' fees),
(2) amounts paid in settlement
(3) judgments, and
(4) fines.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 6
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E. STANDARD--NONDERIVATIVE SUITS. In case of a nonderivative suit, a
person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the nonderivative suit, and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to
any criminal action or proceeding, he had no reason to believe his conduct
was unlawful. The termination of a nonderivative suit by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person failed to satisfy
this Paragraph (E) (2).
F. DETERMINATION THAT STANDARD HAS BEEN MET. A determination that the
standard of Paragraph (C) or (E) has been satisfied may be made by a court of
law or equity or the determination may be made by:
(1) a majority of the directors of the Corporation (whether or not a
quorum) who were not parties to the action, suit or proceeding, or
(2) independent legal counsel (appointed by a majority of the directors
of the Corporation, whether or not a quorum, or elected by the Shareholders
of the Corporation) in a written opinion, or
(3) the Shareholders of the Corporation.
G. PRORATION. Anyone making a determination under Paragraph (F) may
determine that a person has met the standard as to some of the matters but
not as to others, and may reasonably prorate amounts to be indemnified.
H. ADVANCE PAYMENT. The Corporation may pay in advance any expenses
(including attorney's fees) which may become subject to indemnification under
paragraphs (A)-(G) if:
(1) the Board of Directors authorizes the specific payment and
(2) the person receiving the payment undertakes in writing to repay
unless it is ultimately determined that he is entitled to indemnification by
the Corporation under Paragraphs (A)-(G).
L. NONEXCLUSIVE. The indemnification provided by Paragraphs (A)-(G)
shall not be exclusive of any other rights to which a person may be entitled
by law or by by-law, agreement, vote of Shareholders or disinterested
directors, or otherwise.
J. CONTINUATION. The indemnification and advance payment provided by
Paragraphs (A)-(H) shall continue as to a person who has ceased to hold a
position named in paragraph (A) and shall inure to his heirs, executors and
administrators.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 7
- ------------------------------------------------------------------------------
K. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position named in
Paragraph (A) against any liability incurred by him in any such positions or
arising out of this status as such, whether or not the Corporation would have
power to indemnify him against such liability under Paragraphs (A)-(H).
L. REPORTS. Indemnification payments, advance payments, and insurance
purchases and payments made under Paragraphs (A)-(K) shall be reported in
writing to the Shareholders of the Corporation with the next notice of
annual meeting, or within six months, whichever is sooner.
M. AMENDMENT OF ARTICLE. Any changes in the General Corporation Law of
Delaware increasing, decreasing, amending, changing or otherwise effecting
the indemnification of directors, officers, agents, or employees of the
Corporation shall be incorporated by reference in this Article as of the date
of such changes without further action by the Corporation, its Board of
Directors, of Shareholders, it being the intention of this Article that
directors, officers, agents and employees of the Corporation shall be
indemnified to the maximum degree allowed by the General Corporation Law of
the State of Delaware at all times.
ARTICLE FIFTEEN
Limitation On Director Liability
A. SCOPE OF LIMITATION. No person, by virtue of being or having been a
director of the Corporation, shall have any personal liability for monetary
damages to the Corporation or any of its Shareholders for any breach of
fiduciary duty except as to the extent provided in Paragraph (B).
B. EXTENT OF LIMITATION. The limitation provided for in this Article
shall not eliminate or limit the liability of a director to the director to
the Corporation or its Shareholder (i) for any breach of the director's duty
of loyalty to the Corporation or its Shareholders (ii) for any acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) for any unlawful payment of dividends or
unlawful stock purchases or redemptions in violation of Section 174 of the
General Corporation Law of Delaware or (iv) for any transaction for which the
director derived an improper personal benefit.
IN WITNESS WHEREOF, the incorporator hereunto has executed this
certificate of incorporation on this 1st day of June, 1998.
/s/ Lee W. Cassidy
-----------------------------------
Lee W. Cassidy, Incorporator
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
BY-LAWS
ARTICLE I
The Stockholders
Section 1.1. ANNUAL MEETING. The annual meeting of the stockholders of
Sunderland Acquisition Corporation (the "Corporation") shall be held on the
third Thursday in May of each year at 10:30 a.m. local time, or at such other
date or time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, for the election of
directors and for the transaction of such other business as may come before
the meeting.
Section 1.2. SPECIAL MEETINGS. A special meeting of the stockholders
may be called at any time by the written resolution or request of two-thirds
or more of the members of the Board of Directors, the president, or any
executive vice president and shall be called upon the written request of the
holders of two-thirds or more in amount, of each class or series of the
capital stock of the Corporation entitled to vote at such meeting on the
matters(s) that are the subject of the proposed meeting, such written
request in each case to specify the purpose or purposes for which such
meeting shall be called, and with respect to stockholders proposals, shall
further comply with the requirements of this Article.
Section 1.3. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, whether annual or special, stating the date, hour and place
where it is to be held, shall be served either personally or by mail, not
less than fifteen nor more than sixty days before the meeting, upon each
stockholder of record entitled to vote at such meeting, and to any other
stockholder to whom the giving of notice may be required by law. Notice of a
special meeting shall also state the purpose or purposes for which the
meeting is called and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would, if taken, entitle stockholders to
receive payment for their stock, the notice of such meeting shall include a
statement of that purpose and to that effect. If mailed, notice shall be
deemed to be delivered when deposited in the United States mail or with any
private express mail service, postage or delivery fee prepaid, and shall be
directed to each such stockholder at his address, as it appears on the
records of the stockholders of the Corporation, unless he shall have
previously filed with the secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated, in such request.
Section 1.4. FIXING DATE OF RECORD. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than
ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders
<PAGE>
entitled to notice of, or to vote at, a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting (to the
extent that such action by written consent is permitted by law, the
Certificate of Incorporation or these By-Laws), the Board of Directors may
fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by law, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in its state of
incorporation, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 1.5 INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed and the proxies and ballots shall be received and
be taken in charge. All questions touching on the qualification of voters and
the validity of proxies and the acceptance or rejection of votes, shall be
decided by one or more inspectors. Such inspectors shall be appointed by the
Board of Directors before or at the meeting, or, if no such appointment shall
have been made, then by the presiding officer at the meeting. If for any
reason any of the inspectors previously appointed shall fail to attend or
refuse or be unable to serve, inspectors in place of any so failing to attend
or refusing or unable to serve shall be appointed in like manner.
<PAGE>
SECTION 1.6 QUORUM. At any meeting of the stockholders, the holders of a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number shall be required by law, and, in that
case, the representation of the number so required shall constitute a quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed in
accordance with these By-Laws for an annual or special meeting, a majority in
interest of the stockholders present in person or by proxy may adjourn, from
time to time, without notice other than by announcement at the meeting, until
holders of the amount of stock requisite to constitute a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 1.7 BUSINESS. The chairman of the Board, if any, the president,
or in his absence the vice-chairman, if any, or an executive vice president,
in the order named, shall call meetings of the stockholders to order, and
shall act as chairman of such meeting; provided, however, that the Board of
Directors or executive committee may appoint any stockholder to act as
chairman of any meeting in the absence of the chairman of the Board. The
secretary of the Corporation shall act as secretary at all meetings of the
stockholders, but in the absence of the secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as
secretary of the meeting.
SECTION 1.8 STOCKHOLDER PROPOSALS. No proposal by a stockholder shall be
presented for vote at a special or annual meeting of stockholders unless such
stockholder shall, not later than the close of business on the fifth day
following the date on which notice of the meeting is first given to
stockholders, provide the Board of Directors or the secretary of the
Corporation with written notice of intention to present a proposal for action
at the forthcoming meeting of stockholders, which notice shall include the
name and address of such stockholder, the number of voting securities that he
holds of record and that he holds beneficially, the text of the proposal to
be presented to the meeting and a statement in support of the proposal.
Any stockholder who was a stockholder of record on the applicable record
date may make any other proposal at an annual meeting or special meeting of
stockholders and the same may be discussed and considered, but unless stated
in writing and filed with the Board of Directors or the secretary prior to
the date set forth herein above, such proposal shall be laid over for action
at an adjourned, special, or annual meeting of the stockholders taking place
sixty days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees, but in connection with such reports, no
new business proposed by a stockholder, QUA stockholder, shall be acted upon
at such annual meeting unless stated and filed as herein provided.
Notwithstanding any other provision of these By-Laws, the Corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at
a special or annual meeting of stockholders if the Board of Directors
reasonably believes the proponents thereof have not complied with Sections 13
or 14 of
<PAGE>
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder; nor shall the Corporation be required to include any
stockholder proposal not required to be included in its proxy materials to
stockholders in accordance with any such section, rule or regulation.
SECTION 1.9 PROXIES. At all meetings of stockholders, a stockholder
entitled to vote may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact. Such proxy shall
be filed with the secretary before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 1.10 VOTING BY BALLOT. The votes for directors, and upon the
demand of any stockholder or when required by law, the votes upon any
question before the meeting, shall be by ballot.
SECTION 1.11 VOTING LISTS. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares of stock registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
SECTION 1.12 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or any special meeting called by the Board of
Directors. If no designation is made or if a special meeting is otherwise
called, the place of meeting shall be the principal office of the Corporation.
SECTION 1.13 VOTING OF STOCK OF CERTAIN HOLDERS. Shares of capital stock
of the Corporation standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the by-laws of such
corporation may prescribe, or in the absence of such provision, as the board
of directors of such corporation may determine.
Shares of capital stock of the Corporation standing in the name of a
deceased person, a minor ward or an incompetent person may be voted by his
administrator, executor, court-appointed guardian or conservator, either in
person or by proxy, without a transfer of such stock into the name of such
administrator, executor, court-appointed guardian or conservator. Shares of
capital stock of the Corporation standing in the name of a trustee may be
voted by him, either in person or by proxy.
Shares of capital stock of the Corporation standing in the name of a
receiver may be voted, either in person or by proxy, by such receiver, and
stock held by or under the control of a receiver
<PAGE>
may be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in any appropriate order of the court by
which such receiver was appointed.
A stockholder whose stock is pledged shall be entitled to vote such
stock, either in person or by proxy, until the stock has been transferred
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote, either in person or by proxy, the stock so transferred.
Shares of its own capital stock belonging to this Corporation shall not
be voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding stock at any given time, but
shares of its own stock held by it in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding stock at any
given time.
ARTICLE II
Board of Directors
SECTION 2.1. GENERAL POWERS. The business, affairs, and the property
of the Corporation shall be managed and controlled by the Board of Directors
(the "Board"), and, except as otherwise expressly provided by law, the
Certificate of Incorporation or these By-Laws, all of the powers of the
Corporation shall be vested in the Board.
SECTION 2.2. NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole Board shall be no fewer than one nor more than five.
Within the limits above specified, the number of directors shall be
determined by the Board of Directors pursuant to a resolution adopted by a
majority of the directors then in office.
SECTION 2.3. ELECTION, TERM AND REMOVAL. Directors shall be elected at
the annual meeting of stockholders to succeed those directors whose terms
have expired. Each director shall hold office for the term for which elected
and until his or her successor shall be elected and qualified. Directors
need not be stockholders. A director may be removed from office at a meeting
expressly called for that purpose by the vote of not less than a majority of
the outstanding capital stock entitled to vote an election of directors.
SECTION 2.4. VACANCIES. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by the affirmative vote of a majority of the remaining directors then in
office, though less than a quorum; except that vacancies resulting from
removal from office by a vote of the stockholders may be filled by the
stockholders at the same meeting at which such removal occurs provided that
the holders of not less than a majority of the outstanding capital stock of
the Corporation (assessed upon the basis of votes and not on the basis of
number of shares) entitled to vote for the election of directors, voting
together as a single class, shall vote for each replacement director. All
directors elected to fill vacancies shall hold office for a term expiring at
the time of the next annual meeting of stockholders and upon election and
qualification of his successor. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of an incumbent
director.
<PAGE>
SECTION 2.5. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the president or to the secretary of the
Corporation. The resignation of any director shall take effect at the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 2.6. PLACE OF MEETINGS, ETC. The Board of Directors may hold
its meetings, and may have an office and keep the books of the Corporation
(except as otherwise may be provided for by law), in such place or places in
or outside the state of incorporation as the Board from time to time may
determine.
SECTION 2.7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held as soon as practicable after adjournment of the
annual meeting of stockholders at such time and place as the Board of
Directors may fix. No notice shall be required for any such regular meeting
of the Board.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at places and times fixed by resolution of the Board
of Directors, or upon call of the chairman of the Board, if any, or
vice-chairman of the Board, if any, the president, an executive vice
president or two-thirds of the directors then in office.
The secretary or officer performing the secretary's duties shall give
not less than twenty-four hours' notice by letter, telegraph or telephone (or
in person) of all special meetings of the Board of Directors, provided that
notice need not given of the annual meeting or of regular meetings held at
times and places fixed by resolution of the Board. Meetings may be held at
any time without notice if all of the directors are present, or if those not
present waive notice in writing either before or after the meeting. The
notice of meetings of the Board need not state the purpose of the meeting.
SECTION 2.9. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board
of Directors of the Corporation, or any committee thereof, may participate in
a regular or special or any other meeting of the Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meetings.
SECTION 2.10. ACTION BY WRITTEN CONSENT. 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 prior or subsequent to such action
all the members of the Board or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
SECTION 2.11. QUORUM. A majority of the total number of directors then
in office shall constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time.
<PAGE>
SECTION 2.12. BUSINESS. Business shall be transacted at meetings of
the Board of Directors in such order as the Board may determine. At all
meetings of the Board of Directors, the chairman of the Board, if any, the
president, or in his absence the vice-chairman, if any, or an executive vice
president, in the order named, shall preside.
SECTION 2.13. INTEREST OF DIRECTORS IN CONTRACTS. (a) No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one ore more of the Corporation's
directors or officers, are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum: or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders;
or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors or the
stockholders.
(b) Interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
SECTION 2.14. COMPENSATION OF DIRECTORS. Each director of the
Corporation who is not a salaried officer or employee of the Corporation, or
of a subsidiary of the Corporation, shall receive such allowances for serving
as a director and such fees for attendance at meetings of the Board of
Directors or the executive committee or any other committee appointed by the
Board as the Board may from time to time determine.
SECTION 2.15. LOANS TO OFFICERS OR EMPLOYEES. The Board of Directors
may lend money to, guarantee any obligation of, or otherwise assist, any
officer or other employee of the Corporation or of any subsidiary, whether or
not such officer or employee is also a director of the Corporation, whenever,
in the judgment of the directors, such loan, guarantee, or assistance may
reasonably be expected to benefit the Corporation; provided, however, that
any such loan, guarantee, or other assistance given to an officer or employee
who is also a director of the Corporation must be authorized by a majority of
the entire Board of Directors. Any such loan, guarantee, or other assistance
may be made with or without interest and may be unsecured or
<PAGE>
secured in such manner as the Board of Directors shall approve, including,
but not limited to, a pledge of shares of the Corporation, and may be made
upon such other terms and conditions as the Board of Directors may determine.
SECTION 2.16 NOMINATION. Subject to the rights of holders of any class
or series of stock having a preference over the common stock as to dividends
or upon liquidation, nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors at a meeting only if written notice of such stockholder's intent
to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders the close of business on the last day of the
eighth month after the immediately preceding annual meeting of stockholders,
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the
fifth day following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such
other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors, and;
(e) the consent of each nominee to serve as a director of the Corporation if
so elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
ARTICLE III
Committees
SECTION 3.1. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the number of directors then fixed by these By-Laws or
resolution thereto, may establish such standing or special committees of the
Board as it may deem advisable, and the members, terms, and authority of such
committees shall be set forth in the resolutions establishing such committee.
SECTION 3.2. EXECUTIVE COMMITTEE NUMBER AND TERM OF OFFICE. The Board
of Directors may, at any meeting, by majority vote of the Board of Directors,
elect from the directors an executive committee. The executive committee
shall consist of such number of members as may be fixed from time to time by
resolution of the Board of Directors. The Board of Directors may designate a
chairman of the committee who shall preside at all meetings thereof, and the
committee shall designate a member thereof to preside in the absence of the
chairman.
<PAGE>
SECTION 3.3. EXECUTIVE COMMITTEE POWERS. The executive committee may,
while the Board of Directors is not in session, exercise all or any of the
powers of the Board of Directors in all cases in which specific directions
shall not have been given by the Board of Directors; except that the
executive committee shall not have the power or authority of the Board of
Directors to (i) amend the Certificate of Incorporation or the By-Laws of
the Corporation, (ii) fill vacancies on the Board of Directors, (iii) adopt
an agreement or certification of ownership, merger or consolidation, (iv)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or a dissolution
of the Corporation or a revocation of a dissolution, (v) declare a dividend,
or (vi) authorize the issuance of stock.
SECTION 3.4. EXECUTIVE COMMITTEE MEETINGS. Regular and special meetings
of the executive committee may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
By-Laws for regular and special meetings of the Board of Directors. Special
meetings of the executive committee may be called by any member thereof.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special or regular meeting of the executive meeting if a
quorum is present. At any meeting at which every member of the executive
committee shall be present, in person or by telephone, even though without
any notice, any business may be transacted. All action by the executive
committee shall be reported to the Board of Directors at its meeting next
succeeding such action.
The executive committee shall fix its own rules of procedure, and shall
meet where and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority of the total number
of members of the executive committee shall be necessary to constitute a
quorum. In every case, the affirmative vote of a quorum shall be necessary
for the adoption of any resolution.
SECTION 3.5 EXECUTIVE COMMITTEE VACANCIES. The Board of Directors, by
majority vote of the Board of Directors then in office, shall fill vacancies
in the executive committee by election from the directors.
ARTICLE IV
THE OFFICERS
SECTION 4.1. NUMBER AND TERM OF OFFICE. The officers of the Corporation
shall consist of, as the Board of Directors may determine and appoint from
time to time, a chief executive officer, a president, one or more executive
vice-presidents, a secretary, a treasurer, a controller, and/or such other
officers as may from time to time be elected or appointed by the Board of
Directors, including such additional vice-presidents with such designations,
if any, as may be determined by the Board of Directors and such assistant
secretaries and assistant treasurers. In addition, the Board of Directors may
elect a chairman of the Board and may also elect a vice-chairman as officers
of the Corporation. Any two or more offices may be held by the same person.
In its discretion, the Board of Directors may leave unfilled any office
except as may be required by law.
<PAGE>
The officers of the Corporation shall be elected or appointed from time
to time by the Board of Directors. Each officer shall hold office until his
successor shall have been duly elected or appointed or until his death or
until he shall resign or shall have been removed by the Board of Directors.
Each of the salaried officers of the Corporation shall devote his entire
time, skill and energy to the business of the Corporation, unless the
contrary is expressly consented to by the Board of Directors or the executive
committee.
SECTION 4.2. REMOVAL. Any officer may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation
would be served thereby.
SECTION 4.3. THE CHAIRMAN OF THE BOARD. The chairman of the Board, if
any, shall preside at all meetings of stockholders and of the Board of
Directors and shall have such other authority and perform such other duties
as are prescribed by law, by these By-Laws and by the Board of Directors. The
Board of Directors may designate the chairman of the Board as chief executive
officer, in which case he shall have such authority and perform such duties
as are prescribed by these By-Laws and the Board of Directors for the chief
executive officer.
SECTION 4.4. THE VICE-CHAIRMAN. The vice-chairman, if any, shall have
such authority and perform such other duties as are prescribed by these
By-Laws and by the Board of Directors. In the absence or inability to act of
the chairman of the Board and the president, he shall preside at the meetings
of the stockholders and of the Board of Directors and shall have and exercise
all of the powers and duties of the chairman of the Board. The Board of
Directors may designate the vice-chairman as chief executive officer, in which
case he shall have such authority and perform such duties as are prescribed
by these By-Laws and the Board of Directors for the chief executive officer.
SECTION 4.5. THE PRESIDENT. The president shall have such authority and
perform such duties as are prescribed by law, by these By-Laws, by the Board
of Directors and by the chief executive officer (if the president is not the
chief executive officer). The president, if there is no chairman of the
Board, or in the absence or the inability to act of the chairman of the
Board, shall preside at all meetings of stockholders and of the Board of
Directors. Unless the Board of Directors designates the chairman of the Board
or the vice-chairman as chief executive officer, the president shall be the
chief executive officer, in which case he shall have such authority and
perform such duties as are prescribed by these By-Laws and the Board of
Directors for the chief executive officer.
SECTION 4.6. THE CHIEF EXECUTIVE OFFICER. Unless the Board of Directors
designates the chairman of the Board or the vice-chairman as chief executive
officer, the president shall be the chief executive officer. The chief
executive officer of the Corporation shall have, subject to the supervision
and direction of the Board of Directors, general supervision of the business,
property and affairs of the Corporation, including the power to appoint and
discharge agents and employees, and the powers vested in him by the Board of
Directors, by law or by these By-Laws or which usually attach or pertain to
such office.
<PAGE>
SECTION 4.7. THE EXECUTIVE VICE-PRESIDENTS. In the absence of the
chairman of the Board, if any, the president and the vice-chairman, if any,
or in the event of their inability or refusal to act, the executive
vice-president (or in the event there is more than one executive vice-
president, the executive vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall
perform the duties of the chairman of the Board, of the president and of the
vice-chairman, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the chairman of the Board, the president
and the vice-chairman. Any executive vice-president may sign, with the
secretary or an authorized assistant secretary, certificates for stock of the
Corporation and shall perform such other duties as from time to time may be
assigned to him by the chairman of the Board, the president, the
vice-chairman, the Board of Directors or these By-Laws.
SECTION 4.8. THE VICE-PRESIDENTS. The vice-presidents, if any, shall
perform such duties as may be assigned to them from time to time by the
chairman of the Board, the president, the vice-chairman, the Board of
Directors, or these By-Laws.
SECTION 4.9. THE TREASURER. Subject to the direction of chief executive
officer and the Board of Directors, the treasurer shall have charge and
custody of all the funds and securities of the Corporation; when necessary or
proper he shall endorse for collection, or cause to be endorsed, on behalf of
the Corporation, checks, notes and other obligations, and shall cause the
deposit of the same to the credit of the Corporation in such bank or banks or
depositary as the Board of Directors may designate or as the Board of
Directors by resolution may authorize; he shall sign all receipts and
vouchers for payments made to the Corporation other than routine receipts and
vouchers, the signing of which he may delegate; he shall sign all checks made
by the Corporation (provided, however, that the Board of Directors may
authorize and prescribe by resolution the manner in which checks drawn on
banks or depositories shall be signed, including the use of facsimile
signatures, and the manner in which officers, agents or employees shall be
authorized to sign); unless otherwise provided by resolution of the Board of
Directors, he shall sign with an officer-director all bills of exchange and
promissory notes of the Corporation; whenever required by the Board of
Directors, he shall render a statement of his cash account; he shall enter
regularly full and accurate account of the Corporation in books of the
Corporation to be kept by him for that purpose; he shall, at all reasonable
times, exhibit his books and accounts to any director of the Corporation upon
application at his office during business hours; and he shall perform all
acts incident to the position of treasurer. If required by the Board of
Directors, the treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such sure ties as the Board of Directors may
require.
SECTION 4.10. THE SECRETARY. The secretary shall keep the minutes of
all meetings of the Board of Directors, the minutes of all meetings of the
stockholders and (unless otherwise directed by the Board of Directors) the
minutes of all committees, in books provided for that purpose; he shall
attend to the giving and serving all notices of the Corporation; he may sign
with an officer-director or any other duly authorized person, in the name of
the Corporation, all contracts authorized by the Board of Directors or by the
executive committee, and, when so ordered by the Board of Directors or the
executive committee, he shall affix the seal of the Corporation thereto; he
may sign with the president or an executive vice-president all certificates
of shares of the capital
<PAGE>
stock; he shall have charge of the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors or
the executive committee may direct, all of which shall, at all reasonable
times, be open to the examination of any director, upon application at the
secretary's office during business hours; and he shall in general perform all
the duties incident to the office of the secretary, subject to the control of
the chief executive officer and the Board of Directors.
SECTION 4.11. THE CONTROLLER. The controller shall be the chief
accounting officer of the Corporation. Subject to the supervision of the
Board of Directors, the chief executive officer and the treasurer, the
controller shall provide for and maintain adequate records of all assets,
liabilities and transactions of the Corporation, shall see that accurate
audits of the Corporation's affairs are currently and adequately made and
shall perform such other duties as from time to time may be assigned to him.
SECTION 4.12. THE ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors may determine. The assistant
secretaries as thereunto authorized by the Board of Directors may sign with
the chairman of the Board, the president, the vice-chairman or an executive
vice-president, certificates for stock of the Corporation, the issue of which
shall have been authorized by a resolution of the Board of Directors. The
assistant treasurers and assistant secretaries, in general, shall perform
such duties as shall be assigned to them by the treasurer or the secretary,
respectively, or chief executive officer, the Board of Directors, or these
By-Laws.
SECTION 4.13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director
of the Corporation.
SECTION 4.14. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors or by the executive committee, any officer, director or any
person or persons appointed in writing by any of them, shall have full power
and authority in behalf of the Corporation to attend and to act and to vote
at any meetings of stockholders of any corporation in which the Corporation
may hold stock, and at any such meeting shall possess and may exercise any
and all the rights and powers incident to the ownership of such stock, and
which, as the owner thereof, the Corporation might have possessed and
exercised if present. The Board of Directors may confer like powers upon any
other person or persons.
ARTICLE V
Contracts and Loans
SECTION 5.1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of
<PAGE>
and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 5.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
ARTICLES VI
Certificates for Stock and Their Transfer
SECTION 6.1. CERTIFICATES FOR STOCK. Certificates representing stock of
the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the chairman of the Board,
the president, the vice-chairman or an executive vice-president and/or by the
secretary or an authorized assistant secretary and shall be sealed with the
seal of the Corporation. The seal may be a facsimile. If a stock certificate
is countersigned (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee,
any other signature on the certificate may be a facsimile. In the event that
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. All certificates
for stock shall be consecutively numbered or otherwise identified. The name
of the person to whom the shares of stock represented thereby are issued,
with the number of shares of stock and date of issue, shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares of stock shall have been
surrendered and canceled, except that, in the event of a lost, destroyed or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 6.2. TRANSFER OF STOCK. Transfers of stock of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation, and
on surrender for cancellation of the certificate for such stock. The person
in whose name stock stands on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
<PAGE>
ARTICLE VII
Fiscal Year
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January in each year and end on the last day of
December in each year.
ARTICLE VIII
Seal
SECTION 8.1. SEAL. The Board of Directors shall approve a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the Corporation.
ARTICLE IX
Waiver of Notice
SECTION 9.1. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of these By-Laws or under the provisions of the
Certificate of Incorporation or under the provisions of the corporation law
of the state of incorporation, waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance
of any person at a meeting for which any notice is required to be given under
the provisions of these By-Laws, the Certificate of Incorporation or the
corporation law of the state of incorporation shall constitute a waiver of
notice of such meeting except when the person attends for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE X
Amendments
SECTION 10.1. AMENDMENTS. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted at any meeting of the Board of
Directors of the Corporation by the affirmative vote of a majority of the
members of the Board, or by the affirmative vote of a majority of the
outstanding capital stock of the Corporation (assessed upon the basis of
votes and not on the basis of number of shares) entitled to vote generally in
the election of directors, voting together as a single class.
<PAGE>
ARTICLE XI
Indemnification
SECTION 11.1. INDEMNIFICATION. The Corporation shall indemnify its
officers, directors, employees and agents to the fullest extent permitted by
the General Corporation Law of Delaware, as amended from time to time.
[END]
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
CONSENT OF DIRECTOR
IN LIEU OF ORGANIZATION MEETING
AS OF JUNE 9, 1998
The undersigned, being the sole director of Sunderland Acquisition
Corporation (the "Corporation") does hereby consent to the taking of the
following action in lieu of an organizational meeting and hereby waives any
notice required to be given therewith:
RESOLVED by the Board of Directors of the Corporation that;
1. ELECTION OF OFFICERS. The following persons be, and hereby are,
elected to the respective offices indicated to serve until further action of
the Board.
President James M. Cassidy
2. ADOPTION OF BY-LAWS. The by-laws attached hereto be, and hereby are,
adopted by the Corporation, and the Secretary is directed to file a
certified copy thereof in the minute book of the Corporation.
3. CORPORATE RECORDS. The President or Secretary be, and hereby is,
authorized and directed: to procure all corporate books, books of account and
stock books required by the statutes of the place of incorporation or
necessary or appropriate in connection with the business of the Corporation;
to obtain a seal of the Corporation bearing the words and figures.
"SUNDERLAND ACQUISITION CORPORATION, 1998"
which is hereby approved and adopted as and for the corporate seal of the
Corporation, provided that at any time the Secretary or designee may use a
facsimile of such seal; and to obtain certificates for the shares of the
Corporation, which shall be effective upon the endorsement of such
certificates by the authentic or facsimile signature of the President and
specimens of which certificates shall be annexed to this consent, and, which
shall be adopted as the form of certificate for the Corporation.
4. FISCAL YEAR. The fiscal year of the Corporation be, and hereby is,
shall be January 1 to December 31.
5. ISSUANCE OF STOCK. The President be, and hereby is, authorized and
directed to accept from time to time the subscription(s) for the stock of
the Corporation and upon receipts of payment for such stock, the designated
shares of the stock of the Corporation shall be issued to such subscriber(s),
as fully paid and nonassessable, in the full amount of the subscription.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 2
- ------------------------------------------------------------------------------
The Corporation hereby issues to Pierce Mill Associates, Inc. 4,250,000
shares of its Common Stock pursuant to Rule 506 of Regulation D of the
General Rules and Regulations of the Securities and Exchange Commission at
par for a purchase price of $425. The Corporation hereby issues 750,000 shares
of its Common Stock to Cassidy & Associates pursuant to Rule 701 for services.
<TABLE>
<CAPTION>
Subscriber Number of Shares Payment
- ---------- ---------------- -------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 -0-
</TABLE>
6. BANK ACCOUNTS. The President or his designee be and hereby is,
authorized to designate any bank or banks as he shall deem appropriate as a
depositary or depositaries for the funds of the Corporation; that the banking
resolutions required by such bank or banks in order to open an ordinary
checking account and such other accounts as the President of the Corporation
shall deem appropriate be, and they hereby are, adopted as the resolutions of
the Board of Directors as if fully set forth herein; and that the President
be, and hereby is, authorized to designate signatories to execute checks and
other documents on behalf of the Corporation with respect to such accounts;
and that the officers of the Corporation be, and hereby are, authorized and
directed to execute and deliver, in the name and on behalf of the Corporation
and under its corporate seal or otherwise, any and all certificates,
agreements, undertakings, authorizations, and other instruments or documents
as such bank or banks may require and as shall be necessary or appropriate to
carry out the intent and accomplish the purposes of this resolution; and that
copies of any banking resolutions so executed shall be inserted in the minute
book of the Corporation.
7. APPOINTMENT OF AGENTS. For the purpose of authorizing the
Corporation to do business in any state, territory, or possession of the
United States or any foreign country in which it is necessary or expedient
for the Corporation to do business, the officers of the Corporation be, and
hereby are, authorized to appoint and substitute all necessary agents or
attorneys for service of process, to designate and change the location of all
necessary statutory offices, and to make and file all necessary certificates,
reports, powers of attorney, and other instruments as may be required by the
laws of such state, territory, possession, or country to authorize the
Corporation to do business therein, and whenever it is expedient for the
Corporation to cease doing business therein and withdraw therefrom to revoke
any appointment of agent or attorney for services of process and to file any
necessary certificate, report, revocation of appointment, or
surrender of authority of the Corporation to do business therein.
8. EXECUTIVE COMMITTEE. Pursuant to the by-laws of the Corporation,
the President be, and hereby is, designated and constitutes an Executive
Committee of the Corporation.
9. RATIFICATION OF PRIOR ACTIONS. All actions heretofore taken or
authorized by the incorporators with respect to the organization or business
of the Corporation including filings and amendments thereto be, and hereby
are, ratified, approved and confirmed in all aspects.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 3
- ------------------------------------------------------------------------------
10. GENERAL AUTHORITY. The officers of the Corporation be, and hereby
are, authorized to take any and all other actions which they shall deem
necessary or appropriate to complete the organization of the Corporation and
to permit the Corporation legally to commence business within the state of
its jurisdiction.
Effective as of the date hereinabove written.
/s/James M. Cassidy
--------------------------
James M. Cassidy, director
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A#2
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
SUNDERLAND ACQUISITION CORPORATION
------------------
(Name of Small Business Issuer)
Delaware 52-2102142
------------------- --------------------
(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
1504 R Street, N.W., Washington, D.C. 20009
-------------------------------------------
(Address of Principal Executive Offices including Zip Code)
202/387-5400
------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act:
Common Stock, $.0001 Par Value
(Title of Class)
<PAGE>
PART I
ITEM 1. BUSINESS.
Sunderland Acquisition Corporation (the "Company"), was incorporated on
June 2, 1998 under the laws of the State of Delaware to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date other than issuing shares to its original
shareholders.
The Company will attempt to locate and negotiate with a business entity
for the merger of that target company into the Company. In certain instances,
a target company may wish to become a subsidiary of the Company or may wish
to contribute assets to the Company rather than merge. No assurances can be
given that the Company will be successful in locating or negotiating with any
target company.
The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company whose
securities are qualified for trading in the United States secondary market.
PERCEIVED BENEFITS
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. These are commonly thought to include
the following:
* the ability to use registered securities to make acquisitions of
assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
* a presence in the United States capital market.
POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for which a primary purpose of becoming public is the use
of its securities for the acquisition of assets or businesses;
* a company which is unable to find an Underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
<PAGE>
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public mark
to satisfy redemption requirements under a qualified Employee Stock
Option Plan:
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of
its own management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, as to the terms of a business combination, or as to the
nature of the target company.
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement affirming that such
shareholders will not sell or otherwise transfer their shares of the
Company's common stock except in connection with or following completion of a
merger or acquisition resulting in the Company no longer being classified as
a blank check company. The shareholders have deposited their stock
certificates with the Company's management, who will not release the
certificates except in connection with or following the completion of a
merger or acquisition.
The Company is voluntarily filing this Registration Statement with the
Securities and Exchange Commission and is under no obligation to do so under
the Securities Exchange Act of 1934.
RISK FACTORS
The Company's business is subject to numerous risk factors, including
the following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had
no operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company will,
in all likelihood, sustain operating expenses without corresponding revenues,
at least until the consummation of a business combination. This may result in
the Company incurring a net operating loss which will increase continuously
until the Company can consummate a business combination with a target
company. There is no assurance that the Company can identify such a target
company and consummate such a business combination.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of
the Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target
company. While management will prefer business combinations with entities
having established operating histories, there can be no assurance that the
Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be
no assurance, the success of the Company's operations will be dependent upon
management of the target company and numerous other factors beyond the
Company's control.
<PAGE>
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A
large number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies which may
be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources, technical expertise
and managerial capabilities than the Company and, consequently, the Company
will be at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover,
the Company will also compete with numerous other small public companies in
seeking merger or acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION--NO STANDARDS
FOR BUSINESS COMBINATION. The Company has no current arrangement, agreement
or understanding with respect to engaging in a merger with or acquisition of
a specific business entity. There can be no assurance that the Company will
be successful in identifying and evaluating suitable business opportunities
or in concluding a business combination. Management has not identified any
particular industry or specific business within an industry for evaluation by
the Company. There is no assurance that the Company will be able to negotiate
a business combination. Management has not identified any particular industry
or specific business within an industry for evaluation by the Company THere is
no assurance that the Company will be able to negotiate a business
combination on terms favorable to the Company. The Company has not
established a specific length of operating history or a specified level of
earnings, assets, net worth or other criteria which it will require a target
company to have achieved, or without which the Company would not consider a
business combination with such business entity. Accordingly, the Company may
enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential form immediate
earnings limited assets, negative net worth or other negative characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking
a business combination, management anticipates devoting only a limited amount
of time per month to the business of the Company. The Company's sole officer
has not entered into a written employment agreement with the Company and he
is not expected to do so in the foreseeable future. The Company has not
obtained key man life insurance on its officer and director. Notwithstanding
the combined limited experience and time commitment of management, loss of
services and of this individual would adversely affect development of the
Company's business and its likelihood of continuing operations.
CONFLICTS OF INTEREST--GENERAL. The Company's officer and director and
director participates in other business ventures which may compete directly
with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future. Management has adopted a policy
that the Company will not seek a merger with, or acquisition of, any entity
in which any member of management serves as an officer, director or partner,
or in which they or their family members own or hold any ownership interest.
See "ITEM 5, DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS--Conflicts of Interest."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Section 13 of
the Securities Exchange Act of 1934 (the "Exchange Act") requires companies
subject thereto to provide certain information about significant acquisitions
including certified financial statements for the company acquired covering
one or two years, depending on the relative size of the acquisition. The time
and additional costs that may be incurred by some target companies to prepare
such financial statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by the
Company. Even in the event demand exists for a merger or acquisition of the
type contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
LACK OF DIVERSIFICATION. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a
business combination with only one business entity. Consequently, the
Company's activities will be limited to those engaged in by the businesses
entity which the Company merges with or
<PAGE>
acquires. The Company's inability to diversify its activities into a number
of areas may subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
Company's operations.
REGULATION UNDER INVESTMENT COMPANY ACT. Although the Company will be
subject to regulation under the Exchange Act, management believes the Company
will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of target company obtaining a controlling interest in
the Company. Any such business combination may require shareholders of the
Company to sell or transfer all or a portion of the Company's common stock
held by them. The resulting change in control of the Company will likely
result in removal of the present officer and director of the Company and a
corresponding reduction in or elimination of his participation in the future
affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION.
The Company's primary plan of operation is based upon a business combination
with a business entity which, in all likelihood, will result in the Company
issuing securities to shareholders of such business entity. The issuance of
previously authorized and unissued common stock of the Company would result
in reduction in percentage of shares owned by the present shareholders of the
Company and would most likely result in a change of control or management of
the Company.
TAXATION. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the Company may
undertake. Currently, such transactions may be structured so as to result in
tax-free treatment to both companies, pursuant to various federal and state
tax provisions. The Company intends to structure any business combination so
as to minimize the federal and state tax consequences to both the Company and
the target company; however, there can be no assurance that such business
combination will meet the statutory requirements of a tax-free reorganization
or that the parties will obtain the intended tax-free treatment upon a
transfer of stock or assets. A non-qualifying reorganization could result in
the imposition of both federal and state taxes which may have an adverse
effect on both parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management of the Company will request that any potential
business opportunity provide audited financial statements. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company rather than incur the expenses
associated with preparing audited financial statements. In such case, the
Company may choose to obtain certain assurances as to the target company's
assets, liabilities, revenues and expenses prior to consummating a business
combination, with further assurances that an audited financial statement
would be provided after closing of such a transaction. Closing documents
relative thereto may include representations that the audited financial
statements will not materially differ from the representations included in
such closing documents.
ITEM 2. PLAN OF OPERATION
The Company intends to merge with or acquire a business entity in
exchange for the Company's securities. The Company has no particular
acquisition in mind and has not entered into any negotiations regarding such
an acquisition. Neither the Company's officer and director nor any affiliate
has engaged in any negotiations with any representative of any company
regarding the possibility of an acquisition or merger between the Company and
such other company.
<PAGE>
Management anticipates seeking out a target company through
solicitation. Such solicitation may include newspaper or magazine
advertisements, mailings and other distributions to law firms, accounting
firms, investment bankers, financial advisors and similar persons, the use of
one or more World Wide Web sites and similar methods. No estimate can be made
as to the number of persons who will be contacted or solicited. Management
may engage in such solicitation directly or may employ one ore more other
entities to conduct or assist in such solicitation. Management and its
affiliates pay referral fees to consultants and others who refer target
businesses for mergers into public companies in which management and its
affiliates have an interest. Payments are made if a business combination
occurs, and may consist of cash or a portion of the stock in the Company
retained by management and its affiliates, or both.
The Company has no full time employees. The Company's president has
agreed to allocate a portion of his time to the activities of the Company,
without compensation. The president anticipates that the business plan of the
Company can be implemented by his devotion no more than 10 hours per month to
the business affairs of the Company and, consequently, conflicts of interest
may arise with respect to the limited time commitment by such officer.
Management is currently involved with other blank check companies, and
is involved in creating additional blank check companies similar to this one.
A conflict may arise in the event that another blank check company with which
management is affiliated is formed and actively seeks a target company.
Management anticipates that target companies will be located for the Company
and other blank check companies in chronological order of the date of
formation of such blank check companies or by lot. However, other blank check
companies that may be formed may differ from the Company in certain items
such as place of incorporation, number of shares and shareholders, working
capital, types of authorized securities, or other items. It may be that a
target company may be more suitable for or may prefer a certain blank check
company formed after the Company. In such case, a business combination might
be negotiated on behalf of the more suitable or preferred blank check company
regardless of date of formation or choice by lot. See "ITEM 5, DIRECTORS,
EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS--Current Blank Check
Companies."
The Certificate of Incorporation of the Company provides that the
Company may indemnify officers and/or directors of the Company for
liabilities, which can include liabilities arising under the securities laws.
Therefore, assets of the Company could be used or attached to satisfy any
liabilities subject to such indemnification.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business equity which desires to seek the
perceived advantages of a corporation which has a class of securities
registered under the Exchange Act. The Company will not restrict its search
to any specific business, industry, or geographical location and the Company
may participate in a business venture of virtually any kind of nature.
Management anticipates that it will be able to participate in only one
potential business venture because the Company has nominal assets and limited
financial resources. See ITEMS F/S, "FINANCIAL STATEMENTS." This lack of
diversification should be considered a substantial risk to the shareholders
of the Company because it will not permit the Company to offset potential
losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate
purposes. The Company may acquire assets and establish wholly-owned
subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business
entities seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for
<PAGE>
incentive stock options or similar benefits to key employees, increasing the
opportunity to use securities for acquisitions, providing liquidity for
shareholders and other factors. Business opportunities may be available in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a public company without incurring the cost and time required to
conduct an initial public offering. Management has not conducted market
research and is not aware of statistical data to support the perceived
benefits of a merger or acquisition transaction for the owners of a business
opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officer and director of the Company, who is not
a professional business analyst. In analyzing prospective business
opportunities, management will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and
experience of management services which may be available and the depth of
that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential
for growth or expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. This discussion of the proposed
criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Exchange Agent requires that any merger or acquisition candidate
comply with certain reporting requirements, which include providing audited
financial statements to be included in the reporting filings made under the
Exchange Act. The Company will not acquire or merge with any company for
which audited financial statements cannot be obtained at or within a
reasonable period of time after closing of the proposed transaction.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with
the Company. Such consequences may include, but are not limited to, time
delays of the registration process, significant expenses to be incurred in
such an offering, loss of voting control to public shareholders or the
inability to obtain an underwriter or to obtain an underwriter on
satisfactory terms.
The Company will not restrict its search for any specific kind of
business entities, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially any stage
of its business life. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business
may need to seek additional capital, may desire to have its shares publicly
traded, or may seek other perceived advantages which the Company may offer.
Management of the Company, which in all likelihood will not be
experienced in matters relating to the business of a target company, will
rely upon its own efforts in accomplishing the business purposes of the
Company. Outside consultants or advisors may be utilized by the Company to
assist in the search for qualified target companies. If the Company does
retain such an outside consultant or advisor, any cash fee earned by such
person will need to be assumed by the target company, as the Company has
limited cash assets with which to pay such obligation.
Following a business combination the Company may benefit from the
services of others in regard to accounting, legal services, underwritings and
corporate public relations. If requested by a target company, management may
recommend one ore more underwriters, financial advisors, accountants, public
relations firms or other consultants to provide such services.
<PAGE>
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued
after any business combination. Additionally, a target company may be
presented o the Company only on the condition that the services of a
consultant or advisor be continued after a merger or acquisition. Such
preexisting agreements of target companies for the continuation of the
services of attorneys, accountants, advisors or consultants could be a factor
in the selection of a target company.
ACQUISITION OPPORTUNITIES
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may
also acquire stock or assets of an existing business. On the consummation of
a transaction, it is likely that the present management and shareholders of
the Company will no longer be in control of the Company. In addition, it is
likely that the Company's officer and director will, as part of the terms of
the acquisition transaction, resign and be replaced by one or more new
officers and directors.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated
or at specified times thereafter. If such registration occurs, of which there
can be no assurance, it will be undertaken by the surviving entity after the
Company has entered into an agreement for a business combination or has
consummated a business combination and the Company is no longer considered a
blank check company. Until such time as this occurs, the Company will not
register any additional securities. The issuance of additional securities and
their potential sale into any trading market which may develop in the
Company's securities may depress the market value of the Company's securities
in the future if such a market develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351
or 368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings
in the target company. Depending upon, among other things, the target
company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage of ownership may
be subject to significant reduction in the event the Company acquires a
target company with substantial assets. Any merger or acquisition effected by
the Company can be expected to have a significant dilutive effect on the
percentage of shares held by the Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of
such agreements cannot be predicted, generally such agreements will require
certain representations and warranties of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by the parties prior to and after such closing, will
outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, and will include miscellaneous other
terms.
The Company will not acquire or merger with any entity which cannot
provide audited financial statements at or within a reasonable period of time
after closing of the proposed transaction. The Company is subject to all of
the reporting requirements including the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements
as part of or within 60 days following its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial
<PAGE>
statements included in its annual report on Form 10-K (or 10-KSB, as
applicable). If such audited financial statements are not available at
closing, or within time parameters necessary to insure the Company's
compliance with the requirements of the Exchange Act, or if the audited
financial statements provided do not conform to the representations made by
the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of
the Company.
Pierce Mill Associates, Inc. the principal shareholder of the Company,
has agreed that it will advance to the Company any additional funds which the
Company needs for operating capital and for costs in connection with
searching for or completing an acquisition or merger. Such advances will be
made without expectation of repayment unless the owners of the business which
the Company acquires or mergers with agree to repay all or a portion of such
advances. There is no minimum or maximum amount Pierce Mill will advance to
the Company. The Company will not borrow any funds to make any payments to
the Company's promoters, management or their affilites or associates.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek an acquisition or merger with any entity in
which the Company's officer, director, and shareholders or any affiliate or
associate serves as an officer or director or holds any ownership interest.
COMPETITION
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial
resources and limited management availability, the Company will continue to
be at a significant competitive disadvantage compared to the Company's
competitors.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company has no properties and at this time has no agreements to
acquire any properties. The Company currently uses the offices of Pierce Mill
Associates at no cost to the Company. Pierce Mill Associates has agreed to
continue this arrangement until the Company completes an acquisition or
merger.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of June 25, 1998, each person known
by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all directors individually and all directors and
officers of the Company as a group. Except as noted, each person has sole
voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial
of Beneficial Owner Ownership Percentage of Class
- ------------------- -------------------- -------------------
<S> <C> <C>
Pierce Mill Associates, Inc. (1)(2) 4,250,000 85%
1504 R Street, N.W.
Washington, D.C. 20009
Cassidy & Associates (2) 750,000 15%
1504 R Street, N.W.
Washington, D.C. 20009
James M. Cassidy (2) 5,000,000 100%
1504 R Street, N.W.
Washington, D.C. 20009
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
All Executive Officers and
Directors as a Group (1 Person) 5,000,000 100%
</TABLE>
(1) Pierce Mill Associates, Inc. is an affiliate of Cassidy &
Associates, the law firm prepared this registration statement and of which
James M. Cassidy is a principal. James Cassidy is the sole shareholder of
Pierce Mill Associates. Pierce Mill Associates provides services for Cassidy
& Associates, particularly in regard to locating private companies which may
wish to go public, and acts as an initial shareholder in certain companies
formed by Cassidy & Associates. Since Pierce Mill Associates has fewer than
100 shareholders and is not making and does not intend to make a public
offering of its securities, management believes that it is not deemed to be
an investment company by virtue of an exemption provided under the Investment
Company Act of 1940, as amended.
(2) Mr. Cassidy owns 100% of Pierce Mill Associates and is principal of
Cassidy & Associates, a Washington, D.C. securities law firm, and is
considered the beneficial owner of the shares of common stock of the Company
issued to them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS.
The Company has one Director and Officer as follows:
<TABLE>
<CAPTION>
Name Age Positions and Offices Held
---------------- --- --------------------------
<S> <C> <S>
James M. Cassidy 63 President, Secretary,
Director
</TABLE>
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officer and
director is not acting on behalf of nor will act at the direction of any
other person.
Set forth below is the name of the director and officer of the Company,
all positions and offices with the Company held, the period during which he
has served as such, and the business experience during at least the last five
years:
James Michael Cassidy, Esq., J.D., LL.M., received a Bachelor of Science
in Languages and Linguistics from Georgetown University in 1960, a Bachelor
of Laws from The Catholic University School of Law in 1963, and a Master of
Laws in Taxation from The Georgetown University School of Law in 1968. From
1963-1964, Mr. Cassidy was law clerk to the Honorable Inzer B. Wyatt of the
United States District Court for the Southern District of New York. From
1964-1965, Mr. Cassidy was law clerk to the Honorable Wilbur K. Miller of the
United States Court of Appeals for the District of Columbia. From 1969-1975,
Mr. Cassidy was an associate of the law firm of Kieffer & Moroney and a
principal in the law firm of Kieffer & Cassidy, Washington, D.C. From 1975 to
date, Mr. Cassidy has been a principal in the law firm of Cassidy &
Associates, Washington, D.C. and its predecessors, specializing in securities
law and related corporate and federal taxation matters. Mr. Cassidy is a
member of the bar of the District of Columbia and is admitted to practice
before the United States Tax Court and the United States Supreme Court.
PREVIOUS BLANK CHECK COMPANIES
In 1988, management was involved in two blank check offerings. Mr.
Cassidy was vice president, a director and a shareholder of First Agate
Capital Corporation and Consolidated Financial Corporation. In August, 1988,
First Agate Capital Corporation offered 50,000 units at $10.00 for an
aggregate of $500,000 in an underwritten offering of its common stock and
warrants. First Agate Capital is no longer a public company and has had no
activity since 1991. In November, 1988, Consolidated Financial Corporation
offered 50,000 units at $10.00 for an aggregate of
<PAGE>
$500,000 in an underwritten offering of its common stock and warrants. In
1990, in connection with the change in control of Consolidated Financial
Corporation. Mr. Cassidy transferred all his shares of Consolidated Financial
Corporation common stock without compensation or any financial benefit and
resigned as an officer and director of that company. Mr. Cassidy has had no
further relationship or transactions with Consolidated Financial Corporation
since 1990. As described in public filings made by the company, in June,
1991, the new management of Consolidated Financial Corporation effected its
merger with A.B.E Industrial Holdings.
CURRENT BLANK CHECK COMPANIES
Mr. Cassidy is the president, sole director and a beneficial shareholder
of Sheffield Acquisitions, Inc., Tunlaw International Corporation, Chatsworth
Acquisition Corporation and Aberdeen Acquisition Corporation. Until
December 30, 1997, Mr. Cassidy was the sole director and beneficial shareholder
of Corcoran Technologies Corporation. Sheffield Acquisitions, Inc. has filed
a registration statement on Form S-1 under the Securities Act which has not
yet been declared effective. Tunlaw International Corporation, Corcoran
Technologies Corporation, Chatsworth Acquisition Corporation and Aberdeen
Acquisition Corporation have filed registration statements on Forms 10-SB
under the Exchange Act which have become effective and each files periodic
reports under the Exchange Act. The initial business purpose of each of these
companies was to engage in a merger or acquisition with an unidentified
company or companies and each will be classified as a blank check company
until completion of a business acquisition. Mr. Cassidy is the sole director
and beneficial shareholder of Barhill Acquisition Corporation and Westford
Acquisition Corporation for which registration statements on Form 10-SB have
been filed with the Commission on August 13, 1998 and August 27, 1998,
respectively. The initial business purpose of these two companies is to
engage in a merger or acquisition with an unidentified company or companies
and each will be classified as a blank check company until completion of a
business acquisition.
Mr. Cassidy anticipates being involved with additional blank check
companies filed under the Securities Act or under the Exchange Act.
RECENT TRANSACTIONS BY BLANK CHECK COMPANIES
On December 30, 1997, Prime Management, Inc., a California corporation,
merged with and into Corcoran Technologies Corporation. Corcoran Technologies
Corporation was formed on March 27, 1997 to engage in a merger or acquisition
with an unidentified company or companies and was structured substantially
identically to the Company, including identical management and shareholders.
Prime Management, Inc. is an operating transportation company which has two
wholly-owned subsidiaries, Mid-Cal Express, a long-haul trucking company
hauling shipments of general commodities, including temperature-sensitive
goods, in both intrastate and interstate commerce and Mid-Cal Logistics, a
freight brokerage company. Pursuant to the merger, Corcoran Technologies
Corporation changed its name to Prime Companies, Inc., and Corcoran
Technologies Corporation filed a Form 8-K with the Securities and Exchange
Commission describing the merger. The Common stock of Prime Companies, Inc.
trades on the NASD OTC Bulletin Board under the symbol PRMC. Detailed
information concerning Prime Companies, Inc. may be obtained from its filings
under the Exchange Act which are found the EDGAR archives page of the
Securities and Exchange Commission's Website at WWW.SEC.GOV.
CONFLICTS OF INTEREST
The Company's officer and director has organized and expects to organize
other companies of a similar nature and with similar purpose as the Company.
Consequently, there are potential inherent conflicts of interest in acting as
an officer and director of the Company. Insofar as the officer and director
is engaged in other business activities, management anticipates that it will
devote only a minor amount of time to the Company's affairs. The Company does
not have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the
Company's proposed business operations.
<PAGE>
A conflict may arise in the event that another blank check company with
which management is affiliated is formed and actively seeks a target company.
It is anticipated that target companies will be located for the Company and
other blank check companies in chronological order of the date of formation
of such blank check companies or by lot. However, any blank check companies
that may be formed may differ from the Company in certain items such as place
of incorporation, number of shares and shareholders, working capital, types
of authorized securities, or other items. It may be that a target company may
be more suitable for or may prefer a certain blank check company formed after
the Company. In such case, a business combination might be negotiated on
behalf of the more suitable or preferred blank check company regardless of
date of formation or choice by lot. Mr. Cassidy will be responsible for
seeking, evaluating, negotiating and consummating a business combination with
a target company which may result in terms providing benefits to Mr. Cassidy.
Mr. Cassidy is the principal of Cassidy & Associates, a securities law
firm located in Washington, D.C. As such, demands may be placed on the time
of Mr. Cassidy which will detract from the amount of time he is able to
devote to the Company. Mr. Cassidy intends to devote as much time to the
activities of the company as required. However, should such a conflict
arise, there is no assurance that Mr. Cassidy would not attend to other
matters prior to those of the Company. Mr. Cassidy projects that initially up
to ten hours per month of his time may be spent locating a target company
which amount of time would increase when the analysis of, and negotiations
and consummation with, a target company are conducted.
Mr. Cassidy owns 100% of Pierce Mill Associates which, in turn, owns
4,250,000 shares of common stock of the Company and is a principal of
Cassidy & Associates, a securities law firm, which owns 750,000 shares of the
Company's common stock. No other securities, or rights to securities, of the
Company will be issued to management or promoters, or their affiliates or
associates, prior to the completion of a business combination. At the time of
a business combination, management expects that some or all of the shares of
Common Stock owned by Cassidy & Associates will be purchased by the target
company. The amount of Common Stock sold or continued to be owned by Pierce
Mill Associates or Cassidy & Associates cannot be determined at this time.
The terms of business combination may include such terms as Mr. Cassidy
remaining a director or officer of the Company and/or the continuing
securities or other legal work of the Company being handled by the law firm
of which Mr. Cassidy is the principal. The terms of a business combination
may provide for a payment by cash or otherwise to Pierce Mill Associates or
Cassidy & Associates for the purchase of all or part of their common stock of
the Company by a target company. Mr. Cassidy would directly benefit from such
employment or payment. Such benefits may influence Mr. Cassidy's choice of a
target company.
The Company may agree to pay finder's fees, as appropriate and allowed,
to unaffiliated persons who may bring a target company to the Company where
that reference results in a business combination. The amount of any finder's
fee will be subject to negotiation, and cannot be estimated at this time. No
finder's fee of any kind will be paid to management or promoters of the
Company or to their associates or affiliates. No loans of any type have, or
will be, made to management or promoters of the Company or to any of their
associates or affiliates.
The Company's officer and director, its promoter and their affiliates or
associates have not had any negotiations with and there are no present
arrangements or understandings with any representatives of the owners of any
business or company regarding the possibility of a business combination with
the Company.
The Company will not enter into a business combination, or acquire any
assets of any kind for its securities, in which management or promoters of
the Company or any affiliates or associates have any interest, direct or
indirect.
Management has adopted certain policies involving possible conflicts of
interest, including prohibiting any of the following transactions involving
management, promoters, shareholders or their affiliates:
(i) Any lending by the company to such persons;
<PAGE>
(ii) The issuance of any additional securities to such persons prior to
a business combination;
(iii) The entering into any business combination or acquisition of
assets in which such persons have any interest, direct or indirect;
or
(iv) The payment of any finder's fees to such persons.
These policies have been adopted by the Board of Directors of the
Company, and any changes in these provisions require the approval of the
Board of Directors. Management does not intend to propose any such action and
does not anticipate that any such action will occur.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest
in favor of the Company could result in liability of management to the
Company. However, any attempt by shareholders to enforce a liability of
management to the Company would most likely be prohibitively expensive and
time consuming.
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Securities
Act of 1933 and the Securities Exchange Act of 1934, management believes the
Company will not be subject to regulation under the Investment Company Act of
1940 insofar as the Company will not be engaged in the business of investing
or trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940. Any violation
of such Act would subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
The Company's officer and director does not receive any compensation for
his services rendered to the Company, has not received such compensation in
the past, and is not accruing any compensation pursuant to any agreement with
the Company.
The officer and director of the Company will not receive any finder's
fee, either directly or indirectly, as a result of his efforts to implement
the Company's business plan outlined herein. However, the officer and
director of the Company anticipates receiving benefits as a beneficial
shareholder of the Company. See "ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has issued a total of 5,000,000 shares of Common Stock to
the following persons for a total of $500 in cash:
<TABLE>
<CAPTION>
NAME NUMBER OF TOTAL SHARES CONSIDERATION
- ------------------------ ----------------------- -------------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 $75
</TABLE>
<PAGE>
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement, affirming that such
shareholders shall not sell their shares of the Company's common stock except
in connection with or following completion of a merger or acquisition
resulting in the Company no longer being classified as a blank check company.
The shareholders have deposited their stock certificates with the Company's
management, who will not release the certificates except in connection with
or following the completion of a merger or acquisition.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, par value $.0001 per share, and 20,000,000 shares of
Preferred Stock, par value $.0001 per share. The following statements
relating to the capital stock set forth the material terms of the Company's
securities, however, reference is made to the more detailed provisions of,
and such statements are qualified in their entirety by reference to, the
Certificate of Incorporation and the By-laws, copies of which are filed as
exhibits to this registration statement.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock do not have cumulative voting rights. Holders of common stock are
entitled to share ratably in dividends, if any, as may be declared from time
to time by the Board of Directors in its discretion from funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of the Company, the holders of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. All of the
outstanding shares of common stock are fully paid and non-assessable.
Holders of common stock have no pre-emptive rights to purchase the
Company's common stock. There are no conversion or redemption rights or
sinking fund provisions with respect to the common stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of preferred stock, $.0001 par value per share, of which no
shares have been issued. The Board of Directors is authorized to provide for
the issuance of shares of preferred stock in series and, by filing a
certificate pursuant to the applicable law of Delaware, to establish from
time to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions thereof
without any further vote or action by the shareholders. Any shares of
preferred stock so issued would have priority over the common stock with
respect to dividend or liquidation rights. Any future issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the shareholders and may
adversely affect the voting and other rights of the holders of common stock.
At present, the Company has no plans to issue any preferred stock nor adopt
any series, preferences or other classification of preferred stock.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain
circumstances, the issuance of Preferred Stock could adversely affect the
voting power of the holders of the Common Stock. Although the Board of
Directors is required to make my determination to issue such stock based on
its judgment as to the best interests of the stockholders of the
<PAGE>
Company, the Board of Directors could act in a manner that would discourage
an acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or stock exchange rules. The Company
has no present plans to issue any Preferred Stock.
Dividends
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment
of dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for
use in its business operations and accordingly, the Board of Directors does
not anticipate declaring any dividends prior to a business combination.
Glossary
<TABLE>
<S> <C>
"Blank Check" COMPANY As defined in Section 7(b)(3) of the Securities Act, a "blank check" company is a
development stage company that has no specific business plan or purpose or has indicated
that its business plan is to engage in a merger or acquisition with an unidentified company
or companies and is issuing "penny stock" securities as defined in Rule 3a51-1 of the
Exchange Act.
The Company Sunderland Acquisition Corporation, the company whose common stock is subject of this
registration statement.
Exchange Act The Securities Act of 1934, as amended.
"Penny Stock" Security As defined in Rule 3a51-1 of the Exchange Act, a "penny stock" security is any equity
security other than a security (i) that is a reported security (ii) that is issued by an
investment company (iii) that is a put or call issued by the Option Clearing Corporation
(iv) that has a price of $5.00 or more (except for purposes of Rule 419 of the Securities
Act) (v) that is registered on a national securities exchange (vi) that is authorized for
quotation of the Nasdaq Stock Market, unless other provisions of Rule 3a51-1 are not
satisfied, or (vii) that is issued by an issuer with (a) net tangible assets in excess of
$2,000,000, if in continuous operation for more than three years or $5,000,000 if in
operation for less than three years or (b) average revenue of at least $6,000,000 for the
last three years.
Pierce Mill Associates Pierce Mill Associates, Inc., a private company owned by management of the Company. Pierce
Mill Associates provides services for Cassidy & Associates, particularly in regard to
locating private companies which may wish to go public, and acts as an initial shareholder
in certain companies formed by Cassidy & Associates.
Securities Act The Securities Act of 1933, as amended.
Small Business Issuer As defined in Rule 12b-2 of the Exchange Act, a "Small Business Issuer" is an entity (i)
which has revenues of less than $25,000,000 (ii) whose public float (the outstanding
securities not held by affiliates) has a value of less than $25,000,000 (iii) which is a
United States or Canadian issuer (iv) which is not an Investment Company and (v) if a
majority-owned subsidiary, whose parent corporation is also a small business issuer.
</TABLE>
<PAGE>
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET PRICE. There is no trading market for the Company's Common
Stock at present and there has been no trading market to date. There is no
assurance that a trading market will ever develop or, if such a market does
develop, that it will continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure
schedule prepared by the Commission relating to the penny stock market,
which, in highlight form, (i) sets forth the basis on which the broker or
dealer made the suitability determination and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
In order to qualify for listing on the Nasdaq SmallCap Market, a company
must have at lease (i) net tangible assets of $4,000,000 or market
capitalization of $50,000,000 or net income for two of the last three years
of $750,000; (ii) public float of 1,000,000 shares with a market value of
$5,000,000; (iii) a bid price of $4.00; (iv) three market makers; (v) 300
shareholders and (vi) an operating history of one year or, if less than one
year, $50,000,000 in market capitalization. For continued listing on the
Nasdaq SmallCap Markets, a company must have at least (i) net tangible assets
of $2,000,000 or market capitalization of $35,000,000 or net income for two
of the last three years of $500,000; (ii) a public float of 500,000 shares
with a market value of $1,000,000; (iii) a bid price of $1.00 (iv) two market
makers; and (v) 300 shareholders.
If, after a merger or acquisition, the Company does not meet the
qualifications for listing on the Nasdaq SmallCap Market, the Company's
securities may be traded in the over-the-counter ("OTC") market. The OTC
market differs from national and regional stock exchanges in that it (1) is
not sited in a single location but operates through communication of bids,
offers and confirmations between broker-dealers and (2) securities admitted
to quotation are offered by one or more broker-dealers rather than the
"specialist" common to stock exchanges. The Company may apply for listing on
the NASD OTC Bulletin Board or may offer its securities in what are commonly
referred to as the "pink sheets" of the National Quotation Bureau, Inc. To
qualify for listing on the NASD OTC Bulletin Board, an equity security must
have one registered broker-dealer, known as the market maker, willing to list
bid or sale quotations and to sponsor the company for listing on the Bulletin
Board.
If the Company is unable initially to satisfy the requirements for
quotation on the Nasdaq SmallCap Market or becomes unable to satisfy the
requirements for continued quotation thereon, and trading, if any, is
conducted in the OTC market, a shareholder may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities.
<PAGE>
(b) HOLDERS. There are two holders of the Company's Common Stock. On
June 9, 1998, the Company issued 5,000,000 of its Common Shares to these
shareholders for cash at $.0001 per share for a total price of $500. The
issued and outstanding shares of the Company's Common Stock were issued in
accordance with the exemptions from registration afforded by Sections 3(b)
and 4(2) of the Securities Act of 1933 and Rules 506 and 701 promulgated
thereunder.
(c) DIVIDENDS. The Company has not paid any dividends to date, and has
no plans to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AN ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed accountants since its formation and there
are no disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold securities which were
not registered as follows:
<TABLE>
<CAPTION>
Date Name Number of Shares Consideration
- ----------- ------- ---------------- -------------
<S> <C> <C> <C>
June 9, 1998 Pierce Mill 4,250,000 $425
Associates, Inc.(1)
June 9, 1998 Cassidy & Associates(2) 750,000 $75
</TABLE>
- -------------------
(1) Mr. Cassidy, the president and sole director of the Company, is the
sole director and shareholder of Pierce Mill Associates, Inc. and is therefore
considered to be the beneficial owner of the common stock of the Company
issued to Pierce Mill Associates, Inc. With respect to the sales made to
Pierce Mill Associates, Inc., the Company relied on Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated thereunder.
(2) Mr. Cassidy is a principal of Cassidy & Associates, a Washington,
D.C. securities law firm, and is therefore considered to be the beneficial
owner of the common stock of the Company issued to Cassidy & Associates. With
respect to the sales made to Cassidy & Associates, the Company relied
upon Section 3(b) of the Securities Act of 1933, as amended and Rule 701
promulgated thereunder.
The shareholders of the Company have executed and delivered a "lock-up"
letter agreement which provides that such shareholders shall not sell the
securities except in connection with or following the consummation of a
merger or acquisition. Further, each shareholder has placed its stock
certificates with the Company until such time. Any liquidation by the current
shareholders after the release from the "lock-up" selling limitation period
may have a depressive effect upon the trading price of the Company's
securities in any future market which may develop.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents,
against expenses incurred in any action, suit or proceeding. The Certificate
of Incorporation and the By-laws of the Company
<PAGE>
provide for indemnification of directors and officers to the fullest extent
permitted by the General Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation
contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE
UNENFORCEABLE.
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
Attached are audited financial statements for the Company for the period
ended June 10, 1998. The following financial statements are attached to this
report and filed as a part thereof.
1) Table of Contents - Financial Statements
2) Independent Auditors' Report
3) Balance Sheet as of June 10, 1998
4) Notes to Balance Sheet as of June 10, 1998
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheet as of June 10, 1998 F-2
Notes to Balance Sheet as of June 10, 1998 F-3, F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Sunderland Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Sunderland Acquisition
Corporation (a development stage company) as of June 10, 1998. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly in all
material respects, the financial position of Sunderland Acquisition
Corporation (a development state company) as of June 10, 1998, in conformity
with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 12, 1998
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10, 1998
----------------------------------
ASSETS
------
<TABLE>
<S> <C>
Cash $ 500
Organization cost 75
-----
TOTAL ASSETS $ 575
------------ -----
-----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES $ --
-----
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par value, 20 million
shares authorized, zero issued and outstanding --
Common Stock, $.0001 par value, 100 million
shares authorized 5,000,000 issued and
outstanding 500
Capital in excess of par 75
-----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 575
------------------------------------------ -----
-----
</TABLE>
See accompanying notes to balance sheet.
F-2
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10,1998
----------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND BUSINESS OPERATIONS
Sunderland Acquisition Corporation (a development stage
company)(the "Company") was incorporated in Delaware on June 2, 1998
to serve as a vehicle to effect a merger, exchange of capital stock,
asset acquisition or other business combination with a domestic of
foreign private business. At June 10, 1998, the Company had not yet
commenced any formal business operations, and all activity to date
relates to the Company's formation and proposed fund raising. The
Company's fiscal year end is December 31.
The Company's ability to commence operations is contingent upon its
ability to identify a prospective target business and raise the
capital it will require through the issuance of equity securities,
debt securities, bank borrowings or a combination thereof.
B. USE OF ESTIMATES
The preparation of the 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.
NOTE 2. STOCKHOLDERS' EQUITY
A. PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of preferred
stock at $.0001 par value, with such designations, voting and other
rights and preferences as may be determined from time to time by the
Board of Directors.
B. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common
stock at $.0001 par value. The Company issued 4,250,000 and 750,000
shares to Pierce Mill Associates, Inc. and Cassidy & Associates,
respectively.
NOTE 3. RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of the
Company who also owns 100% of the outstanding stock of Pierce Mill
Associates, Inc. The same party is also the controlling owner of
Cassidy & Associates.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
2.1** Certificate of Incorporation
2.2** By-Laws
(3) Instruments Defining the Rights of Holders
3.1** Lock-Up Agreement with Pierce Mill Associates
3.2** Lock-Up Agreement with Cassidy & Associates
(10)(a) Consents-Experts
10.1** Consent of Accountants
- --------------
**Previously Filed
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized.
SUNDERLAND ACQUISITION CORPORATION
By: /s/ James M. Cassidy
James M. Cassidy, Director and President
September 24, 1998
<PAGE>
ASSET ACQUISITION AGREEMENT
ASSET ACQUISITION AGREEMENT between SUNDERLAND ACQUISITION
CORPORATION, a Delaware Corporation ("Sunderland") and DEL MAR MORTGAGE,
INC., a Nevada corporation ("Del Mar Mortgage"), Sunderland and Del Mar
Mortgage being sometimes referred to herein as the "Constituent Corporations".
WHEREAS, Del Mar Mortgage wishes to transfer all its assets
to Sunderland in exchange for voting stock of Sunderland in a
transaction intended to qualify as a reorganization within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(this "Transaction").
NOW, THEREFORE, Sunderland and Del Mar Mortgage adopt this Agreement
and agree as follows:
1. TRANSFER OF ASSETS. At the Closing (as defined hereinafter), Del Mar
Mortgage shall transfer and deliver to Sunderland the properties and assets then
owned by Del Mar Mortgage set out on Exhibit A. Exhibit A sets out all the
liabilities, if any, relating to the property and assets acquired hereunder.
None of the liabilities of Del Mar Mortgage shall transfer to Sunderland except
those which attach to any of the property or assets acquired hereunder and those
listed on Exhibit A.
2. TRANSFER OF SUNDERLAND SHARES.
2.1 At the Closing, Sunderland shall deliver to Del Mar Mortgage one or
more certificates aggregating 60,000 shares of the voting common stock of
Sunderland, $.0001 par value per share, duly authorized, validly existing, fully
paid and nonassessable, as payment in full for the transfer of assets by Del Mar
Mortgage under this Agreement.
2.2 Immediately following the Closing, there will be issued and
outstanding in Sunderland, 750,000 common shares issued to TPG Capital
Corporation, 2,874,762 common shares issued to Del Mar Holdings, Inc., 60,000
common shares issued to Del Mar Mortgage, Inc., 6,000 common shares issued to
Stephen J. Byrne, and 6,000 common shares issued to Steve Brockman.
3. APPROVAL OF SHAREHOLDERS. This Agreement shall be adopted by the
shareholders of Del Mar Mortgage at a meeting of its shareholders called for
that purpose or by written consent pursuant to the laws applicable thereto.
There shall be required for the adoption of this Agreement the affirmative vote
of the holders of at least a majority of the holders of all the shares of the
Common Stock issued and outstanding and entitled to vote thereon.
4. REPRESENTATIONS AND WARRANTIES OF DEL MAR MORTGAGE. Del Mar Mortgage
represents and warrants that:
4.1 Corporate Organization and Good Standing. Del Mar Mortgage is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 2
- --------------------------------------------------------------------------------
4.2 Capitalization. Del Mar Mortgage's authorized capital stock
consists of 2,500 shares of Common Stock, no par value, of which 2,500 shares
are issued and outstanding, and no preferred stock.
4.3 Issued Stock. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and nonassessable.
4.4 Corporate Authority. Del Mar Mortgage has all requisite corporate
power and authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this Agreement.
4.5 Authorization. Execution of this Agreement has been duly authorized
and approved by Del Mar Mortgage's board of directors.
4.6 Subsidiaries. Del Mar Mortgage has no subsidiaries.
4.7 Financial Statements. Del Mar Mortgage's audited balance sheets of
December 31, 1997 and December 31, 1996, and Del Mar Mortgage's unaudited
balance sheets and the related statements of income and retained earnings dated
June 30, 1998, copies of which will have been delivered by Del Mar Mortgage to
Sunderland prior to the Closing Date ("Del Mar Mortgage Financial Statements"),
fairly present the financial condition of Del Mar Mortgage as of the date
therein and the results of its operations for the periods then ended in
conformity with generally accepted accounting principles consistently applied.
Del Mar Mortgage will deliver to Sunderland within 30 days following the Closing
unaudited financial statements for the period January 1, 1999 through March 31,
1999.
4.8 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in Del Mar Mortgage Financial Statements, Del Mar Mortgage
did not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
4.9 No Material Changes. Intentionally omitted.
4.10 Litigation. There is not, to the knowledge of Del Mar Mortgage,
any pending, threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against Del
Mar Mortgage or against any of its officers.
4.11 Contracts. Del Mar Mortgage is not a party to any material
contract not in the ordinary course of business that is to be performed in whole
or in part at or after the date of this Agreement.
4.12 Title. Del Mar Mortgage has good and marketable title to all the
real property and good and valid title to all other property included in Del Mar
Mortgage Financial Statements. Except as set out in the balance sheet thereof,
the properties of Del Mar Mortgage are not subject to any mortgage, encumbrance,
or lien of any kind except minor encumbrances that do not materially interfere
with the use of the property in the conduct of the business of Del Mar Mortgage.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 3
- --------------------------------------------------------------------------------
4.13 Tax Returns. All federal, state, county, municipal, local, foreign
and other taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts, have been properly prepared and
filed by Del Mar Mortgage for all years to and including the taxable year ending
December 31, 1997. The provisions for federal and state taxes reflected in Del
Mar Mortgage Financial Statements are adequate to cover any such taxes that may
be assessed against Del Mar Mortgage in respect of its business and its
operations during the periods covered by Del Mar Mortgage Financial Statements
and all prior periods.
4.14 No Violation. Consummation of the transactions contemplated by
this Agreement will not constitute or result in a breach or default under any
provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or
any order, judgment, decree, law, or regulation to which any property of Del Mar
Mortgage is subject or by which Del Mar Mortgage is bound.
5. REPRESENTATIONS AND WARRANTIES OF SUNDERLAND. Sunderland represents
and warrants that:
5.1 Corporate Organization and Good Standing. Sunderland is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
5.2 Reporting Company. Sunderland has filed with the Securities and
Exchange Commission a registration statement on Form 10-SB which was declared
effective pursuant to the Securities Exchange Act of 1934 and is a reporting
company pursuant to Section 12 thereunder.
5.3 Reporting Company Status. Sunderland has timely filed and is
current on all reports required to be filed by it pursuant to Section 12(g)
of the Securities Exchange Act of 1934.
5.4 Capitalization. Sunderland's authorized capital stock consists of
100,000,000 shares of Common Stock, $.0001 par value, of which 5,000,000 shares
are issued and outstanding (of which 4,250,000 shares have been issued pursuant
to Rule 506 and 750,000 shares pursuant to Rule 701 of the General Rules and
Regulations of the Securities and Exchange Commission) and 20,000,000 shares of
non-designated preferred stock of which no shares are outstanding. Incident to
the transactions contemplated by this Agreement, Sunderland shall retire all its
outstanding shares issued pursuant to Rule 506 which shall thereupon become
treasury shares.
5.5 Stock Rights. There are no stock grants, options, rights, warrants
or other rights to purchase or obtain the Sunderland Common or Preferred Stock
issued or committed to be issued.
5.6 Issued Stock. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and non-assessable.
5.7 Corporate Authority. Sunderland has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its business
as it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this Agreement and all other agreements and
instruments related to this Agreement.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 4
- --------------------------------------------------------------------------------
5.8 Authorization. Execution of this Agreement and the performance of
all obligations hereunder has been duly authorized and approved by all required
corporate action by Sunderland.
5.9 Subsidiaries. Sunderland has no subsidiaries.
5.10 Financial Statements. Sunderland's audited balance sheets and the
related statements of income and retained earnings, dated as of December 31,
1998, copies of which will have been delivered by Sunderland to Del Mar Mortgage
by the Closing Date (the "Sunderland Financial Statements"), fairly present the
financial condition of Sunderland as of the date therein and the results of its
operations for the periods then ended in conformity with generally accepted
accounting principles consistently applied. Sunderland will deliver to Del Mar
Mortgage within 30 days following the Closing unaudited financial statements for
the period January 1, 1999 through March 31, 1999.
5.11 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in the Sunderland Financial Statements, Sunderland did not
have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
5.12 No Material Changes. Intentionally omitted.
5.13 Litigation. There is not, to the knowledge of Sunderland, any
pending, threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against
Sunderland or against any of its officers.
5.14 Contracts. Sunderland is not a party to any material contract not
in the ordinary course of business that is to be performed in whole or in part
at or after the date of this Agreement.
5.15 Title. Sunderland has good and marketable title to all the real
property and good and valid title to all other property included in the
Sunderland Financial Statements. Except as set out in the balance sheet thereof,
the properties of Sunderland are not subject to any mortgage, encumbrance, or
lien of any kind except minor encumbrances that do not materially interfere with
the use of the property in the conduct of the business of Sunderland.
5.16 Tax Returns. All federal, state, county, municipal, local, foreign
and other taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts, have been properly prepared and
filed by Sunderland for all years to and including the taxable year ending
December 31, 1998. The provisions for federal and state taxes reflected in the
Sunderland Financial Statements are adequate to cover any such taxes that may be
assessed against Sunderland in respect of its business and its operations during
the periods covered by the Sunderland Financial Statements and all prior
periods.
5.17 No Violation. Consummation of the transactions contemplated herein
will not constitute or result in a breach or default under any provision of any
charter, bylaw, indenture, mortgage, lease, or agreement, or any order,
judgment, decree, law, or regulation to which any property of Sunderland is
subject or by which Sunderland is bound.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 5
- --------------------------------------------------------------------------------
5.18 Due Diligence. The responses of Sunderland to a certain due
diligence checklist furnished to Sklar Warren Conway Williams & Rosenfeld LLP,
attached hereto as Exhibit B, which are incorporated in this Agreement as though
set out in full, are and remain true and accurate.
6. CONDUCT OF DEL MAR MORTGAGE PENDING THE CLOSING DATE. Del Mar
Mortgage covenants that between the date of this Agreement and the Closing Date:
6.1 No change will be made in Del Mar Mortgage's articles of
incorporation or bylaws.
6.2 Del Mar Mortgage will not make any change in its authorized or
issued capital stock, declare or pay any dividend or other distribution or
issue, encumber, purchase, or otherwise acquire any of its capital stock other
than as provided herein, except to the extent that any such action is not
inconsistent with the provisions of this Agreement.
6.3 Del Mar Mortgage will submit this Agreement for its shareholders'
approval with a favorable recommendation by its board of directors and will use
its best efforts to obtain the requisite shareholder approval.
6.4 Del Mar Mortgage will use its best efforts to maintain and preserve
its business organization, employee relationships, and goodwill intact, and will
not enter into any material commitment except in the ordinary course of business
or to the extent that any such material commitment is not inconsistent with the
provisions of this Agreement.
7. CONDUCT OF SUNDERLAND PENDING THE CLOSING DATE. Sunderland covenants
that between the date of this Agreement and the Closing Date:
7.1 No change will be made in Sunderland's certificate of incorporation
or bylaws.
7.2 Sunderland will not make any change in its authorized or issued
capital stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock otherwise than
as provided herein.
7.3 Sunderland will submit this Agreement for its shareholders'
approval with a favorable recommendation by its board of directors and will use
its best efforts to obtain the requisite shareholder approval.
7.4 Sunderland will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8. Conditions Precedent to Obligation of Del Mar Mortgage. Del Mar
Mortgage's obligation to consummate this merger shall be subject to fulfillment
on or before the Closing Date of each of the following conditions, unless waived
in writing by Del Mar Mortgage:
8.1 Sunderland's Representations and Warranties. The representations
and warranties of Sunderland set forth herein shall be true and correct at the
Closing Date as though made at and as of that date, except as affected by the
transactions contemplated herein.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 6
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8.2 Sunderland's Covenants. Sunderland shall have performed all
covenants required to be performed by it on or before the Closing Date by this
Agreement and the following covenants pursuant to paragraph 2 of a certain
agreement with TPG Capital Corporation dated February 10, 1999:
8.2.1 TPG will provide, at its expense, a Delaware corporation
(Sunderland) with audited financial statements showing no assets or liabilities,
absolute or contingent, which is a reporting company under ss.12(g) of the
Securities Exchange Act of 1934.
8.2.2 Upon the effective date of this Agreement, the existing
shareholders, officers and directors of Sunderland will take all actions to
appoint and elect new officers and directors as selected by Del Mar Mortgage,
Del Mar Holdings, Inc. and Capsource, Inc., ("Capsource") (collectively, the
"Del Mar Entities"), and will resign as officers and directors themselves.
8.2.3 Sunderland will have authorized capital of 100,000,000
shares of common stock, $.0001 par value per share, and 20,000,000 shares of
preferred stock, $.0001 par value per share.
8.2.4 Immediately prior to the effective date of this Agreement,
there will be issued and outstanding by Sunderland 5,000,000 common shares, of
which 4,250,000 shares will have been issued pursuant to Rule 506 and 750,000
shares pursuant to Rule 701.
8.2.5 TPG will deliver an opinion of counsel as to the validity of
the issuance of the outstanding common shares of Sunderland under Rules 506 and
701 and that such shares are fully paid and nonassessable. The Del Mar Entities
understand and agree that such opinion may be issued by an affiliate of TPG.
8.2.6 Incident to the business combinations (the "Business
Combinations") contemplated by this Agreement, by that certain Asset Acquisition
Agreement among Sunderland and Del Mar Holdings, Inc., and by that certain
Agreement and Plan of Reorganization among Sunderland, Capsource and Stephen J.
Byrne, Sunderland shall retire all its outstanding shares issued pursuant to
Rule 506 which shall thereupon become treasury shares.
8.2.7 Incident to the Business Combinations TPG will cause the
name of Sunderland to be changed to "Sunderland Corporation" or such other name
as may be selected by the Del Mar Entities and be available.
8.3 Shareholder Approval. This Agreement shall have been approved by
the required number of shareholders of the Constituent Corporations.
8.4. Regulatory Approvals. Sunderland shall have received all Federal
and state regulatory approvals required of it to complete the transactions
contemplated by this Agreement.
8.5 Supporting Documents of Sunderland. Sunderland shall have delivered
to Del Mar Mortgage supporting documents in form and substance satisfactory to
Del Mar Mortgage, to the effect that:
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 7
- --------------------------------------------------------------------------------
(i) Sunderland is a corporation duly organized, validly
existing, and in good standing.
(ii) Sunderland's authorized and issued capital stock is
as set forth herein.
(iii) The execution and consummation of this Agreement have
been duly authorized and approved by Sunderland's
board of directors.
8.6 Affiliated Transactions. Simultaneously with this Transaction,
Sunderland is entering into an Agreement and Plan of Reorganization among
Sunderland, Capsource and Stephen J. Bryne (the "Affiliated Transaction")
whereby, Sunderland will acquire all of the issued and outstanding securities
of Capsource in a transaction intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended. It is expressly acknowledged and agreed that this Transaction and
the Affiliated Transaction will close simultaneously, or not at all. The
Affiliated Transaction closing (the "Affiliated Closing") is expressly
conditioned upon the approval of the change in control of Capsource by the
Nevada Department of Business and Industry, Division of Financial
Institutions ("Financial Institutions Division Approval"), accordingly, the
effectiveness of this Transaction is expressly subject to the Financial
Institutions Division Approval.
9. CONDITIONS PRECEDENT TO OBLIGATION OF SUNDERLAND. Sunderland's
obligation to consummate this merger shall be subject to fulfillment on or
before the Closing Date of each of the following conditions, unless waived in
writing by Sunderland:
9.1 Del Mar Mortgage's Representations and Warranties. The
representations and warranties of Del Mar Mortgage set forth herein shall be
true and correct at the Closing Date as though made at and as of that date,
except as affected by the transactions contemplated hereby.
9.2 Del Mar Mortgage's Covenants. Del Mar Mortgage shall have performed
all covenants required by this Agreement to be performed by it on or before the
Closing Date.
9.3 Shareholder Approval. This Agreement shall have been approved by
the required number of shareholders of the Constituent Corporations.
9.4 Supporting Documents of Del Mar Mortgage. Del Mar Mortgage shall
have delivered to Sunderland supporting documents in form and substance
satisfactory to Sunderland to the effect that:
(i) Del Mar Mortgage is a corporation duly organized,
validly existing, and in good standing.
(ii) Del Mar Mortgage's authorized and issued capital
stock is as set forth herein.
(iii) The execution and consummation of this Agreement have
been duly authorized and approved by Del Mar
Mortgage's board of directors.
10. ACCESS. From the date hereof to the Closing Date, Sunderland and
Del Mar Mortgage shall provide each other with such information and permit each
other's officers and representatives
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 8
- --------------------------------------------------------------------------------
such access to its properties and books and records as the other may from time
to time reasonably request. If the transactions contemplated by this Agreement
are not consummated, all documents received in connection with this Agreement
shall be returned to the party furnishing such documents, and all information so
received shall be treated as confidential.
11. CLOSING.
11.1 The transfers and deliveries to be made pursuant to this Agreement
(the "Closing") shall be made by and take place at the offices of the Exchange
Agent or other location designated by the Constituent Corporations without
requiring the meeting of the parties hereof. All proceedings to be taken and all
documents to be executed at the Closing shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed. The Constitutent Corporations shall use reasonable best efforts to
cause the Closing and the Affiliated Closing to be consummated on April 9, 1999
or as soon thereafter as reasonably practicable.
11.2 Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission required by this Agreement or any
signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission or original signature.
11.3 At the Closing, Del Mar Mortgage shall deliver to the Exchange
Agent in satisfactory form, if not already delivered to Sunderland:
(i) A list of the holders of the shares of Del Mar
Mortgage Common Stock being exchanged with an
itemization of the number of shares held by each, the
address of each holder, and the aggregate number of
shares of Sunderland Common Stock to be issued to
each holder;
(ii) Evidence of the consent of shareholders of Del Mar
Mortgage to this Agreement;
(iii) Certificate of the Secretary of State of Nevada as of
a recent date as to the good standing of Del Mar
Mortgage;
(iv) Certified copies of the resolutions of the board of
directors of Del Mar Mortgage authorizing the
execution of this Agreement and the consummation of
this Transaction;
(v) Del Mar Mortgage Financial Statements;
(vi) Secretary's certificate of incumbency of the officers
and directors of Del Mar Mortgage; and
(vii) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 9
- --------------------------------------------------------------------------------
11.4 At the Closing, Sunderland shall deliver to the Exchange Agent in
satisfactory form, if not already delivered to Del Mar Mortgage:
(i) A list of the shareholders of record of Sunderland,
including, wherever available, addresses and
telephone numbers;
(ii) Evidence of the consent of shareholders of Sunderland
to this Agreement;
(iii) Certificate of the Secretary of State of Delaware as
of a recent date as to the good standing of
Sunderland;
(iv) Certified copies of the resolutions of the board of
directors of Sunderland authorizing the execution of
this Agreement and the consummation of this
Transaction;
(v) The Sunderland Financial Statements;
(vi) Secretary's certificate of incumbency of the officers
and directors of Sunderland; and
(vii) Any document as may be specified herein or required
to satisfy the conditions, representations and
warranties enumerated elsewhere herein.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Constituent Corporations set out herein shall survive the
Closing Date for a period of one (1) year.
13. ARBITRATION.
13.1 Scope. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether existing
now, in the past or in the future as to which the parties or any affiliates may
be adverse parties, and whether arising out of this Agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association.
13.2 Situs. The parties hereby irrevocably consent to the jurisdiction
of the American Arbitration Association and the situs of the arbitration at a
time and place chosen by American Arbitration Association. Any award in
arbitration may be entered in any domestic or foreign court having jurisdiction
over the enforcement of such awards.
13.3 Applicable Law. The law applicable to the arbitration and this
Agreement shall be that of the State of Delaware, determined without regard to
its provisions which would otherwise apply to a question of conflict of laws.
Any dispute as to the applicable law shall be decided by the arbitrator.
13.4 Disclosure and Discovery. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 10
- --------------------------------------------------------------------------------
order the parties to comply with all or any of the disclosure and discovery
provisions of the Federal Rules of Civil Procedure, as they then exist, as may
be modified by the arbitrator consistent with the desire to simplify the conduct
and minimize the expense of the arbitration.
13.5 Rule of Law. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much as possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
13.6 Finality and Fees. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except as to
errors of law. Each party to the arbitration shall pay its own costs and counsel
fees.
13.7 Measure of Damages. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and no claims shall be
made by any party or affiliate for lost profits, punitive or multiple damages.
13.8 Covenant Not to Sue. The parties covenant that under no
conditions will any party or any affiliate file any action against the other
(except only requests for injunctive or other equitable relief) in any forum
other than before the American Arbitration Association, and the parties agree
that any such action, if filed, shall be dismissed upon application and shall be
referred for arbitration hereunder with costs and attorney's fees to the
prevailing party.
13.9 Intention. It is the intention of the parties and their
affiliates that all disputes of any nature between them, whenever arising, from
whatever cause, based on whatever law, rule or regulation, whether statutory or
common law, and however characterized, be decided by arbitration as provided
herein and that no party or affiliate be required to litigate in any other forum
any disputes or other matters except for requests for injunctive or equitable
relief. This Agreement shall be interpreted in conformance with this stated
intent of the parties and their affiliates.
14. TERMINATION. This Agreement may be terminated (1) by mutual consent
in writing, or (2) by either Del Mar Mortgage, the Shareholders or Sunderland if
there has been a material misrepresentation or material breach of any warranty
or covenant by any other party.
15. GENERAL PROVISIONS
15.1 Further Assurances. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably required
to carry out the intent and purposes of this Agreement.
15.2 Waiver. Any failure on the part of either party hereto to comply
with any of its obligations, agreements, or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
15.3 Brokers. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by brokers
or finders employed or alleged to have been employed by the indemnifying party.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 11
- --------------------------------------------------------------------------------
15.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
If to Sunderland, to:
Sunderland Acquisition Corporation
1504 R Street, N.W.
Washington, D.C. 20009
If to Del Mar Mortgage, to
Del Mar Mortgage, Inc.
2901 El Camino Avenue
Suite 206
Las Vegas, Nevada 89102
15.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
15.6 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this Agreement
without the written consent of the other party shall be void.
15.7 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
15.8 Exchange Agent. The exchange agent is Sklar Warren Conway Williams
& Rosenfeld LLP, Las Vegas, Nevada.
15.9 Effective Date. This effective date of this Agreement shall be
April 9, 1999.
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 12
- --------------------------------------------------------------------------------
SIGNATURE PAGE TO ASSET AGREEMENT
BETWEEN SUNDERLAND ACQUISITION CORPORATION AND
DEL MAR MORTGAGE, INC., DATED APRIL ___, 1999
IN WITNESS WHEREOF, the parties have executed this Agreement.
SUNDERLAND ACQUISITION CORPORATION
By
--------------------------------
James M. Cassidy,
President and Secretary
DEL MAR MORTGAGE, INC.
By
--------------------------------
Michael V. Shustek,
Secretary and Treasurer
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 13
- --------------------------------------------------------------------------------
ASSET ACQUISITION AGREEMENT
BETWEEN SUNDERLAND ACQUISITION CORPORATION
AND DEL MAR MORTGAGE, INC.
DATED APRIL 9, 1999
EXHIBIT A
Assets of Del Mar Mortgage Acquired by Sunderland
All customer lists, FF&E, trade knowledge and procedures, trade names,
trademarks, service marks, logos, fictitious names, marketing materials, trade
dress, and all rights under leases and licenses, other than regulatory licenses
of Del Mar Mortgage, Inc., a Nevada corporation (and all liabilities of
whatsoever type or nature with respect or in any way related to all of the
foregoing.)
<PAGE>
ASSET ACQUISITION AGREEMENT DEL MAR MORTGAGE PAGE NUMBER 14
- --------------------------------------------------------------------------------
Exhibit B
Due Diligence Responses
<PAGE>
PROPOSED TAX-FREE EXCHANGE OF
SUBSTANTIALLY ALL OF THE ASSETS OF
DEL MAR MORTGAGE, INC. AND DEL MAR HOLDINGS, INC.
FOR SHARES OF STOCK OF TPG CAPITAL CORPORATION
DUE DILIGENCE CHECKLIST
Set forth below is a preliminary list of documents and information
which Del Mar Mortgage, Inc. and Del Mar Holdings, Inc. (jointly, "DEL MAR")
would like to review in connection with the proposed exchange of substantially
all of the assets of Del Mark for shares of stock of TPG Capital Corporation
("TPG"). Please provide the information requested in each item below, or if
there is no information or documentation which is responsive to that particular
request, please place the words "NONE" or "NOT APPLICABLE" opposite such
request. Whenever an inquiry is made with respect to an agreement, please
specify whether the agreement is oral or written and provide information
relating thereto. WE RECOGNIZE THAT SIGNIFICANT PORTIONS OF THIS CHECKLIST MAY
BE INAPPLICABLE TO TPG AND UNDERSTAND THAT THE RESPONSE TO ALL BUT A FEW ITEMS
MAY BE "NONE" OR "NOT APPLICABLE."
A. GENERAL CORPORATE MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Articles of Incorporation, as amended to date.
2 Bylaws (or similar document), as amended to date.
3 The last four years of minutes of shareholders' meetings,
including written consents to action without a meeting.
4 The last four years of minutes of board of directors'
meetings, including written consents to action without a
meeting.
5 The last four years of minutes of any committees of the board,
including written consents to action without a meeting.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
6 Shareholder and other lists setting forth the number of
shares, options, warrants, and other rights to acquire shares
of stock of TPG, listing the names and addresses, amounts, the
dates of grants, and the exercise price and vesting in each
case.
7 List of officers and directors.
8 Management structure organization chart.
9 Written documents pertaining to any material relationships
between (i) TPG and its officers and directors, (ii) officers
and directors of TPG and any of TPG's affiliates or
subsidiaries, and (iii) TPG and its affiliates and
subsidiaries.
10 Agreements related to partnerships or joint venture
affiliations, whether presently in effect or terminated.
11 Any purchase options or buyout obligations with respect to any
affiliate or subsidiary.
12 Agreements relating to mergers, acquisitions, sales, or
licenses of material assets or rights of TPG, or acquisition
of the shares or assets of any other business by TPG since the
date of incorporation.
13 List of all states in which TPG is qualified to do business or
is doing business and describe what sort of activities occur
in each such state.
14 Good Standing Certificate for each such state.
15 Tax status certificate for each such state.
16 Any other permits, licenses or other approvals necessary to
conduct such business, as well as information regarding any
such permit, licenses, etc., whether presently in effect,
expired, or terminated.
17 Agreements relating to the purchase, repurchase, sale, or
issuance of TPG's securities, including any options to
purchase stock.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
18 Agreements relating to the issuance of any warrants to
purchase capital stock of TPG.
19 Agreements relating to registration rights.
20 Agreements relating to the voting of TPG's securities and
restrictive share transfers or any other shareholder
agreements.
21 Agreements relating to preemptive or other preferential rights
to acquire TPG's securities and any waivers thereof.
22 Agreements relating to any redemption rights.
23 Agreements relating to any stock appreciation rights, rights
of first refusal, anti-dilution rights, take-along rights,
bring-along rights, or rights upon change in control of TPG.
24 All agreements restricting the payment of cash dividends.
25 Current stockholders' ledger showing all stockholders and
shares owned and a list showing any outstanding options,
warrants, or other rights to acquire securities of TPG.
</TABLE>
3
<PAGE>
B. GENERAL BUSINESS INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 List of all written contracts entered into by TPG.
2 List of all liabilities and/or obligations (including all
contingent liabilities) of TPG.
</TABLE>
4
<PAGE>
C. LITIGATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Description of all litigation, claims and proceedings settled
or concluded since the date of incorporation.
2 Description of all litigation, claims, and proceedings
threatened or pending, including potential litigation against
either TPG or TPG's employees as a result of their employment
with TPG. Please include potential litigation (e.g., employees
who may be in breach of noncompete agreements with former
employers.)
3 All consent decrees, judgments, settlement documents,
injunctions, or similar matters entered into by TPG in
connection with any litigation.
4 Description of all pending or threatened investigations or
governmental proceedings.
5 All attorneys' letters to auditors since formation.
</TABLE>
5
<PAGE>
D. COMPLIANCE WITH LAWS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All citations and notices received from government agencies
since formation or with continuing effect from an earlier
date.
2 All material reports to and correspondence with any government
entity, municipality or agency, including DOL, IRS, EPA and
OSHA, since formation.
3 All documents showing any certification or compliance with, or
any deficiency with respect to, regulatory standards of TPG
since formation.
4 Description of any problems with regulatory compliance,
including ERISA, labor and other federal, state and local
regulations.
5 All material governmental permits, licenses, etc. of TPG
presently in force, together with information regarding any
such permits, licenses, etc., whether presently in effect,
expired, canceled or terminated which are required to carry
out the business or operations of TPG or its subsidiaries or
affiliates.
6 Evidence of qualification or exemption under applicable
federal and state blue sky laws for the issuance or transfer
of TPG's securities.
</TABLE>
6
<PAGE>
E. MANAGEMENT AND EMPLOYEES
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All employment or similar agreements entered into with any
employee and independent contractor. including any officer or
director of TPG.
2 All consulting agreements, commissions to agents or
representatives, or similar arrangements between TPG and any
person, entity, or affiliate.
3 Loans to and guarantees for the benefit of any employee,
including directors, officers or shareholders.
4 Agreements or insurance policies providing for the
indemnification or any officers or directors of TPG.
5 Salary information for employees and independent contractors.
(The name of each employee may be deleted, but please provide
job titles.)
6 Schedule of accrued salaries, commissions, vacation time and
sick leave for employees.
7 Copies of any qualified defined benefit or defined
contribution retirement plans, related trusts and summary plan
descriptions of the same, including all affiliate's or
subsidiary's plans whether or not the affiliate's or
subsidiary's plan provides benefits to TPG employees or
consultants.
8 Copies of all employee welfare benefit plans, related trusts
and summary plan descriptions of the same, including all
affiliate's or subsidiary's plans whether or not the
affiliate's or subsidiary's plan provides benefits to TPG
employees or consultants.
9 Copies of any non-qualified executive compensation plans.
10 Copies of any bonus, commission or similar plan or arrangement
covering employees and consultants.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
11 Copies of any Voluntary Employee Benefit Associations
("VEBAs") or any related plans.
12 Copies of any plans relating to severance or termination pay,
vacation, sick leave, loans, or other extensions of credit,
loan guarantees, relocation assistance, educational
assistance, tuition payments, employee benefits, workers'
compensation, executive compensation, or fringe benefits
(including any plan exempted from ERISA by virtue of section
4(b) of ERISA).
13 copies of any actuarial reports for past three years.
14 Copies of all governmental filings relating to any of the
plans or benefits described in this category for the last
three years.
15 Copies of any investment management agreements.
16 Copies of other material documents related to employment and
labor matters or benefits such as, notices of ERISA Title IV
terminations or withdrawal liability, employee handbooks, and
other written or oral communications with employees,
consultants, affiliates, or subsidiaries.
</TABLE>
8
<PAGE>
F. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All debt instruments, credit agreements, and guarantees
entered into by TPG which are currently in effect, and all
mortgages, liens, pledges, indemnifications, security
agreements, charges or encumbrances of any nature whatsoever
to which any of the property or assets of TPG are subject.
2 All notices of default or noncompliance from lenders during
the last three years and all compliance reports submitted by
TPG or its accountants.
3 All loans and guarantees of third party obligations.
4 All loan agreements, guaranty agreements, and other documents
to which any officers, directors, shareholders or other third
persons have guaranteed obligations of TPG.
5 Annual financial reports for the last three years.
6 All agreements pursuant to which TPG is subject to any
obligation to provide funds to or to make investments in any
other person (in the form of a loan, capital contribution or
otherwise).
7 List of financial institutions and types of accounts, with
copies of all material correspondence to with and from lenders
in the past three years for TPG and any subsidiary.
8 All Uniform Commercial Code financing statements filed with
respect to the above.
9 Copies of notes payable to or notes receivable from any
employee, director, member, affiliate, agent, or shareholder
of TPG for the past three years.
</TABLE>
9
<PAGE>
G. PROPERTY
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All deeds and other instruments of legal title which relate to
any assets or properties of TPG.
2 All operating leases, real property leases and subleases to
which TPG is a party or has a beneficial interest thereunder.
3 Financing leases, sale and lease-back agreements, conditional
sale agreements, or similar agreements which relate to any
assets, properties, or interests of TPG.
</TABLE>
10
<PAGE>
H. MARKETING ARRANGEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All press releases concerning TPG since TPG's formation.
</TABLE>
11
<PAGE>
I. OTHER AGREEMENTS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 All agreements, contracts or commitments limiting freedom of
TPG to engage in any line of business or to compete with any
other business or person.
2 A schedule of all insurance policies of TPG and associated
annual premiums and limits.
3 Principal documents relating to any acquisition or disposition
of businesses by TPG in the last three years.
4 All other agreements material to the business of TPG.
</TABLE>
12
<PAGE>
J. TAX MATTERS
<TABLE>
<CAPTION>
RESPONSE
(E.G., "A-1
ATTACHED" OR "N/A"
ITEM NO. DESCRIPTION OF INFORMATION REQUESTED "NONE")
-------- ------------------------------------ -------
<S> <C> <C>
1 Copies of all federal tax returns for years 1995, 1996 and
1997.
2 Copies of any correspondence or notice from any foreign,
federal, state or local taxing authority regarding any filed
tax return (or any failure to file) including copies of all
audit reports and descriptions of any pending tax audits by
the IRS or other applicable tax authorities.
</TABLE>
13
<PAGE>
Due Diligence Checklist
For Proposed Tax-Free Exchange of
Substantially all of the Assets of
Sel Mar Mmortgage, Inc. and Del Mar Holdings, Inc.
For Shares of Stock of Sunderland Acquisition Corporation
The items below correspond to the numbered paragraphs of the due
diligence checklist furnished in regard to the proposed exchange of
substantially all of the assets of Del Mar Mortgage, Inc. and Del Mar
Holdings, Inc. for shares of stock of Sunderland Acquisition Corporation.
A.1 Attached
A.2 Attached
A.3 None
A.4 Attached
A.5 None
A.6 See Form F-10/A attached
A.7 See Form F-10/A attached
A.8 See Form F-10/A attached
A.9 See Form F-10/A attached
A.10 None
A.11 None
A.12 None
A.13 Delaware
A.14 Ordered
A.15 Ordered
A.16 NA
<PAGE>
A.17 None
A.18 None
A.19 None
A.20 Attached lock-up agreements
A.21 None
A.22 None
A.23 5-year warrant to be granted to TPG Capital Corporation
A.24 None
A.25 See Form F-10/A attached
B.1 Lock-up agreements with its shareholders
B.2 See financials contained in the Form F-10/A attached
C.1 None
C.2 None
C.3 None
C.4 None
C.5 None
D.1 None
D.2 None except with the Securities and Exchange Commission in registration
of securities
D.3 None
D.4 None
D.5 None
<PAGE>
D.6 The National Securities Market Improvement Act of 1996 ("NMSIA") limits
the authority of states to impose restrictions upon sales of securities
made pursuant to Sections 4(1) and 4(3) of the Securities Act of 1933,
as amended (the "Securities Act") of companies which file reports under
Sections 13 or 15(d) of the Securities Exchange Act, Sunderland files
such reports. Sales of the common stock in the secondary trading market
by securityholders are expected to be made pursuant to Section 4(1)
(sales other than by an issuer, underwriter or broker) and therefore not
subject to state restrictions.
E.1 None
E.2 None
E.3 None
E.4 The by-laws provide for indemnification of officers and directors to
the fullest extent allowed by Delaware law.
E.5 NA
E.6 NA
E.7 None
E.8 None
E.9 None
E.10 None
E.11 None
E.12 None
E.13 None
E.14 None
E.16 None
F.1 None
<PAGE>
F.2 None
F.3 None
F.4 None
F.5 See Form F-10/A attached
F.6 None
F.7 Checking account maintained at Riggs Bank, N.A., Dupont Circle Branch,
Washington, DC 20036
F.8 None
F.9 None
G.1 None
G.2 None
G.3 None
H.1 None
I.1 See Form F-10/A attached for scope of business
I.2 None
I.3 None
I.4 None
J.1 Corporation was incorporated in 1998 and no tax return has yet been
filed
J.2 None
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "SUNDERLAND ACQUISITION CORPORATION", FILED IN THIS OFFICE
ON THE SECOND DAY OF JUNE, A.D. 1998, AT 9:01 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
SEAL -----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 9115393
DATE: 06-02-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 06/02/1998
981210158 - 2902945
CERTIFICATE OF INCORPORATION
OF
SUNDERLAND ACQUISITION CORPORATION
ARTICLE ONE
NAME
The name of the Corporation is Sunderland Acquisition Corporation.
ARTICLE TWO
DURATION
The Corporation shall have perpetual existence.
ARTICLE THREE
PURPOSE
The purpose for which this Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE FOUR
SHARES
The total number of shares of stock which the Corporation shall have
authority to issue is 120,000,000 shares, consisting of 100,000,000 shares of
Common Stock having a par value of $.0001 per share and 20,000,000 shares of
Preferred Stock having a par value of $.0001 per share.
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock in series and, by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations of restrictions thereof.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 2
- -----------------------------------------------------------------------------
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
A. The number of shares constituting that series and the distinctive
designation of that series;
B. The dividend rate of the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on share of that series;
C. Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
E. Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
F. Whether that series shall have sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
H. Any other relative rights, preferences and limitations of that
series.
ARTICLE FIVE
COMMENCEMENT OF BUSINESS
The Corporation is authorized to commence business as soon as its
certificate of Incorporation has been filed.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 3
- -----------------------------------------------------------------------------
ARTICLE SIX
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the initial registered office of the
Corporation and the name of its initial registered agent and its business
address is
The Prentice-Hall Corporation System, Inc.
1013 Centre Road
Wilmington, Delaware 19805 (County of New Castle)
The initial registered agent is a resident of the State of Delaware.
ARTICLE SEVEN
INCORPORATOR
Lee W. Cassidy, 1504 R Street, N.W., Washington, D.C. 20009
ARTICLE EIGHT
PRE-EXEMPTIVE RIGHTS
No Shareholder or other person shall have any pre-emptive rights
whatsoever.
ARTICLE NINE
BY-LAWS
The initial by-laws shall be adopted by the Shareholders or the Board of
Directors. The power to alter, amend, or repeal the by-laws or adopt new
by-laws is vested in the Board of Directors, subject to repeal or change by
action of the Shareholders.
ARTICLE TEN
NUMBER OF VOTES
Each share of Common Stock has one vote on each matter on which the
share is entitled to vote.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 4
- -----------------------------------------------------------------------------
ARTICLE ELEVEN
MAJORITY VOTES
A majority vote of a quorum of Shareholders (consisting of the holders
of a majority of the shares entitled to vote, represented in person or by
proxy) is sufficient for any action which requires the vote or concurrence of
Shareholders, unless otherwise required or permitted by law or the by-laws of
the Corporation.
ARTICLE TWELVE
NON-CUMULATIVE VOTING
Directors shall be elected by majority vote. Cumulative voting shall not
be permitted.
ARTICLE THIRTEEN
INTERESTED DIRECTORS, OFFICERS AND SECURITYHOLDERS
A. VALIDITY. If Paragraph (B) is satisfied, no contract or other
transaction between the Corporation and any of its directors, officers or
securityholders, or any corporation or firm in which any of them are directly
or indirectly interested, shall be invalid solely because of this
relationship or because of the presence of the director, officer or
securityholder at the meeting of the Board of Directors or committee
authorizing the contract or transaction, or his participation or vote in the
meeting or authorization.
B. DISCLOSURE, APPROVAL, FAIRNESS. Paragraph (A) shall apply only if:
(1) The material facts of the relationship or interest of each such
director, officer or securityholder are known or disclosed:
(a) to the Board of Directors or the committee and it nevertheless
authorizes or ratifies the contract or transaction by a majority of the
directors present, each such interest director to be counted in determining
whether a quorum is present but not in calculating the majority necessary to
carry the vote; or
(b) to the Shareholders and they nevertheless authorize or ratify the
contract or transaction by a majority of the shares present, each such
interested person to be counted for quorum and voting purposes; or
(2) the contract or transaction is fair to the Corporation as of the
time it is authorized or ratified by the Board of Directors, the committee or
the Shareholders.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 5
- ------------------------------------------------------------------------------
ARTICLE FOURTEEN
INDEMNIFICATION AND INSURANCE
A. PERSONS. The Corporation shall indemnify, to the extent provided in
Paragraphs (B), (D) or (F) and to the extent permitted from time to time by
law;
(1) any person who is or was director, officer, agent or employee of
the Corporation, and
(2) any person who serves or served at the Corporation's request as a
director, officer, agent, employee, partner or trustee of another corporation
or of a partnership, joint venture, trust or other enterprise.
B. EXTENT--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation against a person named in Paragraph (A) by reason of his
holding a position named in Paragraph (A), the Corporation shall indemnify
him. If he satisfies the standard in Paragraph (C), for expenses (including
attorney's fees but excluding amounts paid in settlement) actually and
reasonably incurred by him in connection with the defense or settlement of
the suit.
C. STANDARD--DERIVATIVE SUITS. In case of a suit by or in the right of
the Corporation, a person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the suit, and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation. However, he shall not be indemnified
in respect of any claim, issue or matter as to which he has been adjudged
liable for negligence or misconduct in the performance of his duty to the
Corporation unless (and only to the extent that) the court in which the suit
was brought shall determine, upon application, that despite the adjudication
but in view of all the circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. EXTENT--NONDERIVATIVE SUITS. In case of a suit, action or
proceeding (whether civil, criminal, administrative or investigative), other
than a suit by or in the right of the Corporation against a person named in
Paragraph (A) by reason of his holding a position named in Paragraph (A), the
Corporation shall indemnify him, if he satisfies the standard in
Paragraph (E), for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the suit as
(1) expenses (including attorneys' fees),
(2) amounts paid in settlement
(3) judgments, and
(4) fines.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 6
- ------------------------------------------------------------------------------
E. STANDARD--NONDERIVATIVE SUITS. In case of a nonderivative suit, a
person named in Paragraph (A) shall be indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the subject of
the nonderivative suit, and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to
any criminal action or proceeding, he had no reason to believe his conduct
was unlawful. The termination of a nonderivative suit by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person failed to satisfy
this Paragraph (E) (2).
F. DETERMINATION THAT STANDARD HAS BEEN MET. A determination that the
standard of Paragraph (C) or (E) has been satisfied may be made by a court of
law or equity or the determination may be made by:
(1) a majority of the directors of the Corporation (whether or not a
quorum) who were not parties to the action, suit or proceeding, or
(2) independent legal counsel (appointed by a majority of the directors
of the Corporation, whether or not a quorum, or elected by the Shareholders
of the Corporation) in a written opinion, or
(3) the Shareholders of the Corporation.
G. PRORATION. Anyone making a determination under Paragraph (F) may
determine that a person has met the standard as to some of the matters but
not as to others, and may reasonably prorate amounts to be indemnified.
H. ADVANCE PAYMENT. The Corporation may pay in advance any expenses
(including attorney's fees) which may become subject to indemnification under
paragraphs (A)-(G) if:
(1) the Board of Directors authorizes the specific payment and
(2) the person receiving the payment undertakes in writing to repay
unless it is ultimately determined that he is entitled to indemnification by
the Corporation under Paragraphs (A)-(G).
L. NONEXCLUSIVE. The indemnification provided by Paragraphs (A)-(G)
shall not be exclusive of any other rights to which a person may be entitled
by law or by by-law, agreement, vote of Shareholders or disinterested
directors, or otherwise.
J. CONTINUATION. The indemnification and advance payment provided by
Paragraphs (A)-(H) shall continue as to a person who has ceased to hold a
position named in paragraph (A) and shall inure to his heirs, executors and
administrators.
<PAGE>
CERTIFICATE OF INCORPORATION PAGE NUMBER 7
- ------------------------------------------------------------------------------
K. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position named in
Paragraph (A) against any liability incurred by him in any such positions or
arising out of this status as such, whether or not the Corporation would have
power to indemnify him against such liability under Paragraphs (A)-(H).
L. REPORTS. Indemnification payments, advance payments, and insurance
purchases and payments made under Paragraphs (A)-(K) shall be reported in
writing to the Shareholders of the Corporation with the next notice of
annual meeting, or within six months, whichever is sooner.
M. AMENDMENT OF ARTICLE. Any changes in the General Corporation Law of
Delaware increasing, decreasing, amending, changing or otherwise effecting
the indemnification of directors, officers, agents, or employees of the
Corporation shall be incorporated by reference in this Article as of the date
of such changes without further action by the Corporation, its Board of
Directors, of Shareholders, it being the intention of this Article that
directors, officers, agents and employees of the Corporation shall be
indemnified to the maximum degree allowed by the General Corporation Law of
the State of Delaware at all times.
ARTICLE FIFTEEN
Limitation On Director Liability
A. SCOPE OF LIMITATION. No person, by virtue of being or having been a
director of the Corporation, shall have any personal liability for monetary
damages to the Corporation or any of its Shareholders for any breach of
fiduciary duty except as to the extent provided in Paragraph (B).
B. EXTENT OF LIMITATION. The limitation provided for in this Article
shall not eliminate or limit the liability of a director to the director to
the Corporation or its Shareholder (i) for any breach of the director's duty
of loyalty to the Corporation or its Shareholders (ii) for any acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) for any unlawful payment of dividends or
unlawful stock purchases or redemptions in violation of Section 174 of the
General Corporation Law of Delaware or (iv) for any transaction for which the
director derived an improper personal benefit.
IN WITNESS WHEREOF, the incorporator hereunto has executed this
certificate of incorporation on this 1st day of June, 1998.
/s/ Lee W. Cassidy
-----------------------------------
Lee W. Cassidy, Incorporator
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
BY-LAWS
ARTICLE I
The Stockholders
Section 1.1. ANNUAL MEETING. The annual meeting of the stockholders of
Sunderland Acquisition Corporation (the "Corporation") shall be held on the
third Thursday in May of each year at 10:30 a.m. local time, or at such other
date or time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, for the election of
directors and for the transaction of such other business as may come before
the meeting.
Section 1.2. SPECIAL MEETINGS. A special meeting of the stockholders
may be called at any time by the written resolution or request of two-thirds
or more of the members of the Board of Directors, the president, or any
executive vice president and shall be called upon the written request of the
holders of two-thirds or more in amount, of each class or series of the
capital stock of the Corporation entitled to vote at such meeting on the
matters(s) that are the subject of the proposed meeting, such written
request in each case to specify the purpose or purposes for which such
meeting shall be called, and with respect to stockholders proposals, shall
further comply with the requirements of this Article.
Section 1.3. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, whether annual or special, stating the date, hour and place
where it is to be held, shall be served either personally or by mail, not
less than fifteen nor more than sixty days before the meeting, upon each
stockholder of record entitled to vote at such meeting, and to any other
stockholder to whom the giving of notice may be required by law. Notice of a
special meeting shall also state the purpose or purposes for which the
meeting is called and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would, if taken, entitle stockholders to
receive payment for their stock, the notice of such meeting shall include a
statement of that purpose and to that effect. If mailed, notice shall be
deemed to be delivered when deposited in the United States mail or with any
private express mail service, postage or delivery fee prepaid, and shall be
directed to each such stockholder at his address, as it appears on the
records of the stockholders of the Corporation, unless he shall have
previously filed with the secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated, in such request.
Section 1.4. FIXING DATE OF RECORD. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than
ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders
<PAGE>
entitled to notice of, or to vote at, a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting (to the
extent that such action by written consent is permitted by law, the
Certificate of Incorporation or these By-Laws), the Board of Directors may
fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by law, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in its state of
incorporation, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 1.5 INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed and the proxies and ballots shall be received and
be taken in charge. All questions touching on the qualification of voters and
the validity of proxies and the acceptance or rejection of votes, shall be
decided by one or more inspectors. Such inspectors shall be appointed by the
Board of Directors before or at the meeting, or, if no such appointment shall
have been made, then by the presiding officer at the meeting. If for any
reason any of the inspectors previously appointed shall fail to attend or
refuse or be unable to serve, inspectors in place of any so failing to attend
or refusing or unable to serve shall be appointed in like manner.
<PAGE>
SECTION 1.6 QUORUM. At any meeting of the stockholders, the holders of a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number shall be required by law, and, in that
case, the representation of the number so required shall constitute a quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed in
accordance with these By-Laws for an annual or special meeting, a majority in
interest of the stockholders present in person or by proxy may adjourn, from
time to time, without notice other than by announcement at the meeting, until
holders of the amount of stock requisite to constitute a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 1.7 BUSINESS. The chairman of the Board, if any, the president,
or in his absence the vice-chairman, if any, or an executive vice president,
in the order named, shall call meetings of the stockholders to order, and
shall act as chairman of such meeting; provided, however, that the Board of
Directors or executive committee may appoint any stockholder to act as
chairman of any meeting in the absence of the chairman of the Board. The
secretary of the Corporation shall act as secretary at all meetings of the
stockholders, but in the absence of the secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as
secretary of the meeting.
SECTION 1.8 STOCKHOLDER PROPOSALS. No proposal by a stockholder shall be
presented for vote at a special or annual meeting of stockholders unless such
stockholder shall, not later than the close of business on the fifth day
following the date on which notice of the meeting is first given to
stockholders, provide the Board of Directors or the secretary of the
Corporation with written notice of intention to present a proposal for action
at the forthcoming meeting of stockholders, which notice shall include the
name and address of such stockholder, the number of voting securities that he
holds of record and that he holds beneficially, the text of the proposal to
be presented to the meeting and a statement in support of the proposal.
Any stockholder who was a stockholder of record on the applicable record
date may make any other proposal at an annual meeting or special meeting of
stockholders and the same may be discussed and considered, but unless stated
in writing and filed with the Board of Directors or the secretary prior to
the date set forth herein above, such proposal shall be laid over for action
at an adjourned, special, or annual meeting of the stockholders taking place
sixty days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees, but in connection with such reports, no
new business proposed by a stockholder, QUA stockholder, shall be acted upon
at such annual meeting unless stated and filed as herein provided.
Notwithstanding any other provision of these By-Laws, the Corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at
a special or annual meeting of stockholders if the Board of Directors
reasonably believes the proponents thereof have not complied with Sections 13
or 14 of
<PAGE>
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder; nor shall the Corporation be required to include any
stockholder proposal not required to be included in its proxy materials to
stockholders in accordance with any such section, rule or regulation.
SECTION 1.9 PROXIES. At all meetings of stockholders, a stockholder
entitled to vote may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact. Such proxy shall
be filed with the secretary before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 1.10 VOTING BY BALLOT. The votes for directors, and upon the
demand of any stockholder or when required by law, the votes upon any
question before the meeting, shall be by ballot.
SECTION 1.11 VOTING LISTS. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares of stock registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
SECTION 1.12 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or any special meeting called by the Board of
Directors. If no designation is made or if a special meeting is otherwise
called, the place of meeting shall be the principal office of the Corporation.
SECTION 1.13 VOTING OF STOCK OF CERTAIN HOLDERS. Shares of capital stock
of the Corporation standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the by-laws of such
corporation may prescribe, or in the absence of such provision, as the board
of directors of such corporation may determine.
Shares of capital stock of the Corporation standing in the name of a
deceased person, a minor ward or an incompetent person may be voted by his
administrator, executor, court-appointed guardian or conservator, either in
person or by proxy, without a transfer of such stock into the name of such
administrator, executor, court-appointed guardian or conservator. Shares of
capital stock of the Corporation standing in the name of a trustee may be
voted by him, either in person or by proxy.
Shares of capital stock of the Corporation standing in the name of a
receiver may be voted, either in person or by proxy, by such receiver, and
stock held by or under the control of a receiver
<PAGE>
may be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in any appropriate order of the court by
which such receiver was appointed.
A stockholder whose stock is pledged shall be entitled to vote such
stock, either in person or by proxy, until the stock has been transferred
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote, either in person or by proxy, the stock so transferred.
Shares of its own capital stock belonging to this Corporation shall not
be voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding stock at any given time, but
shares of its own stock held by it in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding stock at any
given time.
ARTICLE II
Board of Directors
SECTION 2.1. GENERAL POWERS. The business, affairs, and the property
of the Corporation shall be managed and controlled by the Board of Directors
(the "Board"), and, except as otherwise expressly provided by law, the
Certificate of Incorporation or these By-Laws, all of the powers of the
Corporation shall be vested in the Board.
SECTION 2.2. NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole Board shall be no fewer than one nor more than five.
Within the limits above specified, the number of directors shall be
determined by the Board of Directors pursuant to a resolution adopted by a
majority of the directors then in office.
SECTION 2.3. ELECTION, TERM AND REMOVAL. Directors shall be elected at
the annual meeting of stockholders to succeed those directors whose terms
have expired. Each director shall hold office for the term for which elected
and until his or her successor shall be elected and qualified. Directors
need not be stockholders. A director may be removed from office at a meeting
expressly called for that purpose by the vote of not less than a majority of
the outstanding capital stock entitled to vote an election of directors.
SECTION 2.4. VACANCIES. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by the affirmative vote of a majority of the remaining directors then in
office, though less than a quorum; except that vacancies resulting from
removal from office by a vote of the stockholders may be filled by the
stockholders at the same meeting at which such removal occurs provided that
the holders of not less than a majority of the outstanding capital stock of
the Corporation (assessed upon the basis of votes and not on the basis of
number of shares) entitled to vote for the election of directors, voting
together as a single class, shall vote for each replacement director. All
directors elected to fill vacancies shall hold office for a term expiring at
the time of the next annual meeting of stockholders and upon election and
qualification of his successor. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of an incumbent
director.
<PAGE>
SECTION 2.5. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the president or to the secretary of the
Corporation. The resignation of any director shall take effect at the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 2.6. PLACE OF MEETINGS, ETC. The Board of Directors may hold
its meetings, and may have an office and keep the books of the Corporation
(except as otherwise may be provided for by law), in such place or places in
or outside the state of incorporation as the Board from time to time may
determine.
SECTION 2.7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held as soon as practicable after adjournment of the
annual meeting of stockholders at such time and place as the Board of
Directors may fix. No notice shall be required for any such regular meeting
of the Board.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at places and times fixed by resolution of the Board
of Directors, or upon call of the chairman of the Board, if any, or
vice-chairman of the Board, if any, the president, an executive vice
president or two-thirds of the directors then in office.
The secretary or officer performing the secretary's duties shall give
not less than twenty-four hours' notice by letter, telegraph or telephone (or
in person) of all special meetings of the Board of Directors, provided that
notice need not given of the annual meeting or of regular meetings held at
times and places fixed by resolution of the Board. Meetings may be held at
any time without notice if all of the directors are present, or if those not
present waive notice in writing either before or after the meeting. The
notice of meetings of the Board need not state the purpose of the meeting.
SECTION 2.9. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board
of Directors of the Corporation, or any committee thereof, may participate in
a regular or special or any other meeting of the Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meetings.
SECTION 2.10. ACTION BY WRITTEN CONSENT. 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 prior or subsequent to such action
all the members of the Board or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
SECTION 2.11. QUORUM. A majority of the total number of directors then
in office shall constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time.
<PAGE>
SECTION 2.12. BUSINESS. Business shall be transacted at meetings of
the Board of Directors in such order as the Board may determine. At all
meetings of the Board of Directors, the chairman of the Board, if any, the
president, or in his absence the vice-chairman, if any, or an executive vice
president, in the order named, shall preside.
SECTION 2.13. INTEREST OF DIRECTORS IN CONTRACTS. (a) No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one ore more of the Corporation's
directors or officers, are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum: or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders;
or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors or the
stockholders.
(b) Interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
SECTION 2.14. COMPENSATION OF DIRECTORS. Each director of the
Corporation who is not a salaried officer or employee of the Corporation, or
of a subsidiary of the Corporation, shall receive such allowances for serving
as a director and such fees for attendance at meetings of the Board of
Directors or the executive committee or any other committee appointed by the
Board as the Board may from time to time determine.
SECTION 2.15. LOANS TO OFFICERS OR EMPLOYEES. The Board of Directors
may lend money to, guarantee any obligation of, or otherwise assist, any
officer or other employee of the Corporation or of any subsidiary, whether or
not such officer or employee is also a director of the Corporation, whenever,
in the judgment of the directors, such loan, guarantee, or assistance may
reasonably be expected to benefit the Corporation; provided, however, that
any such loan, guarantee, or other assistance given to an officer or employee
who is also a director of the Corporation must be authorized by a majority of
the entire Board of Directors. Any such loan, guarantee, or other assistance
may be made with or without interest and may be unsecured or
<PAGE>
secured in such manner as the Board of Directors shall approve, including,
but not limited to, a pledge of shares of the Corporation, and may be made
upon such other terms and conditions as the Board of Directors may determine.
SECTION 2.16 NOMINATION. Subject to the rights of holders of any class
or series of stock having a preference over the common stock as to dividends
or upon liquidation, nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors at a meeting only if written notice of such stockholder's intent
to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders the close of business on the last day of the
eighth month after the immediately preceding annual meeting of stockholders,
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the
fifth day following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such
other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors, and;
(e) the consent of each nominee to serve as a director of the Corporation if
so elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
ARTICLE III
Committees
SECTION 3.1. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the number of directors then fixed by these By-Laws or
resolution thereto, may establish such standing or special committees of the
Board as it may deem advisable, and the members, terms, and authority of such
committees shall be set forth in the resolutions establishing such committee.
SECTION 3.2. EXECUTIVE COMMITTEE NUMBER AND TERM OF OFFICE. The Board
of Directors may, at any meeting, by majority vote of the Board of Directors,
elect from the directors an executive committee. The executive committee
shall consist of such number of members as may be fixed from time to time by
resolution of the Board of Directors. The Board of Directors may designate a
chairman of the committee who shall preside at all meetings thereof, and the
committee shall designate a member thereof to preside in the absence of the
chairman.
<PAGE>
SECTION 3.3. EXECUTIVE COMMITTEE POWERS. The executive committee may,
while the Board of Directors is not in session, exercise all or any of the
powers of the Board of Directors in all cases in which specific directions
shall not have been given by the Board of Directors; except that the
executive committee shall not have the power or authority of the Board of
Directors to (i) amend the Certificate of Incorporation or the By-Laws of
the Corporation, (ii) fill vacancies on the Board of Directors, (iii) adopt
an agreement or certification of ownership, merger or consolidation, (iv)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or a dissolution
of the Corporation or a revocation of a dissolution, (v) declare a dividend,
or (vi) authorize the issuance of stock.
SECTION 3.4. EXECUTIVE COMMITTEE MEETINGS. Regular and special meetings
of the executive committee may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
By-Laws for regular and special meetings of the Board of Directors. Special
meetings of the executive committee may be called by any member thereof.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special or regular meeting of the executive meeting if a
quorum is present. At any meeting at which every member of the executive
committee shall be present, in person or by telephone, even though without
any notice, any business may be transacted. All action by the executive
committee shall be reported to the Board of Directors at its meeting next
succeeding such action.
The executive committee shall fix its own rules of procedure, and shall
meet where and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority of the total number
of members of the executive committee shall be necessary to constitute a
quorum. In every case, the affirmative vote of a quorum shall be necessary
for the adoption of any resolution.
SECTION 3.5 EXECUTIVE COMMITTEE VACANCIES. The Board of Directors, by
majority vote of the Board of Directors then in office, shall fill vacancies
in the executive committee by election from the directors.
ARTICLE IV
THE OFFICERS
SECTION 4.1. NUMBER AND TERM OF OFFICE. The officers of the Corporation
shall consist of, as the Board of Directors may determine and appoint from
time to time, a chief executive officer, a president, one or more executive
vice-presidents, a secretary, a treasurer, a controller, and/or such other
officers as may from time to time be elected or appointed by the Board of
Directors, including such additional vice-presidents with such designations,
if any, as may be determined by the Board of Directors and such assistant
secretaries and assistant treasurers. In addition, the Board of Directors may
elect a chairman of the Board and may also elect a vice-chairman as officers
of the Corporation. Any two or more offices may be held by the same person.
In its discretion, the Board of Directors may leave unfilled any office
except as may be required by law.
<PAGE>
The officers of the Corporation shall be elected or appointed from time
to time by the Board of Directors. Each officer shall hold office until his
successor shall have been duly elected or appointed or until his death or
until he shall resign or shall have been removed by the Board of Directors.
Each of the salaried officers of the Corporation shall devote his entire
time, skill and energy to the business of the Corporation, unless the
contrary is expressly consented to by the Board of Directors or the executive
committee.
SECTION 4.2. REMOVAL. Any officer may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation
would be served thereby.
SECTION 4.3. THE CHAIRMAN OF THE BOARD. The chairman of the Board, if
any, shall preside at all meetings of stockholders and of the Board of
Directors and shall have such other authority and perform such other duties
as are prescribed by law, by these By-Laws and by the Board of Directors. The
Board of Directors may designate the chairman of the Board as chief executive
officer, in which case he shall have such authority and perform such duties
as are prescribed by these By-Laws and the Board of Directors for the chief
executive officer.
SECTION 4.4. THE VICE-CHAIRMAN. The vice-chairman, if any, shall have
such authority and perform such other duties as are prescribed by these
By-Laws and by the Board of Directors. In the absence or inability to act of
the chairman of the Board and the president, he shall preside at the meetings
of the stockholders and of the Board of Directors and shall have and exercise
all of the powers and duties of the chairman of the Board. The Board of
Directors may designate the vice-chairman as chief executive officer, in which
case he shall have such authority and perform such duties as are prescribed
by these By-Laws and the Board of Directors for the chief executive officer.
SECTION 4.5. THE PRESIDENT. The president shall have such authority and
perform such duties as are prescribed by law, by these By-Laws, by the Board
of Directors and by the chief executive officer (if the president is not the
chief executive officer). The president, if there is no chairman of the
Board, or in the absence or the inability to act of the chairman of the
Board, shall preside at all meetings of stockholders and of the Board of
Directors. Unless the Board of Directors designates the chairman of the Board
or the vice-chairman as chief executive officer, the president shall be the
chief executive officer, in which case he shall have such authority and
perform such duties as are prescribed by these By-Laws and the Board of
Directors for the chief executive officer.
SECTION 4.6. THE CHIEF EXECUTIVE OFFICER. Unless the Board of Directors
designates the chairman of the Board or the vice-chairman as chief executive
officer, the president shall be the chief executive officer. The chief
executive officer of the Corporation shall have, subject to the supervision
and direction of the Board of Directors, general supervision of the business,
property and affairs of the Corporation, including the power to appoint and
discharge agents and employees, and the powers vested in him by the Board of
Directors, by law or by these By-Laws or which usually attach or pertain to
such office.
<PAGE>
SECTION 4.7. THE EXECUTIVE VICE-PRESIDENTS. In the absence of the
chairman of the Board, if any, the president and the vice-chairman, if any,
or in the event of their inability or refusal to act, the executive
vice-president (or in the event there is more than one executive vice-
president, the executive vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall
perform the duties of the chairman of the Board, of the president and of the
vice-chairman, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the chairman of the Board, the president
and the vice-chairman. Any executive vice-president may sign, with the
secretary or an authorized assistant secretary, certificates for stock of the
Corporation and shall perform such other duties as from time to time may be
assigned to him by the chairman of the Board, the president, the
vice-chairman, the Board of Directors or these By-Laws.
SECTION 4.8. THE VICE-PRESIDENTS. The vice-presidents, if any, shall
perform such duties as may be assigned to them from time to time by the
chairman of the Board, the president, the vice-chairman, the Board of
Directors, or these By-Laws.
SECTION 4.9. THE TREASURER. Subject to the direction of chief executive
officer and the Board of Directors, the treasurer shall have charge and
custody of all the funds and securities of the Corporation; when necessary or
proper he shall endorse for collection, or cause to be endorsed, on behalf of
the Corporation, checks, notes and other obligations, and shall cause the
deposit of the same to the credit of the Corporation in such bank or banks or
depositary as the Board of Directors may designate or as the Board of
Directors by resolution may authorize; he shall sign all receipts and
vouchers for payments made to the Corporation other than routine receipts and
vouchers, the signing of which he may delegate; he shall sign all checks made
by the Corporation (provided, however, that the Board of Directors may
authorize and prescribe by resolution the manner in which checks drawn on
banks or depositories shall be signed, including the use of facsimile
signatures, and the manner in which officers, agents or employees shall be
authorized to sign); unless otherwise provided by resolution of the Board of
Directors, he shall sign with an officer-director all bills of exchange and
promissory notes of the Corporation; whenever required by the Board of
Directors, he shall render a statement of his cash account; he shall enter
regularly full and accurate account of the Corporation in books of the
Corporation to be kept by him for that purpose; he shall, at all reasonable
times, exhibit his books and accounts to any director of the Corporation upon
application at his office during business hours; and he shall perform all
acts incident to the position of treasurer. If required by the Board of
Directors, the treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such sure ties as the Board of Directors may
require.
SECTION 4.10. THE SECRETARY. The secretary shall keep the minutes of
all meetings of the Board of Directors, the minutes of all meetings of the
stockholders and (unless otherwise directed by the Board of Directors) the
minutes of all committees, in books provided for that purpose; he shall
attend to the giving and serving all notices of the Corporation; he may sign
with an officer-director or any other duly authorized person, in the name of
the Corporation, all contracts authorized by the Board of Directors or by the
executive committee, and, when so ordered by the Board of Directors or the
executive committee, he shall affix the seal of the Corporation thereto; he
may sign with the president or an executive vice-president all certificates
of shares of the capital
<PAGE>
stock; he shall have charge of the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors or
the executive committee may direct, all of which shall, at all reasonable
times, be open to the examination of any director, upon application at the
secretary's office during business hours; and he shall in general perform all
the duties incident to the office of the secretary, subject to the control of
the chief executive officer and the Board of Directors.
SECTION 4.11. THE CONTROLLER. The controller shall be the chief
accounting officer of the Corporation. Subject to the supervision of the
Board of Directors, the chief executive officer and the treasurer, the
controller shall provide for and maintain adequate records of all assets,
liabilities and transactions of the Corporation, shall see that accurate
audits of the Corporation's affairs are currently and adequately made and
shall perform such other duties as from time to time may be assigned to him.
SECTION 4.12. THE ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors may determine. The assistant
secretaries as thereunto authorized by the Board of Directors may sign with
the chairman of the Board, the president, the vice-chairman or an executive
vice-president, certificates for stock of the Corporation, the issue of which
shall have been authorized by a resolution of the Board of Directors. The
assistant treasurers and assistant secretaries, in general, shall perform
such duties as shall be assigned to them by the treasurer or the secretary,
respectively, or chief executive officer, the Board of Directors, or these
By-Laws.
SECTION 4.13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director
of the Corporation.
SECTION 4.14. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors or by the executive committee, any officer, director or any
person or persons appointed in writing by any of them, shall have full power
and authority in behalf of the Corporation to attend and to act and to vote
at any meetings of stockholders of any corporation in which the Corporation
may hold stock, and at any such meeting shall possess and may exercise any
and all the rights and powers incident to the ownership of such stock, and
which, as the owner thereof, the Corporation might have possessed and
exercised if present. The Board of Directors may confer like powers upon any
other person or persons.
ARTICLE V
Contracts and Loans
SECTION 5.1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of
<PAGE>
and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 5.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
ARTICLES VI
Certificates for Stock and Their Transfer
SECTION 6.1. CERTIFICATES FOR STOCK. Certificates representing stock of
the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the chairman of the Board,
the president, the vice-chairman or an executive vice-president and/or by the
secretary or an authorized assistant secretary and shall be sealed with the
seal of the Corporation. The seal may be a facsimile. If a stock certificate
is countersigned (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee,
any other signature on the certificate may be a facsimile. In the event that
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. All certificates
for stock shall be consecutively numbered or otherwise identified. The name
of the person to whom the shares of stock represented thereby are issued,
with the number of shares of stock and date of issue, shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares of stock shall have been
surrendered and canceled, except that, in the event of a lost, destroyed or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 6.2. TRANSFER OF STOCK. Transfers of stock of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation, and
on surrender for cancellation of the certificate for such stock. The person
in whose name stock stands on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
<PAGE>
ARTICLE VII
Fiscal Year
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January in each year and end on the last day of
December in each year.
ARTICLE VIII
Seal
SECTION 8.1. SEAL. The Board of Directors shall approve a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the Corporation.
ARTICLE IX
Waiver of Notice
SECTION 9.1. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of these By-Laws or under the provisions of the
Certificate of Incorporation or under the provisions of the corporation law
of the state of incorporation, waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance
of any person at a meeting for which any notice is required to be given under
the provisions of these By-Laws, the Certificate of Incorporation or the
corporation law of the state of incorporation shall constitute a waiver of
notice of such meeting except when the person attends for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE X
Amendments
SECTION 10.1. AMENDMENTS. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted at any meeting of the Board of
Directors of the Corporation by the affirmative vote of a majority of the
members of the Board, or by the affirmative vote of a majority of the
outstanding capital stock of the Corporation (assessed upon the basis of
votes and not on the basis of number of shares) entitled to vote generally in
the election of directors, voting together as a single class.
<PAGE>
ARTICLE XI
Indemnification
SECTION 11.1. INDEMNIFICATION. The Corporation shall indemnify its
officers, directors, employees and agents to the fullest extent permitted by
the General Corporation Law of Delaware, as amended from time to time.
[END]
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
CONSENT OF DIRECTOR
IN LIEU OF ORGANIZATION MEETING
AS OF JUNE 9, 1998
The undersigned, being the sole director of Sunderland Acquisition
Corporation (the "Corporation") does hereby consent to the taking of the
following action in lieu of an organizational meeting and hereby waives any
notice required to be given therewith:
RESOLVED by the Board of Directors of the Corporation that;
1. ELECTION OF OFFICERS. The following persons be, and hereby are,
elected to the respective offices indicated to serve until further action of
the Board.
President James M. Cassidy
2. ADOPTION OF BY-LAWS. The by-laws attached hereto be, and hereby are,
adopted by the Corporation, and the Secretary is directed to file a
certified copy thereof in the minute book of the Corporation.
3. CORPORATE RECORDS. The President or Secretary be, and hereby is,
authorized and directed: to procure all corporate books, books of account and
stock books required by the statutes of the place of incorporation or
necessary or appropriate in connection with the business of the Corporation;
to obtain a seal of the Corporation bearing the words and figures.
"SUNDERLAND ACQUISITION CORPORATION, 1998"
which is hereby approved and adopted as and for the corporate seal of the
Corporation, provided that at any time the Secretary or designee may use a
facsimile of such seal; and to obtain certificates for the shares of the
Corporation, which shall be effective upon the endorsement of such
certificates by the authentic or facsimile signature of the President and
specimens of which certificates shall be annexed to this consent, and, which
shall be adopted as the form of certificate for the Corporation.
4. FISCAL YEAR. The fiscal year of the Corporation be, and hereby is,
shall be January 1 to December 31.
5. ISSUANCE OF STOCK. The President be, and hereby is, authorized and
directed to accept from time to time the subscription(s) for the stock of
the Corporation and upon receipts of payment for such stock, the designated
shares of the stock of the Corporation shall be issued to such subscriber(s),
as fully paid and nonassessable, in the full amount of the subscription.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 2
- ------------------------------------------------------------------------------
The Corporation hereby issues to Pierce Mill Associates, Inc. 4,250,000
shares of its Common Stock pursuant to Rule 506 of Regulation D of the
General Rules and Regulations of the Securities and Exchange Commission at
par for a purchase price of $425. The Corporation hereby issues 750,000 shares
of its Common Stock to Cassidy & Associates pursuant to Rule 701 for services.
<TABLE>
<CAPTION>
Subscriber Number of Shares Payment
- ---------- ---------------- -------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 -0-
</TABLE>
6. BANK ACCOUNTS. The President or his designee be and hereby is,
authorized to designate any bank or banks as he shall deem appropriate as a
depositary or depositaries for the funds of the Corporation; that the banking
resolutions required by such bank or banks in order to open an ordinary
checking account and such other accounts as the President of the Corporation
shall deem appropriate be, and they hereby are, adopted as the resolutions of
the Board of Directors as if fully set forth herein; and that the President
be, and hereby is, authorized to designate signatories to execute checks and
other documents on behalf of the Corporation with respect to such accounts;
and that the officers of the Corporation be, and hereby are, authorized and
directed to execute and deliver, in the name and on behalf of the Corporation
and under its corporate seal or otherwise, any and all certificates,
agreements, undertakings, authorizations, and other instruments or documents
as such bank or banks may require and as shall be necessary or appropriate to
carry out the intent and accomplish the purposes of this resolution; and that
copies of any banking resolutions so executed shall be inserted in the minute
book of the Corporation.
7. APPOINTMENT OF AGENTS. For the purpose of authorizing the
Corporation to do business in any state, territory, or possession of the
United States or any foreign country in which it is necessary or expedient
for the Corporation to do business, the officers of the Corporation be, and
hereby are, authorized to appoint and substitute all necessary agents or
attorneys for service of process, to designate and change the location of all
necessary statutory offices, and to make and file all necessary certificates,
reports, powers of attorney, and other instruments as may be required by the
laws of such state, territory, possession, or country to authorize the
Corporation to do business therein, and whenever it is expedient for the
Corporation to cease doing business therein and withdraw therefrom to revoke
any appointment of agent or attorney for services of process and to file any
necessary certificate, report, revocation of appointment, or
surrender of authority of the Corporation to do business therein.
8. EXECUTIVE COMMITTEE. Pursuant to the by-laws of the Corporation,
the President be, and hereby is, designated and constitutes an Executive
Committee of the Corporation.
9. RATIFICATION OF PRIOR ACTIONS. All actions heretofore taken or
authorized by the incorporators with respect to the organization or business
of the Corporation including filings and amendments thereto be, and hereby
are, ratified, approved and confirmed in all aspects.
<PAGE>
CONSENT OF DIRECTOR IN LIEU OF MEETING PAGE NUMBER 3
- ------------------------------------------------------------------------------
10. GENERAL AUTHORITY. The officers of the Corporation be, and hereby
are, authorized to take any and all other actions which they shall deem
necessary or appropriate to complete the organization of the Corporation and
to permit the Corporation legally to commence business within the state of
its jurisdiction.
Effective as of the date hereinabove written.
/s/James M. Cassidy
--------------------------
James M. Cassidy, director
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A#2
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
SUNDERLAND ACQUISITION CORPORATION
------------------
(Name of Small Business Issuer)
Delaware 52-2102142
------------------- --------------------
(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
1504 R Street, N.W., Washington, D.C. 20009
-------------------------------------------
(Address of Principal Executive Offices including Zip Code)
202/387-5400
------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act:
Common Stock, $.0001 Par Value
(Title of Class)
<PAGE>
PART I
ITEM 1. BUSINESS.
Sunderland Acquisition Corporation (the "Company"), was incorporated on
June 2, 1998 under the laws of the State of Delaware to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date other than issuing shares to its original
shareholders.
The Company will attempt to locate and negotiate with a business entity
for the merger of that target company into the Company. In certain instances,
a target company may wish to become a subsidiary of the Company or may wish
to contribute assets to the Company rather than merge. No assurances can be
given that the Company will be successful in locating or negotiating with any
target company.
The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company whose
securities are qualified for trading in the United States secondary market.
PERCEIVED BENEFITS
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. These are commonly thought to include
the following:
* the ability to use registered securities to make acquisitions of
assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
* a presence in the United States capital market.
POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for which a primary purpose of becoming public is the use
of its securities for the acquisition of assets or businesses;
* a company which is unable to find an Underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
<PAGE>
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public mark
to satisfy redemption requirements under a qualified Employee Stock
Option Plan:
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of
its own management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, as to the terms of a business combination, or as to the
nature of the target company.
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement affirming that such
shareholders will not sell or otherwise transfer their shares of the
Company's common stock except in connection with or following completion of a
merger or acquisition resulting in the Company no longer being classified as
a blank check company. The shareholders have deposited their stock
certificates with the Company's management, who will not release the
certificates except in connection with or following the completion of a
merger or acquisition.
The Company is voluntarily filing this Registration Statement with the
Securities and Exchange Commission and is under no obligation to do so under
the Securities Exchange Act of 1934.
RISK FACTORS
The Company's business is subject to numerous risk factors, including
the following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had
no operating history nor any revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company will,
in all likelihood, sustain operating expenses without corresponding revenues,
at least until the consummation of a business combination. This may result in
the Company incurring a net operating loss which will increase continuously
until the Company can consummate a business combination with a target
company. There is no assurance that the Company can identify such a target
company and consummate such a business combination.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of
the Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target
company. While management will prefer business combinations with entities
having established operating histories, there can be no assurance that the
Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be
no assurance, the success of the Company's operations will be dependent upon
management of the target company and numerous other factors beyond the
Company's control.
<PAGE>
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A
large number of established and well-financed entities, including venture
capital firms, are active in mergers and acquisitions of companies which may
be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources, technical expertise
and managerial capabilities than the Company and, consequently, the Company
will be at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover,
the Company will also compete with numerous other small public companies in
seeking merger or acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION--NO STANDARDS
FOR BUSINESS COMBINATION. The Company has no current arrangement, agreement
or understanding with respect to engaging in a merger with or acquisition of
a specific business entity. There can be no assurance that the Company will
be successful in identifying and evaluating suitable business opportunities
or in concluding a business combination. Management has not identified any
particular industry or specific business within an industry for evaluation by
the Company. There is no assurance that the Company will be able to negotiate
a business combination. Management has not identified any particular industry
or specific business within an industry for evaluation by the Company THere is
no assurance that the Company will be able to negotiate a business
combination on terms favorable to the Company. The Company has not
established a specific length of operating history or a specified level of
earnings, assets, net worth or other criteria which it will require a target
company to have achieved, or without which the Company would not consider a
business combination with such business entity. Accordingly, the Company may
enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential form immediate
earnings limited assets, negative net worth or other negative characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking
a business combination, management anticipates devoting only a limited amount
of time per month to the business of the Company. The Company's sole officer
has not entered into a written employment agreement with the Company and he
is not expected to do so in the foreseeable future. The Company has not
obtained key man life insurance on its officer and director. Notwithstanding
the combined limited experience and time commitment of management, loss of
services and of this individual would adversely affect development of the
Company's business and its likelihood of continuing operations.
CONFLICTS OF INTEREST--GENERAL. The Company's officer and director and
director participates in other business ventures which may compete directly
with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future. Management has adopted a policy
that the Company will not seek a merger with, or acquisition of, any entity
in which any member of management serves as an officer, director or partner,
or in which they or their family members own or hold any ownership interest.
See "ITEM 5, DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS--Conflicts of Interest."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Section 13 of
the Securities Exchange Act of 1934 (the "Exchange Act") requires companies
subject thereto to provide certain information about significant acquisitions
including certified financial statements for the company acquired covering
one or two years, depending on the relative size of the acquisition. The time
and additional costs that may be incurred by some target companies to prepare
such financial statements may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by the
Company. Even in the event demand exists for a merger or acquisition of the
type contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
LACK OF DIVERSIFICATION. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a
business combination with only one business entity. Consequently, the
Company's activities will be limited to those engaged in by the businesses
entity which the Company merges with or
<PAGE>
acquires. The Company's inability to diversify its activities into a number
of areas may subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
Company's operations.
REGULATION UNDER INVESTMENT COMPANY ACT. Although the Company will be
subject to regulation under the Exchange Act, management believes the Company
will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of target company obtaining a controlling interest in
the Company. Any such business combination may require shareholders of the
Company to sell or transfer all or a portion of the Company's common stock
held by them. The resulting change in control of the Company will likely
result in removal of the present officer and director of the Company and a
corresponding reduction in or elimination of his participation in the future
affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION.
The Company's primary plan of operation is based upon a business combination
with a business entity which, in all likelihood, will result in the Company
issuing securities to shareholders of such business entity. The issuance of
previously authorized and unissued common stock of the Company would result
in reduction in percentage of shares owned by the present shareholders of the
Company and would most likely result in a change of control or management of
the Company.
TAXATION. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination the Company may
undertake. Currently, such transactions may be structured so as to result in
tax-free treatment to both companies, pursuant to various federal and state
tax provisions. The Company intends to structure any business combination so
as to minimize the federal and state tax consequences to both the Company and
the target company; however, there can be no assurance that such business
combination will meet the statutory requirements of a tax-free reorganization
or that the parties will obtain the intended tax-free treatment upon a
transfer of stock or assets. A non-qualifying reorganization could result in
the imposition of both federal and state taxes which may have an adverse
effect on both parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management of the Company will request that any potential
business opportunity provide audited financial statements. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company rather than incur the expenses
associated with preparing audited financial statements. In such case, the
Company may choose to obtain certain assurances as to the target company's
assets, liabilities, revenues and expenses prior to consummating a business
combination, with further assurances that an audited financial statement
would be provided after closing of such a transaction. Closing documents
relative thereto may include representations that the audited financial
statements will not materially differ from the representations included in
such closing documents.
ITEM 2. PLAN OF OPERATION
The Company intends to merge with or acquire a business entity in
exchange for the Company's securities. The Company has no particular
acquisition in mind and has not entered into any negotiations regarding such
an acquisition. Neither the Company's officer and director nor any affiliate
has engaged in any negotiations with any representative of any company
regarding the possibility of an acquisition or merger between the Company and
such other company.
<PAGE>
Management anticipates seeking out a target company through
solicitation. Such solicitation may include newspaper or magazine
advertisements, mailings and other distributions to law firms, accounting
firms, investment bankers, financial advisors and similar persons, the use of
one or more World Wide Web sites and similar methods. No estimate can be made
as to the number of persons who will be contacted or solicited. Management
may engage in such solicitation directly or may employ one ore more other
entities to conduct or assist in such solicitation. Management and its
affiliates pay referral fees to consultants and others who refer target
businesses for mergers into public companies in which management and its
affiliates have an interest. Payments are made if a business combination
occurs, and may consist of cash or a portion of the stock in the Company
retained by management and its affiliates, or both.
The Company has no full time employees. The Company's president has
agreed to allocate a portion of his time to the activities of the Company,
without compensation. The president anticipates that the business plan of the
Company can be implemented by his devotion no more than 10 hours per month to
the business affairs of the Company and, consequently, conflicts of interest
may arise with respect to the limited time commitment by such officer.
Management is currently involved with other blank check companies, and
is involved in creating additional blank check companies similar to this one.
A conflict may arise in the event that another blank check company with which
management is affiliated is formed and actively seeks a target company.
Management anticipates that target companies will be located for the Company
and other blank check companies in chronological order of the date of
formation of such blank check companies or by lot. However, other blank check
companies that may be formed may differ from the Company in certain items
such as place of incorporation, number of shares and shareholders, working
capital, types of authorized securities, or other items. It may be that a
target company may be more suitable for or may prefer a certain blank check
company formed after the Company. In such case, a business combination might
be negotiated on behalf of the more suitable or preferred blank check company
regardless of date of formation or choice by lot. See "ITEM 5, DIRECTORS,
EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS--Current Blank Check
Companies."
The Certificate of Incorporation of the Company provides that the
Company may indemnify officers and/or directors of the Company for
liabilities, which can include liabilities arising under the securities laws.
Therefore, assets of the Company could be used or attached to satisfy any
liabilities subject to such indemnification.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business equity which desires to seek the
perceived advantages of a corporation which has a class of securities
registered under the Exchange Act. The Company will not restrict its search
to any specific business, industry, or geographical location and the Company
may participate in a business venture of virtually any kind of nature.
Management anticipates that it will be able to participate in only one
potential business venture because the Company has nominal assets and limited
financial resources. See ITEMS F/S, "FINANCIAL STATEMENTS." This lack of
diversification should be considered a substantial risk to the shareholders
of the Company because it will not permit the Company to offset potential
losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate
purposes. The Company may acquire assets and establish wholly-owned
subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business
entities seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for
<PAGE>
incentive stock options or similar benefits to key employees, increasing the
opportunity to use securities for acquisitions, providing liquidity for
shareholders and other factors. Business opportunities may be available in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a public company without incurring the cost and time required to
conduct an initial public offering. Management has not conducted market
research and is not aware of statistical data to support the perceived
benefits of a merger or acquisition transaction for the owners of a business
opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officer and director of the Company, who is not
a professional business analyst. In analyzing prospective business
opportunities, management will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and
experience of management services which may be available and the depth of
that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential
for growth or expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. This discussion of the proposed
criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Exchange Agent requires that any merger or acquisition candidate
comply with certain reporting requirements, which include providing audited
financial statements to be included in the reporting filings made under the
Exchange Act. The Company will not acquire or merge with any company for
which audited financial statements cannot be obtained at or within a
reasonable period of time after closing of the proposed transaction.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with
the Company. Such consequences may include, but are not limited to, time
delays of the registration process, significant expenses to be incurred in
such an offering, loss of voting control to public shareholders or the
inability to obtain an underwriter or to obtain an underwriter on
satisfactory terms.
The Company will not restrict its search for any specific kind of
business entities, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially any stage
of its business life. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business
may need to seek additional capital, may desire to have its shares publicly
traded, or may seek other perceived advantages which the Company may offer.
Management of the Company, which in all likelihood will not be
experienced in matters relating to the business of a target company, will
rely upon its own efforts in accomplishing the business purposes of the
Company. Outside consultants or advisors may be utilized by the Company to
assist in the search for qualified target companies. If the Company does
retain such an outside consultant or advisor, any cash fee earned by such
person will need to be assumed by the target company, as the Company has
limited cash assets with which to pay such obligation.
Following a business combination the Company may benefit from the
services of others in regard to accounting, legal services, underwritings and
corporate public relations. If requested by a target company, management may
recommend one ore more underwriters, financial advisors, accountants, public
relations firms or other consultants to provide such services.
<PAGE>
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued
after any business combination. Additionally, a target company may be
presented o the Company only on the condition that the services of a
consultant or advisor be continued after a merger or acquisition. Such
preexisting agreements of target companies for the continuation of the
services of attorneys, accountants, advisors or consultants could be a factor
in the selection of a target company.
ACQUISITION OPPORTUNITIES
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may
also acquire stock or assets of an existing business. On the consummation of
a transaction, it is likely that the present management and shareholders of
the Company will no longer be in control of the Company. In addition, it is
likely that the Company's officer and director will, as part of the terms of
the acquisition transaction, resign and be replaced by one or more new
officers and directors.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated
or at specified times thereafter. If such registration occurs, of which there
can be no assurance, it will be undertaken by the surviving entity after the
Company has entered into an agreement for a business combination or has
consummated a business combination and the Company is no longer considered a
blank check company. Until such time as this occurs, the Company will not
register any additional securities. The issuance of additional securities and
their potential sale into any trading market which may develop in the
Company's securities may depress the market value of the Company's securities
in the future if such a market develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351
or 368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings
in the target company. Depending upon, among other things, the target
company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage of ownership may
be subject to significant reduction in the event the Company acquires a
target company with substantial assets. Any merger or acquisition effected by
the Company can be expected to have a significant dilutive effect on the
percentage of shares held by the Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of
such agreements cannot be predicted, generally such agreements will require
certain representations and warranties of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by the parties prior to and after such closing, will
outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, and will include miscellaneous other
terms.
The Company will not acquire or merger with any entity which cannot
provide audited financial statements at or within a reasonable period of time
after closing of the proposed transaction. The Company is subject to all of
the reporting requirements including the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements
as part of or within 60 days following its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial
<PAGE>
statements included in its annual report on Form 10-K (or 10-KSB, as
applicable). If such audited financial statements are not available at
closing, or within time parameters necessary to insure the Company's
compliance with the requirements of the Exchange Act, or if the audited
financial statements provided do not conform to the representations made by
the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of
the Company.
Pierce Mill Associates, Inc. the principal shareholder of the Company,
has agreed that it will advance to the Company any additional funds which the
Company needs for operating capital and for costs in connection with
searching for or completing an acquisition or merger. Such advances will be
made without expectation of repayment unless the owners of the business which
the Company acquires or mergers with agree to repay all or a portion of such
advances. There is no minimum or maximum amount Pierce Mill will advance to
the Company. The Company will not borrow any funds to make any payments to
the Company's promoters, management or their affilites or associates.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek an acquisition or merger with any entity in
which the Company's officer, director, and shareholders or any affiliate or
associate serves as an officer or director or holds any ownership interest.
COMPETITION
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial
resources and limited management availability, the Company will continue to
be at a significant competitive disadvantage compared to the Company's
competitors.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company has no properties and at this time has no agreements to
acquire any properties. The Company currently uses the offices of Pierce Mill
Associates at no cost to the Company. Pierce Mill Associates has agreed to
continue this arrangement until the Company completes an acquisition or
merger.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of June 25, 1998, each person known
by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all directors individually and all directors and
officers of the Company as a group. Except as noted, each person has sole
voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial
of Beneficial Owner Ownership Percentage of Class
- ------------------- -------------------- -------------------
<S> <C> <C>
Pierce Mill Associates, Inc. (1)(2) 4,250,000 85%
1504 R Street, N.W.
Washington, D.C. 20009
Cassidy & Associates (2) 750,000 15%
1504 R Street, N.W.
Washington, D.C. 20009
James M. Cassidy (2) 5,000,000 100%
1504 R Street, N.W.
Washington, D.C. 20009
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
All Executive Officers and
Directors as a Group (1 Person) 5,000,000 100%
</TABLE>
(1) Pierce Mill Associates, Inc. is an affiliate of Cassidy &
Associates, the law firm prepared this registration statement and of which
James M. Cassidy is a principal. James Cassidy is the sole shareholder of
Pierce Mill Associates. Pierce Mill Associates provides services for Cassidy
& Associates, particularly in regard to locating private companies which may
wish to go public, and acts as an initial shareholder in certain companies
formed by Cassidy & Associates. Since Pierce Mill Associates has fewer than
100 shareholders and is not making and does not intend to make a public
offering of its securities, management believes that it is not deemed to be
an investment company by virtue of an exemption provided under the Investment
Company Act of 1940, as amended.
(2) Mr. Cassidy owns 100% of Pierce Mill Associates and is principal of
Cassidy & Associates, a Washington, D.C. securities law firm, and is
considered the beneficial owner of the shares of common stock of the Company
issued to them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS.
The Company has one Director and Officer as follows:
<TABLE>
<CAPTION>
Name Age Positions and Offices Held
---------------- --- --------------------------
<S> <C> <S>
James M. Cassidy 63 President, Secretary,
Director
</TABLE>
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officer and
director is not acting on behalf of nor will act at the direction of any
other person.
Set forth below is the name of the director and officer of the Company,
all positions and offices with the Company held, the period during which he
has served as such, and the business experience during at least the last five
years:
James Michael Cassidy, Esq., J.D., LL.M., received a Bachelor of Science
in Languages and Linguistics from Georgetown University in 1960, a Bachelor
of Laws from The Catholic University School of Law in 1963, and a Master of
Laws in Taxation from The Georgetown University School of Law in 1968. From
1963-1964, Mr. Cassidy was law clerk to the Honorable Inzer B. Wyatt of the
United States District Court for the Southern District of New York. From
1964-1965, Mr. Cassidy was law clerk to the Honorable Wilbur K. Miller of the
United States Court of Appeals for the District of Columbia. From 1969-1975,
Mr. Cassidy was an associate of the law firm of Kieffer & Moroney and a
principal in the law firm of Kieffer & Cassidy, Washington, D.C. From 1975 to
date, Mr. Cassidy has been a principal in the law firm of Cassidy &
Associates, Washington, D.C. and its predecessors, specializing in securities
law and related corporate and federal taxation matters. Mr. Cassidy is a
member of the bar of the District of Columbia and is admitted to practice
before the United States Tax Court and the United States Supreme Court.
PREVIOUS BLANK CHECK COMPANIES
In 1988, management was involved in two blank check offerings. Mr.
Cassidy was vice president, a director and a shareholder of First Agate
Capital Corporation and Consolidated Financial Corporation. In August, 1988,
First Agate Capital Corporation offered 50,000 units at $10.00 for an
aggregate of $500,000 in an underwritten offering of its common stock and
warrants. First Agate Capital is no longer a public company and has had no
activity since 1991. In November, 1988, Consolidated Financial Corporation
offered 50,000 units at $10.00 for an aggregate of
<PAGE>
$500,000 in an underwritten offering of its common stock and warrants. In
1990, in connection with the change in control of Consolidated Financial
Corporation. Mr. Cassidy transferred all his shares of Consolidated Financial
Corporation common stock without compensation or any financial benefit and
resigned as an officer and director of that company. Mr. Cassidy has had no
further relationship or transactions with Consolidated Financial Corporation
since 1990. As described in public filings made by the company, in June,
1991, the new management of Consolidated Financial Corporation effected its
merger with A.B.E Industrial Holdings.
CURRENT BLANK CHECK COMPANIES
Mr. Cassidy is the president, sole director and a beneficial shareholder
of Sheffield Acquisitions, Inc., Tunlaw International Corporation, Chatsworth
Acquisition Corporation and Aberdeen Acquisition Corporation. Until
December 30, 1997, Mr. Cassidy was the sole director and beneficial shareholder
of Corcoran Technologies Corporation. Sheffield Acquisitions, Inc. has filed
a registration statement on Form S-1 under the Securities Act which has not
yet been declared effective. Tunlaw International Corporation, Corcoran
Technologies Corporation, Chatsworth Acquisition Corporation and Aberdeen
Acquisition Corporation have filed registration statements on Forms 10-SB
under the Exchange Act which have become effective and each files periodic
reports under the Exchange Act. The initial business purpose of each of these
companies was to engage in a merger or acquisition with an unidentified
company or companies and each will be classified as a blank check company
until completion of a business acquisition. Mr. Cassidy is the sole director
and beneficial shareholder of Barhill Acquisition Corporation and Westford
Acquisition Corporation for which registration statements on Form 10-SB have
been filed with the Commission on August 13, 1998 and August 27, 1998,
respectively. The initial business purpose of these two companies is to
engage in a merger or acquisition with an unidentified company or companies
and each will be classified as a blank check company until completion of a
business acquisition.
Mr. Cassidy anticipates being involved with additional blank check
companies filed under the Securities Act or under the Exchange Act.
RECENT TRANSACTIONS BY BLANK CHECK COMPANIES
On December 30, 1997, Prime Management, Inc., a California corporation,
merged with and into Corcoran Technologies Corporation. Corcoran Technologies
Corporation was formed on March 27, 1997 to engage in a merger or acquisition
with an unidentified company or companies and was structured substantially
identically to the Company, including identical management and shareholders.
Prime Management, Inc. is an operating transportation company which has two
wholly-owned subsidiaries, Mid-Cal Express, a long-haul trucking company
hauling shipments of general commodities, including temperature-sensitive
goods, in both intrastate and interstate commerce and Mid-Cal Logistics, a
freight brokerage company. Pursuant to the merger, Corcoran Technologies
Corporation changed its name to Prime Companies, Inc., and Corcoran
Technologies Corporation filed a Form 8-K with the Securities and Exchange
Commission describing the merger. The Common stock of Prime Companies, Inc.
trades on the NASD OTC Bulletin Board under the symbol PRMC. Detailed
information concerning Prime Companies, Inc. may be obtained from its filings
under the Exchange Act which are found the EDGAR archives page of the
Securities and Exchange Commission's Website at WWW.SEC.GOV.
CONFLICTS OF INTEREST
The Company's officer and director has organized and expects to organize
other companies of a similar nature and with similar purpose as the Company.
Consequently, there are potential inherent conflicts of interest in acting as
an officer and director of the Company. Insofar as the officer and director
is engaged in other business activities, management anticipates that it will
devote only a minor amount of time to the Company's affairs. The Company does
not have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the
Company's proposed business operations.
<PAGE>
A conflict may arise in the event that another blank check company with
which management is affiliated is formed and actively seeks a target company.
It is anticipated that target companies will be located for the Company and
other blank check companies in chronological order of the date of formation
of such blank check companies or by lot. However, any blank check companies
that may be formed may differ from the Company in certain items such as place
of incorporation, number of shares and shareholders, working capital, types
of authorized securities, or other items. It may be that a target company may
be more suitable for or may prefer a certain blank check company formed after
the Company. In such case, a business combination might be negotiated on
behalf of the more suitable or preferred blank check company regardless of
date of formation or choice by lot. Mr. Cassidy will be responsible for
seeking, evaluating, negotiating and consummating a business combination with
a target company which may result in terms providing benefits to Mr. Cassidy.
Mr. Cassidy is the principal of Cassidy & Associates, a securities law
firm located in Washington, D.C. As such, demands may be placed on the time
of Mr. Cassidy which will detract from the amount of time he is able to
devote to the Company. Mr. Cassidy intends to devote as much time to the
activities of the company as required. However, should such a conflict
arise, there is no assurance that Mr. Cassidy would not attend to other
matters prior to those of the Company. Mr. Cassidy projects that initially up
to ten hours per month of his time may be spent locating a target company
which amount of time would increase when the analysis of, and negotiations
and consummation with, a target company are conducted.
Mr. Cassidy owns 100% of Pierce Mill Associates which, in turn, owns
4,250,000 shares of common stock of the Company and is a principal of
Cassidy & Associates, a securities law firm, which owns 750,000 shares of the
Company's common stock. No other securities, or rights to securities, of the
Company will be issued to management or promoters, or their affiliates or
associates, prior to the completion of a business combination. At the time of
a business combination, management expects that some or all of the shares of
Common Stock owned by Cassidy & Associates will be purchased by the target
company. The amount of Common Stock sold or continued to be owned by Pierce
Mill Associates or Cassidy & Associates cannot be determined at this time.
The terms of business combination may include such terms as Mr. Cassidy
remaining a director or officer of the Company and/or the continuing
securities or other legal work of the Company being handled by the law firm
of which Mr. Cassidy is the principal. The terms of a business combination
may provide for a payment by cash or otherwise to Pierce Mill Associates or
Cassidy & Associates for the purchase of all or part of their common stock of
the Company by a target company. Mr. Cassidy would directly benefit from such
employment or payment. Such benefits may influence Mr. Cassidy's choice of a
target company.
The Company may agree to pay finder's fees, as appropriate and allowed,
to unaffiliated persons who may bring a target company to the Company where
that reference results in a business combination. The amount of any finder's
fee will be subject to negotiation, and cannot be estimated at this time. No
finder's fee of any kind will be paid to management or promoters of the
Company or to their associates or affiliates. No loans of any type have, or
will be, made to management or promoters of the Company or to any of their
associates or affiliates.
The Company's officer and director, its promoter and their affiliates or
associates have not had any negotiations with and there are no present
arrangements or understandings with any representatives of the owners of any
business or company regarding the possibility of a business combination with
the Company.
The Company will not enter into a business combination, or acquire any
assets of any kind for its securities, in which management or promoters of
the Company or any affiliates or associates have any interest, direct or
indirect.
Management has adopted certain policies involving possible conflicts of
interest, including prohibiting any of the following transactions involving
management, promoters, shareholders or their affiliates:
(i) Any lending by the company to such persons;
<PAGE>
(ii) The issuance of any additional securities to such persons prior to
a business combination;
(iii) The entering into any business combination or acquisition of
assets in which such persons have any interest, direct or indirect;
or
(iv) The payment of any finder's fees to such persons.
These policies have been adopted by the Board of Directors of the
Company, and any changes in these provisions require the approval of the
Board of Directors. Management does not intend to propose any such action and
does not anticipate that any such action will occur.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest
in favor of the Company could result in liability of management to the
Company. However, any attempt by shareholders to enforce a liability of
management to the Company would most likely be prohibitively expensive and
time consuming.
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Securities
Act of 1933 and the Securities Exchange Act of 1934, management believes the
Company will not be subject to regulation under the Investment Company Act of
1940 insofar as the Company will not be engaged in the business of investing
or trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940. Any violation
of such Act would subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
The Company's officer and director does not receive any compensation for
his services rendered to the Company, has not received such compensation in
the past, and is not accruing any compensation pursuant to any agreement with
the Company.
The officer and director of the Company will not receive any finder's
fee, either directly or indirectly, as a result of his efforts to implement
the Company's business plan outlined herein. However, the officer and
director of the Company anticipates receiving benefits as a beneficial
shareholder of the Company. See "ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has issued a total of 5,000,000 shares of Common Stock to
the following persons for a total of $500 in cash:
<TABLE>
<CAPTION>
NAME NUMBER OF TOTAL SHARES CONSIDERATION
- ------------------------ ----------------------- -------------
<S> <C> <C>
Pierce Mill Associates, Inc. 4,250,000 $425
Cassidy & Associates 750,000 $75
</TABLE>
<PAGE>
The proposed business activities described herein classify the Company
as a blank check company. See "GLOSSARY". The Securities and Exchange
Commission and many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies. Management does not
intend to undertake any efforts to cause a market to develop in the Company's
securities until such time as the Company has successfully implemented its
business plan described herein. Accordingly, the shareholders of the Company
have executed and delivered a "lock-up" letter agreement, affirming that such
shareholders shall not sell their shares of the Company's common stock except
in connection with or following completion of a merger or acquisition
resulting in the Company no longer being classified as a blank check company.
The shareholders have deposited their stock certificates with the Company's
management, who will not release the certificates except in connection with
or following the completion of a merger or acquisition.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, par value $.0001 per share, and 20,000,000 shares of
Preferred Stock, par value $.0001 per share. The following statements
relating to the capital stock set forth the material terms of the Company's
securities, however, reference is made to the more detailed provisions of,
and such statements are qualified in their entirety by reference to, the
Certificate of Incorporation and the By-laws, copies of which are filed as
exhibits to this registration statement.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock do not have cumulative voting rights. Holders of common stock are
entitled to share ratably in dividends, if any, as may be declared from time
to time by the Board of Directors in its discretion from funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of the Company, the holders of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. All of the
outstanding shares of common stock are fully paid and non-assessable.
Holders of common stock have no pre-emptive rights to purchase the
Company's common stock. There are no conversion or redemption rights or
sinking fund provisions with respect to the common stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of preferred stock, $.0001 par value per share, of which no
shares have been issued. The Board of Directors is authorized to provide for
the issuance of shares of preferred stock in series and, by filing a
certificate pursuant to the applicable law of Delaware, to establish from
time to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions thereof
without any further vote or action by the shareholders. Any shares of
preferred stock so issued would have priority over the common stock with
respect to dividend or liquidation rights. Any future issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the shareholders and may
adversely affect the voting and other rights of the holders of common stock.
At present, the Company has no plans to issue any preferred stock nor adopt
any series, preferences or other classification of preferred stock.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain
circumstances, the issuance of Preferred Stock could adversely affect the
voting power of the holders of the Common Stock. Although the Board of
Directors is required to make my determination to issue such stock based on
its judgment as to the best interests of the stockholders of the
<PAGE>
Company, the Board of Directors could act in a manner that would discourage
an acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or stock exchange rules. The Company
has no present plans to issue any Preferred Stock.
Dividends
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment
of dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for
use in its business operations and accordingly, the Board of Directors does
not anticipate declaring any dividends prior to a business combination.
Glossary
<TABLE>
<S> <C>
"Blank Check" COMPANY As defined in Section 7(b)(3) of the Securities Act, a "blank check" company is a
development stage company that has no specific business plan or purpose or has indicated
that its business plan is to engage in a merger or acquisition with an unidentified company
or companies and is issuing "penny stock" securities as defined in Rule 3a51-1 of the
Exchange Act.
The Company Sunderland Acquisition Corporation, the company whose common stock is subject of this
registration statement.
Exchange Act The Securities Act of 1934, as amended.
"Penny Stock" Security As defined in Rule 3a51-1 of the Exchange Act, a "penny stock" security is any equity
security other than a security (i) that is a reported security (ii) that is issued by an
investment company (iii) that is a put or call issued by the Option Clearing Corporation
(iv) that has a price of $5.00 or more (except for purposes of Rule 419 of the Securities
Act) (v) that is registered on a national securities exchange (vi) that is authorized for
quotation of the Nasdaq Stock Market, unless other provisions of Rule 3a51-1 are not
satisfied, or (vii) that is issued by an issuer with (a) net tangible assets in excess of
$2,000,000, if in continuous operation for more than three years or $5,000,000 if in
operation for less than three years or (b) average revenue of at least $6,000,000 for the
last three years.
Pierce Mill Associates Pierce Mill Associates, Inc., a private company owned by management of the Company. Pierce
Mill Associates provides services for Cassidy & Associates, particularly in regard to
locating private companies which may wish to go public, and acts as an initial shareholder
in certain companies formed by Cassidy & Associates.
Securities Act The Securities Act of 1933, as amended.
Small Business Issuer As defined in Rule 12b-2 of the Exchange Act, a "Small Business Issuer" is an entity (i)
which has revenues of less than $25,000,000 (ii) whose public float (the outstanding
securities not held by affiliates) has a value of less than $25,000,000 (iii) which is a
United States or Canadian issuer (iv) which is not an Investment Company and (v) if a
majority-owned subsidiary, whose parent corporation is also a small business issuer.
</TABLE>
<PAGE>
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET PRICE. There is no trading market for the Company's Common
Stock at present and there has been no trading market to date. There is no
assurance that a trading market will ever develop or, if such a market does
develop, that it will continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure
schedule prepared by the Commission relating to the penny stock market,
which, in highlight form, (i) sets forth the basis on which the broker or
dealer made the suitability determination and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
In order to qualify for listing on the Nasdaq SmallCap Market, a company
must have at lease (i) net tangible assets of $4,000,000 or market
capitalization of $50,000,000 or net income for two of the last three years
of $750,000; (ii) public float of 1,000,000 shares with a market value of
$5,000,000; (iii) a bid price of $4.00; (iv) three market makers; (v) 300
shareholders and (vi) an operating history of one year or, if less than one
year, $50,000,000 in market capitalization. For continued listing on the
Nasdaq SmallCap Markets, a company must have at least (i) net tangible assets
of $2,000,000 or market capitalization of $35,000,000 or net income for two
of the last three years of $500,000; (ii) a public float of 500,000 shares
with a market value of $1,000,000; (iii) a bid price of $1.00 (iv) two market
makers; and (v) 300 shareholders.
If, after a merger or acquisition, the Company does not meet the
qualifications for listing on the Nasdaq SmallCap Market, the Company's
securities may be traded in the over-the-counter ("OTC") market. The OTC
market differs from national and regional stock exchanges in that it (1) is
not sited in a single location but operates through communication of bids,
offers and confirmations between broker-dealers and (2) securities admitted
to quotation are offered by one or more broker-dealers rather than the
"specialist" common to stock exchanges. The Company may apply for listing on
the NASD OTC Bulletin Board or may offer its securities in what are commonly
referred to as the "pink sheets" of the National Quotation Bureau, Inc. To
qualify for listing on the NASD OTC Bulletin Board, an equity security must
have one registered broker-dealer, known as the market maker, willing to list
bid or sale quotations and to sponsor the company for listing on the Bulletin
Board.
If the Company is unable initially to satisfy the requirements for
quotation on the Nasdaq SmallCap Market or becomes unable to satisfy the
requirements for continued quotation thereon, and trading, if any, is
conducted in the OTC market, a shareholder may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities.
<PAGE>
(b) HOLDERS. There are two holders of the Company's Common Stock. On
June 9, 1998, the Company issued 5,000,000 of its Common Shares to these
shareholders for cash at $.0001 per share for a total price of $500. The
issued and outstanding shares of the Company's Common Stock were issued in
accordance with the exemptions from registration afforded by Sections 3(b)
and 4(2) of the Securities Act of 1933 and Rules 506 and 701 promulgated
thereunder.
(c) DIVIDENDS. The Company has not paid any dividends to date, and has
no plans to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AN ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed accountants since its formation and there
are no disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold securities which were
not registered as follows:
<TABLE>
<CAPTION>
Date Name Number of Shares Consideration
- ----------- ------- ---------------- -------------
<S> <C> <C> <C>
June 9, 1998 Pierce Mill 4,250,000 $425
Associates, Inc.(1)
June 9, 1998 Cassidy & Associates(2) 750,000 $75
</TABLE>
- -------------------
(1) Mr. Cassidy, the president and sole director of the Company, is the
sole director and shareholder of Pierce Mill Associates, Inc. and is therefore
considered to be the beneficial owner of the common stock of the Company
issued to Pierce Mill Associates, Inc. With respect to the sales made to
Pierce Mill Associates, Inc., the Company relied on Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated thereunder.
(2) Mr. Cassidy is a principal of Cassidy & Associates, a Washington,
D.C. securities law firm, and is therefore considered to be the beneficial
owner of the common stock of the Company issued to Cassidy & Associates. With
respect to the sales made to Cassidy & Associates, the Company relied
upon Section 3(b) of the Securities Act of 1933, as amended and Rule 701
promulgated thereunder.
The shareholders of the Company have executed and delivered a "lock-up"
letter agreement which provides that such shareholders shall not sell the
securities except in connection with or following the consummation of a
merger or acquisition. Further, each shareholder has placed its stock
certificates with the Company until such time. Any liquidation by the current
shareholders after the release from the "lock-up" selling limitation period
may have a depressive effect upon the trading price of the Company's
securities in any future market which may develop.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents,
against expenses incurred in any action, suit or proceeding. The Certificate
of Incorporation and the By-laws of the Company
<PAGE>
provide for indemnification of directors and officers to the fullest extent
permitted by the General Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation
contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE
UNENFORCEABLE.
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
Attached are audited financial statements for the Company for the period
ended June 10, 1998. The following financial statements are attached to this
report and filed as a part thereof.
1) Table of Contents - Financial Statements
2) Independent Auditors' Report
3) Balance Sheet as of June 10, 1998
4) Notes to Balance Sheet as of June 10, 1998
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheet as of June 10, 1998 F-2
Notes to Balance Sheet as of June 10, 1998 F-3, F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Sunderland Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Sunderland Acquisition
Corporation (a development stage company) as of June 10, 1998. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly in all
material respects, the financial position of Sunderland Acquisition
Corporation (a development state company) as of June 10, 1998, in conformity
with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 12, 1998
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10, 1998
----------------------------------
ASSETS
------
<TABLE>
<S> <C>
Cash $ 500
Organization cost 75
-----
TOTAL ASSETS $ 575
------------ -----
-----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES $ --
-----
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par value, 20 million
shares authorized, zero issued and outstanding --
Common Stock, $.0001 par value, 100 million
shares authorized 5,000,000 issued and
outstanding 500
Capital in excess of par 75
-----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 575
------------------------------------------ -----
-----
</TABLE>
See accompanying notes to balance sheet.
F-2
<PAGE>
SUNDERLAND ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF JUNE 10,1998
----------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND BUSINESS OPERATIONS
Sunderland Acquisition Corporation (a development stage
company)(the "Company") was incorporated in Delaware on June 2, 1998
to serve as a vehicle to effect a merger, exchange of capital stock,
asset acquisition or other business combination with a domestic of
foreign private business. At June 10, 1998, the Company had not yet
commenced any formal business operations, and all activity to date
relates to the Company's formation and proposed fund raising. The
Company's fiscal year end is December 31.
The Company's ability to commence operations is contingent upon its
ability to identify a prospective target business and raise the
capital it will require through the issuance of equity securities,
debt securities, bank borrowings or a combination thereof.
B. USE OF ESTIMATES
The preparation of the 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.
NOTE 2. STOCKHOLDERS' EQUITY
A. PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of preferred
stock at $.0001 par value, with such designations, voting and other
rights and preferences as may be determined from time to time by the
Board of Directors.
B. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common
stock at $.0001 par value. The Company issued 4,250,000 and 750,000
shares to Pierce Mill Associates, Inc. and Cassidy & Associates,
respectively.
NOTE 3. RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of the
Company who also owns 100% of the outstanding stock of Pierce Mill
Associates, Inc. The same party is also the controlling owner of
Cassidy & Associates.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
2.1** Certificate of Incorporation
2.2** By-Laws
(3) Instruments Defining the Rights of Holders
3.1** Lock-Up Agreement with Pierce Mill Associates
3.2** Lock-Up Agreement with Cassidy & Associates
(10)(a) Consents-Experts
10.1** Consent of Accountants
- --------------
**Previously Filed
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized.
SUNDERLAND ACQUISITION CORPORATION
By: /s/ James M. Cassidy
James M. Cassidy, Director and President
September 24, 1998
<PAGE>
[WEINBERG & COMPANY, P.A. LETTERHEAD]
May 3, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SUNDERLAND ACQUISITION CORPORATION
FILE REF. NO. 000-24803
----------------------------------
We were previously the principal accountant for Sunderland Acquisition
Corporation and, under the date of June 10, 1998 we reported on the
consolidated financial statements of Sunderland Acquisition Corporation as of
June 10, 1998. On May 3, 1999, our appointment as principal accountant was
terminated. We have read Sunderland Acquisiton Corporation's statements
included under Item 4 of its Form 8-K dated April 27, 1999, and we agree with
such statements.
Very truly yours,
/s/ WEINBERG & COMPANY, P.A.
WEINBERG & COMPANY, P.A.
Certified Public Accountants
