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U. S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 2
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
OAK BROOK CAPITAL I
(Name of Small Business Issuer in its charter)
Colorado 05-0499525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
360 Thames Street, Newport, Rhode Island 02840
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (401) 841-9444
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Not Applicable Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
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FORWARD LOOKING STATEMENTS
THIS FORM 10-SB12G AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
OAK BROOK CAPITAL I, INC. (HEREINAFTER REFERRED TO AS "OAK BROOK" AND/OR
"COMPANY") OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FIFTEEN U.S.C.A. SECTIONS 77Z-2
AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF OAK BROOK AND MEMBERS OF ITS
MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE
BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR
COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1
TO THIS FORM 10-SB12G, AND ARE HEREBY INCORPORATED HEREIN BY REFERENCE. THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING
STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED
EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
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RISK FACTORS
1. YEAR 2000.
It is possible that the Company's currently installed computer system,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the years 1999, 2000 or thereafter without error or
interruption (commonly known as the "Year 2000" problem). The Company has
conducted a review of its business systems, including its computer systems,
and is querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached.
The detail planning and inventory for the majority of the Company's legacy
systems that are being modified for Year 2000 compatibility has been
completed and such systems are in remediation.
The estimated cost of the Company's Year 2000 efforts is $1,000 to
$1,500 over 1998 and 1999, the majority of which represents redirection
of internal resources. However, there can be no assurance that the Company
will identify all such Year 2000 problems in its computer systems or those
of its customers, vendors or resellers in advance of their occurrence or
that the Company will be able to successfully remedy any problems that are
discovered. The expenses of the Company's efforts to identify and address
such problems, or the expenses or liabilities to which the Company may become
subject as a result of such problems, could have a material adverse effect on
the Company's business, financial condition and results of operations.
In addition, failure of the Company to identify and remedy Year 2000
problems could put the Company at a competitive disadvantage relative to
companies that have corrected such problems.
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2. Control by Principal Shareholders, Officers and Directors.
The Company's principal shareholders, officers and directors will
beneficially own approximately ninety percent (90%) of the
Company's Common Stock. As a result, such persons may have the
ability to control the Company and direct its affairs and
business. Such concentration of ownership may also have the
effect of delaying, deferring or preventing change in control of
the Company. See "Principal Stockholders."
3. Conflicts of Interest.
Certain conflicts of interest exist between the Company and its
officers and directors. They have other business interests to which
they devote their attention, and they may be expected to continue
to do so although management time should be devoted to the business
of the Company. As a result, conflicts of interest may arise that
can be resolved only through their exercise of such judgment as is
consistent with his fiduciary duties to the Company. See
"Management," and "Conflicts of Interest."
The Company's President, Vice President and all current shareholders
own all of the issued and outstanding stock of three (3) additional
corporations (Oak Brook Capital II, III and IV) which are shell companies
formed May 15-18. The Form 10-SB registration statement of Oak Brook
Capital II, III and IV may become effective by lapse of time on or about
December 29-31, respectively. (See "Item 5. Directors, Executive
Officers, Promoters, and Control Persons---Other Blind Pool Activities.")
Thus, the Company may be in competition with Oak Brook Capital II, III
and IV in seeking merger candidates.
The Company's President and Vice President may form Newport
Capital I, Inc., which is a shell company with the same capital
structure and business plan as Oak Brook Capital II, III and IV, and
the Company. They may also elect, in the future, to form one or more
additional public shell companies with a business plan similar or
identical to that of the Company. Any such additional shell
companies would also be in direct competition with the Company for
available business opportunities. (See Item 5 - "Directors, Executive
Officers, Promoters and Control Persons - Conflicts of Interest.")
It is anticipated that Company's President and Vice President
may actively negotiate or otherwise consent to the purchase of a portion
of their common stock as a condition to, or in connection with, a proposed
merger or acquisition transaction. In this process, the Company's
President and/or Vice President may consider their own personal pecuniary
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benefit rather than the best interests of other Company shareholders, and
the other Company shareholders are not expected to be afforded the
opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
4. Possible Need for Additional Financing.
The Company has very limited funds, and such funds may not be adequate
to take advantage of any available business opportunities. Even if the
Company's funds prove to be sufficient to acquire an interest in, or
complete a transaction with, a business opportunity, the Company may not
have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The
Company has not investigated the availability, source, or terms that
might govern the acquisition of additional capital and will not do so
until it determines a need for additional financing. If additional
capital is needed, there is no assurance that funds will be available
from any source or, if available, that they can be obtained on terms
acceptable to the Company. If not available, the Company's opera-
tions will be limited to those that can be financed with its modest
capital.
5. Regulation of Penny Stocks.
The Company's securities, when available for trading, will be subject to
a Securities and Exchange Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to
persons other than established customers or accredited investors. For
purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or
individuals having a net worth in excess of $1,000,000 or having an
annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the rule,
the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of broker-
dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in any market that
might develop therefor.
In addition, the Securities and Exchange Commission has
adopted a number of rules to regulate "penny stocks." Such rules
include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and
15g-7 under the Securities Exchange Act of 1934, as amended.
Because the securities of the Company may constitute "penny stocks"
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within the meaning of the rules, the rules would apply to the Company
and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any
market that might develop for them.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differentials and markups by selling broker-
dealers; and (v) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a
desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. The Company's
management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to
be in a position to dictate the behavior of the market or of broker-
dealers who participate in the market, management will strive within
the confines of practical limitations to prevent the described patterns
from being established with respect to the Company's securities.
6. No Operating History.
The Company was formed in May of 1998 for the purpose of registering
its common stock under the 1934 Act and acquiring a business opportunity.
The Company has no operating history, revenues from operations, or assets
other than cash from private sales of stock. The Company faces all of
the risks of a new business and the special risks inherent in the
investigation, acquisition, or involvement in a new business opportunity.
The Company must be regarded as a new or "start-up" venture with all of
the unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
7. No Assurance of Success or Profitability.
There is no assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or
profits, or that the market price of the Company's Common Stock will
be increased thereby.
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8. 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 entities to prepare such 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 1934 Act are applicable.
9. Lack of Market Research or Marketing Organization.
The Company has neither conducted, nor have others made available to it,
results of market research indicating that market demand exists for the
transactions contemplated by the Company. Moreover, the Company does not
have, and does not plan to establish, a marketing organization. Even in the
event demand is identified for a merger or acquisition contemplated by
the Company, there is no assurance the Company will be successful in
completing any such business combination.
10. Possible Business - Not Identified and Highly Risky.
The Company has not identified and has no commitments to enter into or
acquire a specific business opportunity and therefore can disclose the
risks and hazards of a business or opportunity that it may enter into
in only a general manner, and cannot disclose the risks and hazards of
any specific business or opportunity that it may enter into. An
investor can expect a potential business opportunity to be quite risky.
The Company's acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total
loss to the Company and its stockholders if the business or
opportunity proves to be unsuccessful. See Item 1 "Description of
Business."
11. Type of Business Acquired.
The type of business to be acquired may be one that desires to avoid
effecting its own public offering and the accompanying expense, delays,
uncertainties, and federal and state requirements which purport to protect
investors. Because of the Company's limited capital, it is more likely than
not that any acquisition by the Company will involve other parties whose
primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be
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currently unprofitable or present other negative factors.
12. Impracticability of Exhaustive Investigation.
The Company's limited funds and the lack of full-time management will
likely make it impracticable to conduct a complete and exhaustive
investigation and analysis of a business opportunity before the Company
commits its capital or other resources thereto. Management decisions,
therefore, will likely be made without detailed feasibility studies,
independent analysis, market surveys and the like which, if the Com-
pany had more funds available to it, would be desirable. The
Company will be particularly dependent in making decisions upon
information provided by the promoter, owner, sponsor, or others
associated with the business opportunity seeking the Company's
participation. A significant portion of the Company's available funds
may be expended for investigative expenses and other expenses related
to preliminary aspects of completing an acquisition transaction,
whether or not any business opportunity investigated is eventually
acquired.
13. Lack of Diversification.
Because of the limited financial resources that the Company has, it is
unlikely that the Company will be able to diversify its acquisitions or
operations. The Company's probable inability to diversify its activities
into more than one area will subject the Company to economic fluctuations
within a particular business or industry and therefore increase the risks
associated with the Company's operations.
14. Possible Reliance upon Unaudited Financial Statements.
The Company generally will require audited financial statements from
companies that it proposes to acquire. No assurance can be given,
however, that audited financials will be available to the Company. In
cases where audited financials are unavailable, the Company will have
to rely upon unaudited information received from target companies'
management that has not been verified by outside auditors. The lack
of the type of independent verification which audited financial
statements would provide, increases the risk that the Company, in
evaluating an acquisition with such a target company, will not have
the benefit of full and accurate information about the financial
condition and operating history of the target company. This risk
increases the prospect that the acquisition of such a company might
prove to be an unfavorable one for the Company or the holders of the
Company's securities.
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Moreover, the Company will be subject to the reporting provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
thus will be required to furnish certain information about significant
acquisitions, including audited financial statements for any business
that it acquires. Consequently, acquisition prospects that do not have,
or are unable to provide reasonable assurances that they will be able to
obtain, the required audited statements would not be considered by the
Company to be appropriate for acquisition so long as the reporting
requirements of the Exchange Act are applicable. Should the Company,
during the time it remains subject to the reporting provisions of the
Exchange Act, complete an acquisition of an entity for which audited
financial statements prove to be unobtainable, the Company would be
exposed to enforcement actions by the Securities and Exchange Commission
(the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its
management. The legal and other costs of defending a Commission
enforcement action are likely to have material, adverse consequences
for the Company and its business. The imposition of administrative
sanctions would subject the Company to further adverse consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ,
the automated quotation system sponsored by the National Association of
Securities Dealers, Inc., or on any existing stock exchange. Moreover,
the lack of such financial statements is likely to discourage broker-dealers
from becoming or continuing to serve as market makers in the securities
of the Company. Without audited financial statements, the Company would
almost certainly be unable to offer securities under a registration statement
pursuant to the Securities Act of 1933, and the ability of the Company to
raise capital would be significantly limited until such financial statements
were to become available.
15. Other Regulation.
An acquisition made by the Company may be of a business that is subject to
regulation or licensing by federal, state, or local authorities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit other investment opportunities of the Company.
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16. Dependence upon Management; Limited Participation of Management.
The Company currently has two individuals who are serving as its sole
officers and directors. The Company will be heavily dependent upon
their skills, talents, and abilities to implement its business plan,
and may, from time to time, find that the inability of the sole
officers and directors to devote their full time attention to the
business of the Company results in a delay in progress toward
implementing its business plan. Furthermore, since only two individuals
are serving as the sole officers and directors of the Company, it will be
entirely dependent upon their experience in seeking, investigating, and
acquiring a business and in making decisions regarding the Company's
operations. See "Management." Because investors will not be able to
evaluate the merits of possible business acquisitions by the Company,
they should critically assess the information concerning the Company's
sole officer and director.
17. Lack of Continuity in Management.
The Company does not have an employment agreement with its sole officers
and directors, and as a result, there is no assurance that they will
continue to manage the Company in the future. In connection with
acquisition of a business opportunity, it is likely the current officers
and directors of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
18. Indemnification of Officers and Directors.
The Company's Articles of Incorporation provide for the indemnification
of its directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them
in any litigation to which they become a party arising from their association
with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company
therefor if it is ultimately determined that any such person shall not
have been entitled to indemnification. This indemnification policy could
result in substantial expenditures by the Company which it will be unable
to recoup.
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19. Director's Liability Limited.
The Company's Articles of Incorporation exclude personal liability of its
directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action
against its directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable
state securities laws.
20. Dependence upon Outside Advisors.
To supplement the business experience of its sole officer and director,
the Company may be required to employ accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. The selection
of any such advisors will be made by the Company's President without any
input from stockholders. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company. In the event the
President of the Company considers it necessary to hire outside
advisors, he may elect to hire persons who are affiliates, if they are
able to provide the required services.
21. Leveraged Transactions.
There is a possibility that any acquisition of a business opportunity by
the Company may be leveraged, i.e., the Company may finance the acquisition
of the business opportunity by borrowing against the assets of the business
opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired
through a leveraged transaction is profitable only if it generates
enough revenues to cover the related debt and expenses. Failure to
make payments on the debt incurred to purchase the business
opportunity could result in the loss of a portion or all of the assets
acquired. There is no assurance that any business opportunity
acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
22. Competition.
The search for potentially profitable business opportunities is intensely
competitive. The Company expects to be at a disadvantage when competing
with many firms that have substantially greater financial and management
resources and capabilities than the Company. These competitive conditions
will exist in any industry in which the Company may become interested.
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23. No Foreseeable Dividends.
The Company has not paid dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future.
24. Loss of Control by Present Management and Stockholders.
The Company may consider an acquisition in which the Company
would issue as consideration for the business opportunity to be
acquired an amount of the Company's authorized but unissued
Common Stock that would, upon issuance, represent the great majority
of the voting power and equity of the Company. The result of such
an acquisition would be that the acquired company's stockholders and
management would control the Company, and the Company's
management could be replaced by persons unknown at this time.
Such a merger would result in a greatly reduced percentage of
ownership of the Company by its current shareholders. In addition, the
Company's President and/or Vice President could sell their control
block of stock at a premium price to the acquired company's
stockholders.
25. No Public Market Exists.
There is no public market for the Company's common stock, and no
assurance can be given that a market will develop or that a shareholder
ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly
volatile. Factors such as those discussed in this "Risk Factors"
section may have a significant impact upon the market price of the
securities offered hereby. Owing to the low price of the securities,
many brokerage firms may not be willing to effect transactions in the
securities. Even if a purchaser finds a broker willing to effect a
transaction in these securities, the combination of brokerage
commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will
not permit the use of such securities as collateral for any loans.
26. Rule 144 Sales.
All of the outstanding shares of Common Stock held by present
stockholders are "restricted securities" within the meaning of
Rule 144 under the Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144
or other applicable exemptions from registration under the Act and as
required under applicable state securities laws. Rule 144 provides in
essence that a person who has held restricted securities for a
prescribed period may, under certain conditions, sell every three
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months, in brokerage transactions, a number of shares that does not
exceed the greater of 1.0% of a company's outstanding common stock
or the average weekly trading volume during the four calendar weeks
prior to the sale. As a result of revisions to Rule 144 which
became effective on or about April 29, 1997, there will be no limit on
the amount of restricted securities that may be sold by a nonaffiliate
after the restricted securities have been held by the owner for a period
of two years. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registrations of
shares of Common Stock of present stockholders, may have a
depressive effect upon the price of the Common Stock in any market
that may develop. Of the total 1,228,000 shares of common stock held
by present stockholders of the Company, 1,105,200 shares which were
issued pursuant to Rule 701, will become available for resale under Rule
144, on or about February 3, 1999, and the remaining 122,800 shares
will become available for resale starting in May, 1999.
27. Blue Sky Considerations.
Because the securities registered hereunder have not been registered for
resale under the blue sky laws of any state, the holders of such shares
and persons who desire to purchase them in any trading market that might
develop in the future, should be aware that there may be significant state
blue-sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Some jurisdictions
may not under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, investors should consider the
secondary market for the Company's securities to be a limited one.
PART I
ITEM I. DESCRIPTION OF BUSINESS.
General
The Company was incorporated under the laws of the State of
Colorado on May 15, 1998, and is in the early developmental and
promotional stages. To date the Company's only activities have been
organizational ones, directed at developing its business plan and
raising its initial capital. The Company has not commenced any
commercial operations. The Company has no full-time employees and
owns no real estate.
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The proposed business activities described herein classify the Company
as a "blank check" or "shell company whose sole purpose at this time is
to locate and consummate a merger or acquisition with a private entity.
Many states have enacted statutes, rules and regulations limiting the sale
of securities of "blank check" companies in their respective jurisdictions.
Management does not believe it will 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. However,
if the Company intends to facilitate the eventual creation of a public trading
market in its outstanding securities, it must consider that the Company's
securities, when available for trading, will be subject to a Securities and
Exchange Commission rule that imposes special sales practice requirements
upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. For purposes of the
rule, the phrase "accredited investors" means, in general terms,
institutions with assets in excess of $5,000,000, or individuals having
a net worth in excess of $1,000,000 or having an annual income that
exceeds $200,000 (or that, when combined with a spouse's income,
exceeds $300,000). For transactions covered by the rule, the broker-
dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of broker-
dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in any market that
might develop therefor.
In addition, the Securities and Exchange Commission has
adopted a number of rules to regulate "penny stocks." Such rules
include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and
15g-7 under the Securities Exchange Act of 1934, as amended.
Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the
Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any
market that might develop for them.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (iii) "boiler room"
<PAGE 13>
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differentials and markups by selling broker-
dealers; and (v) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a
desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. The Company's
management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to
be in a position to dictate the behavior of the market or of broker-
dealers who participate in the market, management will strive within
the confines of practical limitations to prevent the described patterns
from being established with respect to the Company's securities.
As part of its business plan, this Company is filing this registration
statement on Form 10-SB on a voluntary basis in order to become a "public"
company by virtue of being subject to the reporting requirements of the
Securities Exchange Act of 1934.
The Company's business plan is to seek, investigate, and, if
warranted, acquire one or more properties or businesses, and to pursue
other related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase,
merger, exchange of stock, or otherwise, and may encompass assets
or a business entity, such as a corporation, joint venture, or
partnership. The Company has very limited capital, and it is unlikely
that the Company will be able to take advantage of more than one
such business opportunity. The Company intends to seek
opportunities demonstrating the potential of long-term growth as
opposed to short-term earnings.
At the present time the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached
any agreement or definitive understanding with any person concerning
an acquisition. The Company's officers and directors have previously
been involved in transactions involving a merger between an
established company and a shell entity, and have a number of contacts
within the field of corporate finance. As a result, they have had
preliminary contacts with representatives of numerous companies
concerning the general possibility of a merger or acquisition by a shell
company. However, none of these preliminary contacts or discussions
involved the possibility of a merger or acquisition transaction with the
Company.
<PAGE> 14
It is anticipated that the Company's officers and directors may
contact broker-dealers and other persons with whom they are acquainted
who are involved in corporate finance matters to advise them of the
Company's existence and to determine if any companies or businesses
they represent have an interest in considering a merger or acquisition
with the Company. No assurance can be given that the Company will
be successful in finding or acquiring a desirable business opportunity,
given the limited funds that are expected to be available for
acquisitions, or that any acquisition that occurs will be on terms that
are favorable to the Company or its stockholders.
The Company's search will be directed toward small and
medium-sized enterprises which have a desire to become public
corporations and which are able to satisfy, or anticipate in the
reasonably near future being able to satisfy, the minimum asset
requirements in order to qualify shares for trading on NASDAQ or on
a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business
opportunities presented to it will (i) be recently organized with no
operating history, or a history of losses attributable to
under-capitalization or other factors; (ii) be experiencing financial or
operating difficulties; (iii) be in need of funds to develop a new
product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a
combination of the characteristics mentioned in (i) through (iv). The
Company intends to concentrate its acquisition efforts on properties or
businesses that it believes to be undervalued. Given the above factors,
investors should expect that any acquisition candidate may have a
history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry,
and may, therefore, engage in essentially any business, to the extent
of its limited resources. This includes industries such as service,
finance, natural resources, manufacturing, high technology, product
development, medical, communications and others. The Company's
discretion in the selection of business opportunities is unrestricted,
subject to the availability of such opportunities, economic conditions,
and other factors.
<PAGE> 15
As a consequence of this registration of its securities, any
entity which has an interest in being acquired by, or merging into the
Company, is expected to be an entity that desires to become a public
company and establish a public trading market for its securities. In
connection with such a merger or acquisition, it is highly likely that
an amount of stock constituting control of the Company would be
issued by the Company or purchased from the current principal
shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is
very likely to result in substantial gains to them relative to their
purchase price for such stock, or the "zero" basis that occurred for those
eighty-seven shareholders who received shares as a "bona fide" gift.
In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of the
Section 2(11) of the Securities Act of 1933, as amended. The sale
of a controlling interest by certain principal shareholders of the
Company could occur at a time when the other shareholders of the
Company remain subject to restrictions on the transfer of their shares.
Depending upon the nature of the transaction, the current
officers and directors of the Company may resign their management
positions with the Company in connection with the Company's
acquisition of a business opportunity. See "Form of Acquisition,"
below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's
current management would not have any control over the conduct of
the Company's business following the Company's combination with
a business opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and
directors, its other stockholders, professional advisors such as attorneys
and accountants, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited
proposals. The Company has no plans, understandings, agreements,
or commitments with any individual for such person to act as a finder
of opportunities for the Company.
<PAGE> 16
The Company does not foresee that it would enter into a
merger or acquisition transaction with any business with which its
officers or directors are currently affiliated. Should the Company
determine in the future, contrary to the foregoing expectations, that a
transaction with an affiliate would be in the best interests of the
Company and its stockholders, the Company is in general permitted
by Colorado law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or
are known to the Board of Directors, and the Board in good
faith authorizes the contract or transaction by the affirmative
vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
2. The material facts as to the relationship or interest of the
affiliate 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 Company as of the
time it is authorized, approved or ratified, by the Board of
Directors or the stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality
of the other company's management and personnel, the anticipated
acceptability of new products or marketing concepts, the merit of
technological changes, the perceived benefit the company will derive
from becoming a publicly held entity, and numerous other factors
which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is antici-
pated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future
because of the possible need to shift marketing approaches
substantially, expand significantly, change product emphasis, change
or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity
to identify any such problems which may exist and to implement, or
be primarily responsible for the implementation of, required changes.
<PAGE> 17
Because the Company may participate in a business opportunity with
a newly organized firm or with a firm which is entering a new phase
of growth, it should be emphasized that the Company will incur fur-
ther risks, because management in many instances will not have
proved its abilities or effectiveness, the eventual market for such
company's products or services will likely not be established, and such
company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the Company's
management to complete acquisitions without submitting any proposal
to the stockholders for their consideration. Holders of the Company's
securities should not anticipate that the Company necessarily will
furnish such holders, prior to any merger or acquisition, with financial
statements, or any other documentation, concerning a target company
or its business. In some instances, however, the proposed participation
in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under
the supervision of the Company's President, who is not a professional
business analyst. See "Management." Since Company management has
no current plans to use any outside consultants or advisors to assist in the
investigation and selection of business opportunities, no policies have
been adopted regarding use of such consultants or advisors, the criteria
to be used in selecting such consultants or advisors, the services to be
provided, the term of service, or regarding the total amount of fees
that may be paid. As of the date of this filing, the Company owed
$4,225 in organizational and consulting fees to Dennis Bersch,
independent auditor for the Company, in connection with initial reviews
of the Company's business plan.
<PAGE> 18
The Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
2. The Company's perception of how any particular business
opportunity will be received by the investment community and
by the Company's stockholders;
3. Whether, following the business combination, the financial
condition of the business opportunity would be, or would have
a significant prospect in the foreseeable future of becoming
sufficient to enable the securities of the Company to qualify
for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit
the trading of such securities to be exempt from the
requirements of Rule 15c2-6 recently adopted by the Securities
and Exchange Commission. See "Risk Factors - The
Company - Regulation of Penny Stocks."
4. Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations,
through the sale of additional securities, through joint ventures
or similar arrangements, or from other sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of
similar size and experience within the industry segment as
well as within the industry as a whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other
required items.
<PAGE> 19
In regard to the possibility that the shares of the Company
would qualify for listing on NASDAQ, the current standards include
the requirements that the issuer of the securities that are sought to be
listed have total assets of at least $4,000,000 and total capital and
surplus of at least $2,000,000, and proposals have recently been made
to increase these qualifying amounts. Many, and perhaps most, of the
business opportunities that might be potential candidates for a
combination with the Company would not satisfy the NASDAQ listing
criteria.
No one of the factors described above will be controlling in
the selection of a business opportunity, and management will attempt
to analyze all factors appropriate to each opportunity and make a
determination based upon reasonable investigative measures and
available data. Potentially available business opportunities may occur
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 extremely difficult and complex.
Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited
experience in business analysis, the Company may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in
a business opportunity. It expects, however, that the analysis of
specific proposals and the selection of a business opportunity may take
several months or more.
Prior to making a decision to participate in a business
opportunity, the Company will generally request that it be provided
with written materials regarding the business opportunity containing
such items as a description of products, services and company history;
management resumes; financial information; available projections, with
related assumptions upon which they are based; an explanation of
proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions
between such company and its affiliates during relevant periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated
capital requirements; audited financial statements, or if they are not
available, unaudited financial statements, together with reasonable
assurances that audited financial statements would be able to be
<PAGE> 20
produced within a reasonable period of time not to exceed 60 days
following completion of a merger transaction; and other information
deemed relevant.
As part of the Company's investigation, the Company's
executive officers and directors may meet personally with management
and key personnel, may visit and inspect material facilities, obtain
independent analysis or verification of certain information provided,
check references of management and key personnel, and take other
reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise. There will
be no loan agreements or understandings between the Company
and third parties, nor does the Company intend to raise any operating
capital by implementing private placements of restricted stock and/or
public offerings of its common stock.
It is possible that the range of business opportunities that
might be available for consideration by the Company could be limited
by the impact of Securities and Exchange Commission regulations
regarding purchase and sale of "penny stocks." The regulations would
affect, and possibly impair, any market that might develop in the
Company's securities until such time as they qualify for listing on
NASDAQ or on another exchange which would make them exempt
from applicability of the "penny stock" regulations. See "Risk Factors
- - Regulation of Penny Stocks."
Company management believes that various types of potential
merger or acquisition candidates might find a business combination
with the Company to be attractive. These include acquisition
candidates desiring to create a public market for their shares in order
to enhance liquidity for current shareholders, acquisition candidates
which have long-term plans for raising capital through the public sale
of securities and believe that the possible prior existence of a public
market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of
development of a public market for their securities will be of
assistance in that process. Acquisition candidates which have a need
for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive alternative.
<PAGE> 21
Form of Acquisition
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business op-
portunities will be reviewed as well as the respective needs and desires
of the Company and the promoters of the opportunity and, upon the
basis of that review and the relative negotiating strength of the
Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements,
licenses, joint ventures and other contractual arrangements. The
Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing
such structure may require the merger, consolidation or reorganization
of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the
Company would be the surviving entity. In addition, the present
management and stockholders of the Company most likely will not
have control of a majority of the voting shares of the Company
following a reorganization transaction. As part of such a transaction,
the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
Management may actively negotiate or otherwise consent to the
purchase of any portion of their common shares as a condition to or
in connection with a proposed merger or acquisition transaction.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the Company's
management to complete acquisitions without submitting any proposal
to the stockholders for their consideration. Holders of the Company's
securities should not anticipate that the Company necessarily will
furnish such holders, prior to any merger or acquisition, with financial
statements, or any other documentation, concerning a target company
or its business. In some instances, however, the proposed participation
in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
It is likely that the Company will acquire its participation in
a business opportunity through the issuance of Common Stock or
other securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
<PAGE> 22
circumstances the criteria for determining whether or not an acquisi-
tion is a so-called "tax free" reorganization under the Internal Revenue
Code of 1986, depends upon the issuance to the stockholders of the
acquired company of a controlling interest (i.e. 80% or more) of the
common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under
the Internal Revenue Code, the Company's current stockholders would
retain in the aggregate 20% or less of the total issued and outstanding
shares. This could result in substantial additional dilution in the
equity of those who were stockholders of the Company prior to such
reorganization. Any such issuance of additional shares might also be
done simultaneously with a sale or transfer of shares representing a
controlling interest in the Company by the current officers, directors
and principal shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any
reorganization would be issued in reliance upon exemptions, if any are
available, from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain conditions
or at specified times thereafter. The issuance of substantial additional
securities and their potential sale into any trading market that might
develop in the Company's securities may have a depressive effect
upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the terms
of closing and the conditions which must be satisfied by each of the
parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent
with the management, principals or owners of a prospective business
opportunity prior to signing a binding agreement. Such a letter of
intent will set forth the terms of the proposed acquisition but will not
bind any of the parties to consummate the transaction. Execution of
<PAGE> 23
a letter of intent will by no means indicate that consummation of an
acquisition is probable. Neither the Company nor any of the other
parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the ac-
quisition as described in the preceding paragraph is executed. Even
after a definitive agreement is executed, it is possible that the
acquisition would not be consummated should any party elect to
exercise any right provided in the agreement to terminate it on
specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by
purchasing, trading or selling the securities of such business. The
Company does not, however, intend to engage primarily in such
activities. Specifically, the Company intends to conduct its activities
so as to avoid being classified as an "investment company" under the
Investment Company Act of 1940 (the "Investment Act"), and
therefore to avoid application of the costly and restrictive registration
and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of
an "investment company," and it excludes any entity that does not
engage primarily in the business of investing, reinvesting or trading in
securities, or that does not engage in the business of investing,
owning, holding or trading "investment securities" (defined as "all
securities other than government securities or securities of
majority-owned subsidiaries") the value of which exceeds 40% of the
value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a
<PAGE> 24
manner which will result in the availability of this exception from the
definition of "investment company." Consequently, the Company's
participation in a business or opportunity through the purchase and
sale of investment securities will be limited.
The Company's plan of business may involve changes in its
capital structure, management, control and business, especially if it
consummates a reorganization as discussed above. Each of these areas
is regulated by the Investment Act, in order to protect purchasers of
investment company securities. Since the Company will not register
as an investment company, stockholders will not be afforded these
protections.
Any securities which the Company might acquire in exchange
for its Common Stock will be "restricted securities" within the
meaning of the Securities Act of 1933, as amended (the "Act"). If the
Company elects to resell such securities, such sale cannot proceed
unless a registration statement has been declared effective by the
Securities and Exchange Commission or an exemption from
registration is available. Section 4(1) of the Act, which exempts sales
of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does
not contemplate resale of securities acquired, if such a sale were to be
necessary, the Company would be required to comply with the
provisions of the Act to effect such resale.
An acquisition made by the Company may be in an industry
which is regulated or licensed by federal, state or local authorities.
Compliance with such regulations can be expected to be a
time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in
its efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and corporations,
venture capital affiliates of large industrial and financial companies,
small investment companies, and wealthy individuals. Many of these
entities will have significantly greater experience, resources and
managerial capabilities than the Company and will therefore be in a
better position than the Company to obtain access to attractive
business opportunities. The Company also will experience competition
from other public "blind pool" companies, many of which may have
more funds available than does the Company.
<PAGE> 25
Administrative Offices
The Company currently maintains a mailing address at 360
Thames Street, Newport, Rhode Island 02840, which is the office
address of its legal counsel. The Company's telephone number is
(401) 841-9444. Other than this mailing address, the Company does
not currently maintain any other office facilities, and does not
anticipate the need for maintaining office facilities at any time in the
foreseeable future. The Company pays no rent or other fees for the
use of this mailing address.
Employees
The Company is a development stage company and currently
has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not anti-
cipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for em-
ployees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its
nature or amount, remuneration may be paid to or accrued for the
benefit of, the Company's officers prior to, or in conjunction with,
the completion of a business acquisition. The Company's officers
have accepted common stock for services rendered for consulting,
organizing the corporation, seeking merger candidates and evaluating
these candidates. See "Executive Compensation" and under "Certain
Relationships and Related Transactions."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS.
General
The Registrant intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Registrant has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other
company regarding the possibility of an acquisition or merger between the
Company and such other company as of the date of this registration statement.
<PAGE> 26
While the Company will attempt to obtain audited financial statements of
a target entity, there is no assurance that such audited financial statements
will be available. The Board of Directors does intend to obtain certain
assurances of value of the target entity's assets prior to consummating such a
transaction, with further assurances that an audited statement would be
provided within seventy-five days after closing of such a transaction.
Closing documents relative thereto will include representations that the value
of the assets conveyed to or otherwise so transferred will not materially
differ from the representations included in such closing documents.
The Company is filing this registration statement on a voluntary basis
because the primary attraction of the Registrant as a merger partner or
acquisition vehicle will be its status as an SEC reporting company. Any
business combination or transaction will likely result in a significant
issuance of shares and substantial dilution to present stockholders of the
Registrant.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant 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 publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8-K's, 10-K's or 10-KSB's, agreements and related
reports and documents. The Securities Exchange Act of 1934 (the "34 Act"),
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings relevant to complying
with the 34 Act. Nevertheless, the officers and directors of the Company have
not conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction
for the owners of a business opportunity.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The
Company is subject to all of the reporting requirements included in the 34
Act. Included in these requirements is the affirmative duty of the Company to
file independent audited financial statements as part of 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 statements
<PAGE> 27
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 34 Act, or if the audited financial statements provided do not conform
to the representations made by the candidate to be acquired in the closing
documents, the closing documents may provide that the proposed transaction
will be voidable, at the discretion of the present management of the Company.
The Company's officers and shareholders have verbally agreed that they
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. These persons have further agreed that such
advances will be made in proportion to each person's percentage ownership of
the Company. These persons have also agreed that such advances will be made
interest free without expectation of repayment unless the owners of the
business which the Company acquires or merges with agree to repay all or a
portion of such advances. Such repayment will in no way be a condition to the
selection of a target company. There is no dollar cap on the amount of money
which such persons will advance to the Company. The Company will not borrow any
funds from anyone other than its current shareholders for the purpose of
repaying advances made by the shareholders, and the Company will not borrow
any funds to make any payments to the Company's promoters, management or their
affiliates or associates.
Liquidity and Capital Resources
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity. The Company's balance sheet as of
December 31, 1998, reflects a current asset value of $3,675.00, and a
total asset value of $3,675 in the form of cash and capitalized
organizational costs.
The Company will carry out its plan of business as discussed
above. The Company cannot predict to what extent its liquidity and
capital resources will be diminished prior to the consummation of a
business combination or whether its capital will be further depleted by
the operating losses (if any) of the business entity which the Company
may eventually acquire.
<PAGE> 28
Results of Operations
During the period from May 15, 1998 (inception) through
December 31, 1998, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital
and preparation for registration of its securities under the Securities
Exchange Act of 1934, as amended. No revenues were received by
the Company during this period.
For the current fiscal year, the Company anticipates incurring
a loss as a result of organizational expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates. The
Company anticipates that until a business combination is completed
with an acquisition candidate, it will not generate revenues other than
interest income, and may continue to operate at a loss after completing
a business combination, depending upon the performance of the
acquired business.
Need for Additional Financing
The Company believes that its existing capital will be
sufficient to meet the Company's cash needs, including the costs of
compliance with the continuing reporting requirements of the
Securities Exchange Act of 1934, as amended, for a period of
approximately one year. Accordingly, in the event the Company is
able to complete a business combination during this period, it
anticipates that its existing capital will be sufficient to allow it to
accomplish the goal of completing a business combination. There is
no assurance, however, that the available funds will ultimately prove
to be adequate to allow it to complete a business combination, and
once a business combination is completed, the Company's needs for
additional financing are likely to increase substantially.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") issued by the Financial Accounting Standards Board ("FASB"), under which
deferred tax assets and liabilities are provided on differences between the
carrying amounts for financial reporting and the tax basis of assets and
liabilities for income tax purposes using the enacted tax rates.
<PAGE> 29
Under SFAS 109, deferred tax assets may be recognized for temporary
differences that will result in deductible amounts in future periods. A
valuation allowance is recognized, if on the weight of available evidence, it
is more likely than not that some portion or all of the deferred tax asset
will not be realized.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") issued by the FASB, is effective for financial statements for
fiscal years beginning after December 15, 1995. The standard establishes new
guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment, certain identifiable intangible assets, and
goodwill, should be recognized and how impairment losses should be measured.
The Company does not expect adoption to have a material effect on its
financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective for
specific transactions entered into after December 15, 1995. The disclosure
requirements of SFAS 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard established
a fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
Federal Income Tax Aspects of Investment in the Company
The discussion contained herein has been prepared by the
Company and is based on existing law as contained in the Code,
amended United States Treasury Regulations ("Treasury
Regulations"), administrative rulings and court decisions as of the
date of this Registration Statement. No assurance can be given
that future legislative enactments, administrative rulings or court
decisions will not modify the legal basis for statements contained
in this discussion. Any such development may be applied
retroactively to transactions completed prior to the date thereof,
and could contain provisions having an adverse affect upon the
Company and the holders of the Common Stock. In addition, several
of the issues dealt with in this summary are the subject of
<PAGE> 30
proposed and temporary Treasury Regulations. No assurance can be
given that these regulations will be finally adopted in their
present form.
Basis in Common Stock
The tax basis that a Shareholder will have in his Common Stock
will equal his cost in acquiring his Common Stock. If a
Shareholder acquires Common Stock at different times or at
different prices, he must maintain records of those transactions so
that he can accurately report gain or loss realized upon
disposition of the Common Stock.
Dividends on Common Stock
Distributions made by the Company with respect to the Common
Stock will be characterized as dividends that are taxable as
ordinary income to the extent of the Company's current or
accumulated earnings and profits ("earnings and profits"), if any,
as determined for U.S. federal income tax purposes. To the extent
that a distribution on the Common Stock exceeds the holder's
allocable share of the Company's earnings and profits, such
distribution will be treated first as a return of capital that will
reduce the holder's adjusted tax basis in such Common Stock, and
then as taxable gain to the extent the distribution exceeds the
holder's adjusted tax basis in such Common Stock. The gain will
generally be taxed as a long-term capital gain if the holder's
holding period for the Common Stock is more than one year.
The availability of earnings and profits in future years will
depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion
of a distribution on the Common Stock will be characterized as a
dividend for general income tax purposes. Corporate shareholders
will not be entitled to claim the dividends received deduction with
respect to distributions that do not qualify as dividends. See the
discussion regarding the dividends received deduction below.
<PAGE> 31
Redemption of Common Stock
The Company does not have the right to redeem any Common
Stock. However, any redemption of Common Stock, with the consent
of the holder, will be a taxable event to the redeemed holder.
The Company does not believe that the Common Stock will be
treated as debt for federal income tax purposes. However, in the
event that the Common Stock is treated as debt for federal tax
purposes, a holder generally will recognize gain or loss upon the
redemption of the Common Stock measured by the difference between
the amount of cash or the fair market value of property received
and the holder's tax basis in the redeemed Common Stock. To the
extent the cash or property received are attributable to accrued
interest, the holder may recognize ordinary income rather than
capital gain. Characterization of the Common Stock as debt would
also cause a variety of other tax implications, some of which may
be detrimental to either the holders, the Company, or both
(including, for example, original issue discount treatment to the
Investors). Potential Investors should consult their tax advisors
as to the various ramifications of debt characterization for
federal income tax purposes.
Other Disposition of the Common Stock
Upon the sale or exchange of shares of Common Stock, to or
with a person other than the Company, a holder will recognize
capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's adjusted basis
in such stock. Any capital gain or loss recognized will generally
be treated as a long-term capital gain or loss if the holder held
such stock for more than one year. For this purpose, the period
for which the Common Stock was held would be included in the
holding period of the Common Stock received upon a conversion.
State, Local and Foreign Taxes
In addition to the federal income tax consequences described
above, prospective investors should consider potential state, local
and foreign tax consequences of an investment in the Common Stock.
<PAGE> 32
ERISA Considerations for Tax-Exempt Investors/Shareholders
General Fiduciary Requirements
Title I of ERISA includes provisions governing the
responsibility of fiduciaries to their Qualified Plans. Qualified
Plans must be administered according to these rules. Keogh plans
that cover only partners of a partnership or self-employed owners
of a business are not subject to the fiduciary duty rules of ERISA,
but are subject to the prohibited transaction rules of the Code.
Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a
Qualified Plan is considered to be a fiduciary of such Qualified
Plan (subject to certain exceptions not here relevant).
ERISA Section 404(a)(1) requires a fiduciary of a Qualified
Plan to "discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and (A) for the
exclusive purpose of: (i) providing benefits to participants and
their beneficiaries, and (ii) defraying reasonable expenses of
administering the plan; (B) with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims; (C) by diversifying the investments of a plan so as to
minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and (D) in accordance with the
documents and instruments governing the plan."
FIDUCIARIES WHO BREACH THE DUTIES THAT ERISA IMPOSES MAY
SUFFER A WIDE VARIETY OF LEGAL AND EQUITABLE REMEDIES, INCLUDING
(i) THE REQUIREMENT TO RESTORE QUALIFIED PLAN LOSSES AND TO PAY
OVER ANY FIDUCIARY'S PROFITS TO THE QUALIFIED PLAN; (ii) REMOVAL AS
FIDUCIARY OF THE QUALIFIED PLAN; AND (iii) LIABILITY FOR EXCISE
TAXES THAT SECTION 4975 OF THE CODE IMPOSES.
ITEM III. DESCRIPTION OF PROPERTY.
The Company does not currently maintain an office or any
other facilities. It does currently maintain a mailing address at 360
Thames Street, Newport, Rhode Island 02840, which is the office
address of its legal counsel. The Company pays no rent for the use
<PAGE> 33
of this mailing address. The Company does not believe that it will
need to maintain an office at any time in the foreseeable future in
order to carry out its plan of operations described herein. The
Company's telephone number is (401) 841-9444.
ITEM IV. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth as of May 15, 1998, information with
respect to the beneficial ownership of the Company's outstanding Common Stock
by (i) each director and executive officer of the Company, (ii) all directors
and executive officers of the Company as a group, and (iii) each shareholder
who was known by the Company to be the beneficial owner of more than 5% of
the Company's outstanding Common Stock. Except as otherwise indicated,
the persons or entities listed below have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Name and Address Number of Percent of
Shares Owned Class Owned
Beneficially
<S> <C> <C>
Gerard Werner, Esq.(1)
C/O Law Offices of
Mark T. Thatcher
360 Thames Street
Newport, RI 02840 552,600 45.00%
Mark T. Thatcher(1)
360 Thames Street
Newport, RI 02840 552,600 45.00%
All directors and executive
officers as a group (2 persons) 1,105,200 90.00%
</TABLE>
<PAGE> 34
(1) The persons listed are the sole officers and directors of the Company.
Management has no plans to issue any additional securities to management,
promoters or their affiliates or associates and will do so only if such
issuance is in the best interests of shareholders of the Company and
complies with all applicable federal and state securities rules and
regulations.
Although the Company has a very large amount of authorized but unissued
common and preferred stock that may be issued without further shareholder
approval or notice, it is the intention of the Company to avoid inhibiting
certain transactions with prospective acquisition or merger candidiates,
based upon the perception by such candidate that they may be engaged
in a rapidly exopanding indutry (i.e. internet) and cannot afford to proxy
shareholders each time their management needs to authorize additional
shares.
ITEM V. DIRECTORS, EXECUTIVE OFFICES, PROMOTERS AND CONTROL PERSONS
The directors and executive officers currently serving the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions Held and Tenure
<S> <C> <C>
Mark T. Thatcher 34 President and Director since
May 15, 1998
Gerard Werner 28 Vice President and Director since
May 15, 1998
</TABLE>
The directors named above will serve until the first annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding
<PAGE> 35
between the sole directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer.
The sole directors and officers of the Company will devote their
time to the Company's affairs on an "as needed" basis. As a result,
the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to
month.
Biographical Information
Mark T. Thatcher, Esq.
Mr. Thatcher has participated as a business and legal advisor
for a number of public and privately held companies. He has been
retained for federal and state securities compliance, venture capital
analysis, public and private mergers and acquisitions, corporate
reorganization/restructuring, and international franchising development.
He is presently general counsel for Acadia National Health Systems,
Inc. (Ticker: "ACAD"), ATI Networks, Inc. (Ticker "ATIW") and
CDX Corporation (Ticker "CDX").
Mr. Thatcher was a junior partner of Daniel P. Edwards, P.C., an
"AV" rated Colorado law firm with multiple listings in the "Preeminent Bar
Register" of the Martindale Hubell Directory. The firm was "of counsel" to
Hughes Dorsey, Denver, Colorado, Heron Burchette, Washington, D.C. and
Sparks, Dix and Enoch, Colorado Springs, Colorado. He is an honorary
member of Phi Kappa Delta, Sutton Award candidate, and recipient of the
E.V. Graham Scholarship Merit Award.
Mr. Thatcher attended the University of Denver where he earned
a Juris Doctorate and Masters in Business Administration. He is
presently a member of the State Bar of Colorado; Court of Appeals,
District of Columbia; Committee Member of the Securities Forum,
Colorado and Washington, D.C.; and Member of the International
Society of Business Law.
<PAGE> 36
Gerard Werner
Mr. Werner passed the District of Columbia, Court of Appeals Bar
examination in February 1998. Since that time he has served as
Case Design Manager for The Equitable, April 1998- Sep. 1998.
He is a registered representative, having passed series 6 and series
63, as well as Virginia's Life and Health Insurance licensing exam.
Mr. Werner graduated from the Georgetown University Law School
in 1997 where he served as a staff member of the American Criminal
Law Review Volume 33, and as Articles and Notes Editor Volume 34.
He published author Volume 33-3, Eleventh Survey of White Collar
Crime- "Tax Evasion".
Mr. Werner graduated in 1994 from Georgetown University with a
double major in philosophy and government. He served as an intern
in United States Representative Thomas Petri's office on three separate
occasions: 1992, 1994 and 1995.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of In-
corporation provide that the Company will indemnify its directors and
officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in
any such action, they are adjudged to have acted with gross negligence
or willful misconduct. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in that Act and is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Business Corporation Act, the
Company's Articles of Incorporation exclude personal liability for its
directors for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any breach of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, acts in violation
of Section 7-106-401 of the Colorado Business Corporation Act, or
<PAGE> 37
any transaction from which a director receives an improper personal
benefit. This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
Other Public Shell Activities
The Company's President and Vice President have also recently
formed three other shell companies, Oak Brook Capital II, III and IV.
Each of the persons who is currently a shareholder in the Company is also
a shareholder in these other shell companies.
Oak Brook Capital II was formed May 16, 1998, and filed a
registration statement on Form 10-SB which may become effective
on or about December 25, 1998 as a result of lapse of time. There is not
currently a market for resale of the outstanding shares of Oak Brook
Capital II.
Oak Brook Capital III was formed May 17, 1998, and filed a
registration statement on Form 10-SB which may become effective on
or about December 26, 1998 as a result of lapse of time. There is not
currently a market for resale of the outstanding shares of Oak Brook
Capital III.
Oak Brook Capital IV was formed May 18, 1998, and filed a
registration statement on Form 10-SB which may become effective on
or about December 27, 1998 as a result of lapse of time. There is not
currently a market for resale of the outstanding shares of Oak Brook
Capital IV.
Conflicts of Interest
The sole officers and directors of the Company will devote only
a small portion of their time to the affairs of the Company, estimated
to be no more than approximately 20 hours per month. There will be
occasions when the time requirements of the Company's business
conflict with the demands of their other business and investment
activities. Such conflicts may require that the Company attempt to
employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon
terms favorable to the Company.
<PAGE> 38
The Company's sole officers and directors will promote all four (4)
"blank check" entities noted above and will use the vehicles in
an ascending selection from Oak Brook Capital I, Inc. to Oak Brook
Capital IV, Inc. to justify placing a particular privately held entity
into one of the "blank check" entities. Therefore, the first privately
held entity that elects to consummate an acquisition or merger with
one of Oak Brook Capital entities will be provided with Oak Brook
Capital I, Inc. Management does not intend to promote any other
"blank check" entities until business combination transactions
are completed on behalf of all four (4) Oak Brook Capital
entities.
There is no procedure in place which would allow Mr. Thatcher or
Mr. Werner to resolve potential conflicts in an arms-length fashion.
Accordingly, they will be required to use their discretion to resolve them
in a manner which they consider appropriate.
The Company's sole officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of their
common stock as a condition to, or in connection with, a proposed
merger or acquisition transaction. It is anticipated that a substantial
premium over the initial cost of such shares may be paid by the
purchaser in conjunction with any sale of shares by the Company's
officers and directors which is made as a condition to, or in connection
with, a proposed merger or acquisition transaction. The fact that a
substantial premium may be paid to the Company's sole officers and
directors to acquire their shares creates a potential conflict of interest for
them in satisfying their fiduciary duties to the Company and its other
shareholders. Even though such a sale could result in a substantial
profit to them, they would be legally required to make the decision based
upon the best interests of the Company and the Company's other
shareholders, rather than their own personal pecuniary benefit.
ITEM VI. EXECUTIVE COMPENSATION
At inception of the Company, its Directors, Mark T. Thatcher and
Gerard Werner each received 552,500 shares of Common Stock
valued at $0.0038 per share in consideration of pre-incorporation services
rendered to the Company related to investigating and developing the
Company's proposed business plan and capital structure, and completion
of the incorporation and organization of the Company. No officer or
director has received any other remuneration. Although there is no
<PAGE> 39
current plan in existence, it is possible that the Company will adopt
a plan to pay or accrue compensation to its sole officers and directors
for services related to seeking business opportunities and completing
a merger or acquisition transaction. See "Certain Relationships and
Related Transactions." The Company has no stock option, retirement,
pension, or profit-sharing programs for the benefit of directors,
officers or other employees, but the Board of Directors may
recommend adoption of one or more such programs in the future.
It is possible that, after the Company successfully consummates a merger
or acquisition with an unaffiliated entity, that entity may desire to employ
or retain one or more members of the Company's management for the purposes of
providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of
management will not be a consideration in the Company's decision to undertake
any proposed transaction. Each member of management has agreed to disclose to
the Company's Board of Directors any discussions concerning possible
compensation to be paid to them by any entity which proposes to undertake a
transaction with the Company and further, to abstain from voting on such
transaction. Therefore, as a practical matter, if each member of the
Company's Board of Directors is offered compensation in any form from any
prospective merger or acquisition candidate, the proposed transaction will not
be approved by the Company's Board of Directors as a result of the inability
of the Board to affirmatively approve such a transaction.
No member of management of the Company will receive any finders fee, either
directly or indirectly, as a result of their respective efforts to implement
the Company's business plan outlined herein. Also, there are no plans,
proposals, arrangements or understandings with respect to the sale or issuance
of additional securities by the Company prior to the location of an
acquisition or merger candidate. Please also see Item I, Description of
Business-General for information regarding the seeking out and selection of
a target company, addressing matters such as the manner of solicitation of
potential investors, the approximate number of persons who will be contacted
or solicited, their relationships to the Company's mangement, etc.
<PAGE> 40
ITEM VII. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is no public market for OAK BROOK Common Stock. The
OAK BROOK Common Sock may be traded in the over-the-counter market
in the near future, however, there can be no assurance as to the price
at which trading in OAK BROOK Common Stock will occur.
With respect to financial and other information relating to
OAK BROOK, Mark T. Thatcher, P.C., whose address is
360 Thames Street, Newport, Rhode Island 02840 will file annual and
periodic reports with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934. Copies of such reports may be
inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington D.C. 20549, and copies may be obtained from
the Commission at prescribed rates. In addition, OAK BROOK will
provide without charge, upon the request of any stockholder,
a copy of its Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998, to be filed with the Commission. Any such
requests should be directed to the President of OAK BROOK, address
360 Thames Street, Newport, RI 02840.
Prior to the date of this Registration Statement, the Company
issued to its officers and directors a total of 1,105,200 shares of Common
Stock for a total services valued at $4,200. Certificates evidencing the
Common Stock issued by the Company to these persons have all been
stamped with a restrictive legend, and are subject to stop transfer orders
by the Company. For additional information concerning restrictions
that are imposed upon the securities held by current stockholders,
and the responsibilities of such stockholders to comply with federal
securities laws in the disposition of such Common Stock, see "Risk
Factors -Rule 144 Sales."
No officer, director, promoter, or affiliate of the Company has
or proposes to have any direct or indirect material interest in any asset
proposed to be acquired by the Company through security holdings,
contracts, options, or otherwise.
Although there is no current plan in existence, it is possible
that the Company will adopt a plan to pay or accrue compensation to
its sole officers and directors for services related to seeking business
opportunities and completing a merger or acquisition transaction.
<PAGE> 41
The Company maintains a mailing address at the office of its
legal counsel, but otherwise does not maintain an office. As a result,
it pays no rent and incurs no expenses for maintenance of an office
and does not anticipate paying rent or incurring office expenses in the
future.
Although management has no current plans to cause the
Company to do so, it is possible that the Company may enter into an
agreement with an acquisition candidate requiring the sale of all or a
portion of the Common Stock held by the Company's current
stockholders to the acquisition candidate or principals thereof, or to
other individuals or business entities, or requiring some other form of
payment to the Company's current stockholders, or requiring the
future employment of specified officers and payment of salaries to
them. It is more likely than not that any sale of securities by the
Company's current stockholders to an acquisition candidate would be
at a price substantially higher than that originally paid by such
stockholders. Any payment to current stockholders in the context of
an acquisition involving the Company would be determined entirely
by the largely unforeseeable terms of a future agreement with an
unidentified business entity.
ITEM VIII. DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorize the issu-
ance of 50,000,000 shares of Common Stock. Each record holder of
Common Stock is entitled to one vote for each share held on all
matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by the
Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled
to such dividends as may be declared from time to time by the Board
of Directors out of legally available funds; and, in the event of
liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive, ratably, the net assets of the Company
available to stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon liquidation.
Holders of outstanding shares of Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding
shares of Common Stock are, and all unissued shares when offered
<PAGE> 42
and sold will be, duly authorized, validly issued, fully paid, and
nonassessable. To the extent that additional shares of the Company's
Common Stock are issued, the relative interests of then existing
stockholders may be diluted.
Preferred Stock
The Company's Articles of Incorporation authorize the issu-
ance of 10,000,000 shares of preferred stock. The Board of Directors
of the Company is authorized to issue the preferred stock from time
to time in series and is further authorized to establish such series, to
fix and determine the variations in the relative rights and preferences
as between series, to fix voting rights, if any, for each series, and to
allow for the conversion of preferred stock into Common Stock. No
preferred stock has been issued by the Company. The Company anti-
cipates that preferred stock may be utilized in making acquisitions.
Transfer Agent
The Company is currently serving as its own transfer agent,
and plans to continue to serve in that capacity until such time as
management believes it is necessary or appropriate to employ an
independent transfer agent in order to facilitate the creation of a public
trading market for the Company's securities. Since the Company does
not currently expect any public market to develop for its securities
until after it has completed a business combination, it does not
currently anticipate that it will seek to employ an independent transfer
agent until it has completed such a transaction.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual
report for each fiscal year containing financial statements audited by
its independent certified public accountants. In the event the
Company enters into a business combination with another company,
it is the present intention of management to continue furnishing annual
reports to stockholders. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate. The Company intends to
comply with the periodic reporting requirements of the Securities
Exchange Act of 1934 for so long as it is subject to those
requirements.
<PAGE> 43
PART II
ITEM I. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
No public trading market exists for the Company's securities
and all of its outstanding securities are restricted securities as defined
in Rule 144. There were eighty-nine (89) holders of record of the Company's
common stock on May 15, 1999. No dividends have been paid to
date and the Company's Board of Directors does not anticipate paying
dividends in the foreseeable future.
The Company does not plan to take affirmative steps to request or
encourage any broker-dealer to act as a market maker for the Company's
securities. There are to date no understandings, agreements or discussions
in place with any such broker-dealer. Although management has set forth
disclosure throughout this registration statement indicating it would consider
the public "trading" of its securities if such activity was in the best
interests of its shareholders, it presently has no plans to do so.
(a) MARKET PRICE. The Registrant's Common Stock is not quoted at the
present time.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established 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.
<PAGE> 44
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.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share.
In order to continue to be included on NASDAQ, a company must maintain
$1,000,000 in net tangible assets and a $1,000,000 market value of its
publicly-traded securities. In addition, continued inclusion requires two
market-makers and a minimum bid price of $1.00 per share.
Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate which will allow the Company's securities
to be traded without the aforesaid limitations. However, there can be no
assurances that, upon a successful merger or acquisition, the Company will
qualify its securities for listing on NASDAQ or some other national exchange,
or be able to maintain the maintenance criteria necessary to insure continued
listing. The failure of the Company to qualify its securities or to meet the
relevant maintenance criteria after such qualification in the future may
result in the discontinuance of the inclusion of the Company's securities on a
national exchange. In such events, trading, if any, in the Company's
securities may then continue in the non-NASDAQ over-the-counter market. As a
result, 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> 45
(b) HOLDERS. There are eighty-nine (89) holders of the Company's
Common Stock. Prior to the date of this Registration Statement, the Company
issued to its officers and directors a total of 1,105,200 shares of Common
Stock for a total services valued at $4,200. Eighty-seven (87) of the Company's
holders received their shares via "bona fide" gift based upon their personal
relationship with the sole officers and directors of the Company. The
designation of said holders that were gifted shares was random and was not
intended as past, present or future consideration, inducements for reciprocal
consideration, or incentive for future services or rewards. The Company
anticipates that certain potential acquisition or merger candidates might
satisfy the NASDAQ SmallCap requirements, but would need at least one
hundred (100) round-lot holders of their common stock.
Although the Company believes that the "gifting" of common shares may provide
a "value" to certain potential target companies, (i) this aspect of the
Company's structure should not to be a determining factor by a target company
in its indepdendent valuation of the Company; and (iii) the Company provides
no assurances or representations that a target company could obtain a NASDAQ
SmallCap listing on the basis of such transactions.
Certificates evidencing the Common Stock issued by the Company to these
persons have all been stamped with a restrictive legend, and are subject to
stop transfer orders by the Company. For additional information concerning
restrictions that are imposed upon the securities held by current stockholders,
and the responsibilities of such stockholders to comply with federal
securities laws in the disposition of such Common Stock.
The Company has taken the following action to ensure that a public
re-distribution of the Shares does not take place:
(i) a "restrictive" legend will be placed on each stock certificate issued to
donees in connection with the gifting transactions;
(ii) "stop transfer" order instructions will be placed on each stock
certificate issued to donees in connection with the gifting transactions;
(iii) donees have been placed on notice that their securities will need to be
sold in compliance with Rule 144 of the Act, and may not be transferred
otherwise;
<PAGE> 46
(iv) disclosure has been set forth throughout the Form 10SB describing the
above restrictions.
Redistribution - Rule 144
Rule 144 of the Securities Act lists criteria under which
restricted securities and securities held by affiliates or
control persons may be resold without registration. The rule
prevents the creation of public markets in securities when the
issuers have not made adequate current information available to
the public. Preliminary Note to Securities Act Rule 144. The
requirements of Rule 144(b) through (i) include provisions that:
1) current public information be available regarding
the issuer of the securities;
2) at least one year elapse between the time the
securities are acquired from an issuer or affiliate and
the date the securities are resold under the rule;
3) the amount of securities able to be sold is limited,
depending on whether the sale is by an affiliate or
not;
4) the securities be sold in brokers' transactions or
with a market maker;
5) Commission Form 144 be filed depending on the size
of the transaction; and
6) the person filing the form has a bona fide intention
to sell the securities within a reasonable time.
State Exemptions Following the Section 4(2) Exemption:
A number of states exempt from their registration requirements offers and
sales exempt from federal registration by reason of Section 4(2) of the
Securities Act. That provision provides an exemption for transactions not
involving a public offering and constitutes the issuer private placement
exemption. The exemption may explicitly refer to Section 4(2) of the
Securities Act or may exempt non-public offerings. Of course, those
jurisdictions without general securities registration requirements, including
Colorado, District of Columbia, New York, and Nevada may also rely on the
Section 4(2) exemption.
<PAGE> 47
The Company is relying on the following state exemptive provision's that are
applicable to the private placement contemplated herein and that no further
requirements are necessary in the respective jurisdictions to ensure the
availability of such states' various private placement exemptions:
No. Of Shareholders Exemptive
State Receiving Gift Provision
Rhode Island 20 1992 Reenactment, General Laws of
Rhode Island, as amended,
Sec. 7-11-402(10)
Colorado 15 Colorado Rev. Statutes, 192 Laws 1990,
H 1222, Sec. 11-51-308
Texas 12 Texas Rev. Statutes, Securities Act
of 1957, Sec. 5(581-5) IC
Georgia 5 Georgia Securities Act of 1973,
Sec. 10-5-9; Subsec. (5)(13)
Arizona 6 Arizona Rev. Statutes,
Sec. 44-1844(1)
Wisconsin 4 Wisconsin Rev. Statutes, 87-88,
Sec. 551-23(11)
Massachusetts 4 General Laws of MA, 1990,
Sec. 402(b)(9)
Minnesota 3 Minnesota Statutes, 86,
Sec. 80A-15, subd 2(a)(1)
Maine 3 Maine Rev. Statutes,
Sec. 10 502(2Q)
Maryland 2 Annotated Code of Maryland,
Sec. 11-602(9)
New Jersey 1 New Jersey Statutes Annotated,
Sec. 49:3-50(b)9
New York 1 New York Consolidated Laws,
Sec. 352-G
<PAGE> 48
Connecticut 1 Title 366, CT Sec. Law & Business
Opportunity Investment Act,
Sec. 36b-21(b) 15
Florida 1 Florida Statutes, 1987,
Sec. 517.061 11(a)
Illinois 1 Illinois Laws, Sec. 4(514) 6.1
The Company has confirmed that the following states have adopted the National
Securities Markets Improvement Act of 1996 which provides for exemptive
provisions applicable to the status of secondary trading in the "gifted"
securities following the distribution to the shareholders:
Section 18(b) of the Securities Act of 1933, i.e., Subsection 18(b)(1),
18(b)(2), 18(b)(3) and 18(b)4 defines a "covered security" or "federal covered
security". Exempt from state regulation are (1) investment companies
registered under the Investment Company Act of 1940; (2) certain securities
listed on nationally-recognized stock exchanges; (3) offers or sales made to
qualified purchasers; (4) certain transactions exempt from registration under
the Securities Act of 1933; (5) investment advisers with assets over
$25,000,000; and (6) Rule 506 offerings. States are still allowed to regulate
smaller offerings, penny stocks, intrastate offerings, and certain limited
offerings. Except for certain exchange-listed securities, the states may
still require notice filings and have the power to require registration or
suspend offerings for which notices have not been filed.
In particular, Section 18(b)(4)(A) provides that a security is a covered
security with respect to a transaction that is exempt from registration
pursuant to paragraph (1) or (3) of Section 4, and the issuer of such security
files reports with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Section 4(1) of the Act exempts transactions by any person other than an
issuer, underwriter, or dealer.
Section 4(3) of the Act exempts transactions by a dealer (including an
underwriter no longer acting as an underwriter in respect of the security
involved in such transaction), except--
(A) transactions taking place prior to the expiration of 40 days after the
first date upon which the security was bona fide offered to the public by the
issuer or by or through an underwriter;
(B) transactions in a security as to which a registration statement has been
filed taking place prior to the expiration of 40 days.
<PAGE> 49
The following states have adopted laws and/or regulations addressing Section
(b)(4)(A) of NSMIA:
Arizona Georgia
Illinois Maine
Maryland Minnesota
New Jersey Rhode Island
Texas Wisconsin
Based upon the foregoing. We are of the opinion that "secondary trading"
opportunities will exist pursuant to Sections 18(b)(4)(A), 4(1), 4(3) or 4(4)
of the Act, in the states referenced above, provided that the Company
continues to timely files reports required under Section 13 or 15(d) of the
Exchange Act and effectuate any filings that may be required in each
respective state listed above, if any.
Colorado:
To obtain the exemption for "non-issuer" secondary trading (Colorado
Rev. Statutes Sec. 11-51-308(1)(b)(V)), the Company will be required to file
Form ST with the Securities Commissioner in order for the transactional
securities registration exemption to apply.
Connecticut:
Section 4(1), 4(3) ane 4(4) of the Act have ben adopted and
provide an exemption for "non-issuer", secondary trading transactions.
Regulations also provide an exemption for sales made through registered
"broker/dealers".
Florida:
Sec. 517.061, Florida Statutes provides that the offer or sale of
securities in a transaction exempt under Section 4(1) of the Act is an exempt
transaction, so long as the person has owned the securities for at least one
(1) year.
Mass.:
Section 4(1), 4(3) ane 4(4) of the Act have been adopted and provide an
exemption for "non-issuer", secondary trading transactions. Regulations also
provide an exemption for sales made through registered "broker/dealers".
New York:
Sec. 352-g of the New York Consolidated Laws, provides an exemption
for "secondary trading"
Although the above information may provide "secondary trading" exemptions for
the donees, provided they sell in full compliance with Rule 144 of the Act,
nonetheless, the Company must still timely file the reports required to be
filed as prescribed by Section 13 or 15(d) of the Exchange Act and must file
any required material with each respective state authority:
<PAGE> 50
(c) DIVIDENDS. The Registrant has not paid any dividends to date, and
has no plans to do so in the immediate future.
ITEM II. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings,
and no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner
of record or beneficial owner of more than 5.0% of the securities of
the Company, or any associate of any such director, officer or security
holder is a party adverse to the Company or has a material interest
adverse to the Company in reference to pending litigation.
ITEM III. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM IV. RECENT SALES OF UNREGISTERED SECURITIES
Since May 15, 1998 (the date of the Company's formation),
the Company has sold its Common Stock to the persons listed in the
table below in transactions summarized as follows:
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Purchase
Sale Purchase Price
Price per Share
<S> <C> <C> <C> <C>
Mark T. Thatcher 05/15/98 552,600 $30,000(1) $0.038
Gerard Werner 05/15/98 552,600 $30,000(1) $0.038
</TABLE>
(1) Consideration consisted of pre-incorporation consulting services
rendered to the Registrant related to investigating and developing the
Registrant's proposed business plan and capital structure and
completing the organization and incorporation of the Registrant.
With respect to the sales made, the Registrant relied on Section 4(2) of
the Securities Act of 1933, as amended. No advertising or general
solicitation was employed in offering the shares. The securities were offered
for investment only and not for the purpose of resale or distribution, and the
transfer thereof was appropriately restricted.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of one percent of the then outstanding Common
Stock or the average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the
sale of shares without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the preceding
three months, an affiliate of the Company.
Each of the sales listed above was made either for cash or for
services. Sales for which the consideration was services were made in
reliance upon the exemption from registration provided by Rule 701
adopted pursuant to Section 3(b) of the Securities Act of 1933. Sales for
which the consideration was cash were made in reliance upon the
exemption from registration offered by Section 4(2) of the Securities Act
of 1933. Based upon the Preincorporation Consultation and Subscription
Agreement executed by the persons who acquired shares for services, and
the Subscription Agreement and Investment Representations executed by
persons who acquired shares for cash, and based upon the pre-existing
relationship between the cash subscribers and the Company's officers and
directors, the Company had reasonable grounds to believe immediately
prior to making an offer to the private investors, and did in fact believe,
when such subscriptions were accepted, that such purchasers (1) were
purchasing for investment and not with a view to distribution, and (2) had
such knowledge and experience in financial and business matters that they
were capable of evaluating the merits and risks of their investment and
were able to bear those risks. The purchasers had access to pertinent
information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive
legend is imprinted upon each of the certificates representing such shares,
and stop-transfer instructions have been entered in the Company's transfer
records. All such sales were effected without the aid of underwriters, and
no sales commissions were paid.
<PAGE> 52
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7-109-101 through 7-109-109 of the Colorado Business
Corporation Act provides that any director or officer of a Colorado
corporation may be indemnified against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by him in
connection with or in defending any action, suit or proceeding in
which he is a party by reason of his position, so long as it shall
be determined that he conducted himself in good faith and that he
reasonably believed that his conduct was in the corporation's best
interest. If a director or officer is wholly successful, on the
merits or otherwise, in connection with such proceeding, such
indemnification is mandatory.
The Company's articles of incorporation and bylaws contain
provisions which provide, among other things, that the Company
shall indemnify certain persons, including officers and directors,
against judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interest of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. As to any action brought by or in the right of the
Company, such indemnification is limited to expenses (including
attorney's fees) actually and reasonably incurred in connection
with the defense or settlement of the case, and shall not be made,
absent court approval, if it was determined that such person was
liable for negligence or misconduct in the performance of his duty
to the Company.
The Articles of Incorporation and the Bylaws of the Company,
filed as Exhibits 3.1 and 3.2, respectively, provide that the Company
will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits, or
proceedings where the officer or director acted in good faith and in a
manner he reasonably believed to be in the Company's best interest
and is a party by reason of his status as an officer or director, absent
a finding of negligence or misconduct in the performance of duty.
<PAGE> 53
OAK BROOK CAPITAL I
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
The following financial statements include a balance sheet as of
December 31, 1998, a statement of operations and a statement of changes
in stockholders' equity for the period from May 15, 1998,
(inception) through December 31, 1998.
OAK BROOK CAPITAL I, INC.
(A Development Stage Company)
Index to Financial Statements 1
Report of Independent Auditor's Report 2
Balance Sheet 3
Statement of Operations 4
Statement of Changes in
Stockholders' Equity 5
Notes to Financial Statements 6
<PAGE> 54
OAK BROOK CAPITAL I, INC.
(A Development Stage Company)
April 15, 1999
Shareholders and Board of Directors
OAK BROOK CAPITAL I, INC.
Newport, Rhode Island
Report of Independent Auditors
We have audited the accompanying balance sheet of Oak Brook Capital
I, Inc. (a development stage Company) as of December 31, 1998, and the
related statements of operations and stockholders' equity from the company's
inception on May 15, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Oak Brook Capital
I, Inc. (a development stage Company) as of December 31, 1998, and
the results of operations, and its cash flows for the period from May 15, 1998
(inception) to December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Dennis W. Bersch
Milwaukee, Wisconsin
February 25, 1999
<PAGE> 55
OAK BROOK CAPITAL I, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C>
OTHER ASSETS:
Organizational Costs $4,200
Less accumulated amortization (525)
Total other assets $3,675
Total assets $ 3,675
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $7,725
Total current liabilities $7,725
EQUITY:
Preferred Stock, no par value,
10,000,000 shares authorized
Common Stock, no par value,
50,000,000 shares authorized,
1,228,000 shares outstanding;
1,105,200 shares issued at
$.0038 $4,200
122,800 shares issued by gift 0.00
Issued and Outstanding $4,200
Deficit accumulated during the
development stage (8,250)
Total equity $(4,050)
Total liabilities and equity $3,675
</TABLE>
<PAGE> 56
OAK BROOK CAPITAL I, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 15, 1998 (Inception) to
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
REVENUE $ 0
COSTS AND EXPENSES:
Audit and professional fees $ 7,725
Amortization of Organizational Cost 525
Net loss $ (8,250)
PER SHARE INFORMATION:
Weighted average number of
common shares outstanding 614,000
Profit (loss) per share $ (0.01344)
</TABLE>
<PAGE> 57
OAK BROOK CAPITAL I, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common
Shares Stock Retained
Issued Amount Earnings Equity
<S> <C> <C> <C> <C>
Equity at Inception $ -
Shares issued at inception
for services at $0.0038
per share 1,105,200 $ 4,200 $ 4,200
Shares issued by gift 122,800
Net loss for the period $ (8,250) $(8,250)
TOTAL 1,228,000 $ 4,200 $ (8,250) $ 4,050
</TABLE>
<PAGE> 58
OAK BROOK CAPITAL I, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on May 1, 1998, in the State of Colorado.
The Company is in the development stage and its intent is to operate as
a capital market access corporation and to acquire one or more existing
businesses through merger or acquisition. The Company has had no significant
business activity to date. The Company has selected the calendar year as its
fiscal year.
Organizational costs
Organizational costs include costs for professional fees and are amortized
using the straight-line method over five years.
Net loss per share
The net loss per share is computed by dividing the net loss for the period
by the weighted average number of common shares outstanding for the
period.
Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
2. STOCKHOLDERS' EQUITY
On May 15, 1998, the Company issued 1,105,200 shares of its no par value
common stock to affiliates for services valued at their fair market value
of $4,200. The shares were issued pursuant to Rule 701 of the Securities
Act of 1933 (the "Act") and are restricted securities within the meaning of
Rule 144 of the Act. An additional 122,800 shares were issued as qualified
gifts during the year.
3. RELATED PARTY TRANSACTIONS
There have been no related party transactions since the issuance of shares
<PAGE> 59
using organization costs as consideration. The account payable of $7725.00
reflects $4225.00 for services in connection with the organization of the
company and $3500.00 for the December 31 audit.
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
3(a) Articles of Incorporation
3(b) Bylaws
4(a) Agreements Defining Certain Rights of Shareholders
4(b) Specimen Stock Certificate
7 Not applicable
9 Not applicable
10(a) Pre-incorporation Consultation and
Subscription Agreement
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
23.1 Consent of Counsel, Mark T. Thatcher, P.C.
24 Not applicable
27 Financial Data Schedule
28 Not applicable
99 Not applicable
<PAGE> 60
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
<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.
OAK BROOK CAPITAL I, INC.
By: /s/ Mark T. Thatcher
________________________________
Mark T. Thatcher
General Counsel and Director
Date: May 14, 1999
<PAGE>
ARTICLES OF INCORPORATION
OF
OAK BROOK CAPITAL I, INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of the age of
eighteen (18) years or more, and desiring to form a corporation under the laws
of the State of Colorado, does hereby sign, verify and deliver in duplicate
to the Secretary of State of the State of Colorado these Articles of
Incorporation.
ARTICLE I
NAME
The name of the corporation shall be OAK BROOK CAPITAL I, INC.
The principal offices and addresses are 360 Thames Street, Newport, Rhode
Island 02840 and P.O. Box 5052, Oak Brook, Illinois 50522.
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to
law.
ARTICLE III
PURPOSE
The purpose for which this corporation is organized is to transact any
lawful business or businesses for which corporations may be incorporated
pursuant to the Colorado Business Corporation Act.
<PAGE>
ARTICLE IV
POWERS
In furtherance of the foregoing purposes the corporation shall have and
may exercise all of the rights, powers and privileges now or hereafter
conferred upon corporations organized under the Colorado Business Corporation
Act, as amended, or by law. In addition, it may do everything necessary,
suitable or proper for the accomplishment of any corporate purpose.
ARTICLE V
CAPITAL
The aggregate number of common shares which this corporation shall have
the authority to issue is forty million (40,000,000), each without par value
which shares shall be designated common stock. No share shall be issued
without consideration being exchanged, and it shall thereafter be
nonassessable. The Board of Directors may determine by a majority vote if
gifts of shares will be allowed under certain circumstances.
Shares of the corporation not having a par value shall be issued for such
consideration expressed in dollars as may be fixed from time to time by the
vote of the director(s).
The following is a description of each class of stock of the Corporation
with the preferences, conversion and other rights, restrictions, voting
powers, limitations as to distributions, qualifications, and terms and
conditions of redemption of each class:
FIRST: In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of any Preferred
Stock then outstanding shall be paid out of the assets of the Corporation
available for distribution to its stockholders an amount equal to One Dollar
($1.00) per share plus an amount equal to all unpaid declared distributions
thereon, without interest, and no more, before any amount shall be paid or any
assets of the Corporation shall be distributed among the holders of the Common
Stock and, if the assets of the Corporation available for distribution to its
stockholders shall be insufficient to permit the payment in full to the
holders of the Preferred Stock, as aforesaid, then the entire assets of the
Corporation available for distribution to its stockholders shall be
distributed ratably among the holders of the Preferred Stock; then and
thereafter, the remaining assets of the Corporation available for distribution
to its stockholders shall be distributed among and paid to the holders of the
Preferred Stock and the Common Stock, share and share alike and without any
distinction as to class, in proportion to their respective stockholdings.
<PAGE>
A merger of the Corporation with or into any other corporation, a share
exchange involving the Corporation, or a sale, lease, exchange, or transfer of
all or any part of the assets of the Corporation which shall not in fact
result in the liquidation of the Corporation and the distribution of its
assets to its stockholders shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation within
the meaning of this Article SIXTH, paragraph 1.
SECOND: Except as hereinabove provided in paragraph 1 of this Article
SIXTH, the Preferred Stock and the Common Stock of the Corporation shall be
identical in all respects and for all purposes and the holders of the
Preferred Stock and the holders of the Common Stock voting together and
without distinction as to class shall be entitled to one vote per share in all
proceedings in which actions shall be taken by the stockholders of the
Corporation.
THIRD: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
(2) The Board of Directors of the Corporation may classify or reclassify
any unissued stock by setting or changing in any one or more respects, from
time to time before issuance of such stock, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms or conditions of redemption of such stock.
(3) The Board of Directors shall have power, if authorized by the Bylaws,
to designate by resolution or resolutions adopted by a majority of the whole
Board of Directors, one or more committees, each committee to consist of two
or more of the directors of the Corporation, which, to the extent provided in
said resolutions or in the Bylaws of the Corporation and permitted by the
Colorado Business Corporation Act, shall have and may exercise any or all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of the
Corporation to be affixed to all instruments and documents which may require
it.
(4) If the Bylaws so provide, the Board of Directors of the Corporation
shall have power to hold its meetings, to have an office or offices and,
subject to the provisions of the Colorado Business Corporation Act, to keep
the books of the Corporation, outside of said State at such place or places
as may from time to time be designated by it.
(5) The Board of Directors shall have power to borrow or raise money,
from time to time and without limit, and upon any terms, for any corporate
purposes; and, subject to the Colorado Business
<PAGE>
Corporation Act, to authorize the creation, issue, assumption or guaranty of
bonds, notes or other evidences of indebtedness for moneys so borrowed, to
include therein such provisions as to redeemability, convertibility or
otherwise, as the Board of Directors, in its sole discretion, may determine
and to secure the payment of principal, interest or sinking fund in respect
thereof by mortgage upon, or the pledge of, or the conveyance or assignment in
trust of, the whole or any part of the properties, assets and goodwill of the
Corporation then owned or thereafter acquired.
The enumeration and definition of a particular power of the Board of
Directors included in the foregoing shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other article of these Articles of Incorporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the laws of the State of Colorado now or
hereafter in force.
FOURTH: Notwithstanding any provision of law to the contrary, the
affirmative vote of a majority of all the votes entitled to be cast on the
matter shall be sufficient, valid and effective, after due authorization,
approval or advice of such action by the Board of Directors, as required by
law, to approve and authorize the following acts of the Corporation:
(i) the amendment of these Articles of Incorporation;
(ii) the merger of the Corporation into another corporation or the merger
of one or more other corporations into the Corporation;
(iii) the sale, lease, exchange or other transfer of all, or
substantially all, of the property and assets of the Corporation, including
its goodwill and franchises;
(iv) the participation by the Corporation in a share exchange (as defined
in the Colorado Business Corporation Act) as the corporation the stock of
which is to be acquired; and
(v) the voluntary or involuntary liquidation, dissolution or winding-up
of or the revocation of any such proceedings relating to the Corporation.
ARTICLE VI
AUTHORIZATION OF CONVERTIBLE PREFERRED STOCK
The total number of shares of the capital stock which the Corporation has
authority to issue is 50,000,000, divided into forty million (40,000,000)
shares of common stock (the "Common Stock"), and ten million (10,000,000)
shares of Series A Convertible Preferred Stock with a par value of $100 per
share (hereinafter sometimes referred to as the "Series A Convertible
Preferred Stock" or the "Preferred Stock").
<PAGE>
A description of the "Series A Convertible Preferred Stock", including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications, and terms and conditions for
redemption, all as set by the Board of Directors of the Corporation, is as
follows:
1. Designation and Initial Number. The class of shares of Preferred Stock
hereby classified shall be designated the "Series A Convertible Preferred
Stock." The initial number of authorized shares of the Preferred Stock shall
be ten million (10,000,000).
2. Distributions. Commencing on January 1, 1999, the holders of the
Preferred Stock shall be entitled to receive, out of funds at the time legally
available for payment of distributions in the State of Colorado, a
non-cumulative distribution at the rate of $100.00 per share per annum,
payable semi-annually in equal installments on the first days of January and
July in each year, if, as and when determined by the Board of Directors,
before any distribution shall be set apart or paid on any other capital stock
for such year.
3. Redemption. The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the Preferred Stock at any time
outstanding, at any time or from time to time after January 1, 1999, provided
that the Corporation, at any such time, shall have consummated a sale of its
securities pursuant to an effective registration statement (a "Public
Offering") filed with the Securities and Exchange Commission (the "SEC"), upon
at least 30 days' prior written notice to the holders of record of the
Preferred Stock to be redeemed, by paying a redemption price per share equal
to 150% of the par value thereof, plus all accrued and unpaid distributions
declared thereon, at the date fixed for redemption, without interest, in cash,
for each share of Preferred Stock so redeemed. The Board of Directors shall
have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which and the terms and
conditions upon which the Preferred Stock shall be redeemed at any time and
from time to time. The notice of redemption to each stockholder whose shares
of Preferred Stock are to be redeemed shall specify the number of shares of
Preferred Stock of such stockholder to be redeemed, the date fixed for
redemption and the redemption price at which the shares of Preferred Stock are
to be redeemed, and shall specify where payment of the redemption price is to
be made upon surrender of such shares, shall state the conversion rate then in
effect, and that conversion rights of such shares shall terminate at the
closing of business on the date fixed for redemption. None of the Preferred
Stock acquired by the Corporation by redemption or otherwise shall be reissued
or disposed of but shall, from time to time, be retired in the manner
provided by law.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Preferred Stock shall
be entitled to receive for each share of Preferred Stock, before any
distribution of the assets of the Corporation shall be made to the holders of
any other capital stock, a dollar amount equal to the par value thereof plus
all accrued and unpaid distributions declared thereon,
<PAGE>
without interest. After such payment shall have been made in full to the
holders of the issued and outstanding Preferred Stock, or funds necessary for
such payment shall have been set aside in trust for the account of the holders
of the issued and outstanding Preferred Stock so as to be and continue to be
available therefor, then, before any further distribution of the assets of the
Corporation shall be made, a dollar amount equal to that already distributed
to the holders of the Preferred Stock shall be distributed pro-rata to the
holders of the other issued and outstanding capital stock of the Corporation,
subject to the rights of any other class of capital stock set forth in the
Articles of Incorporation of the Corporation or Amendments to the Articles of
Incorporation to State Terms of Series Shares filed by the Corporation. After
such payment shall have been made in full to the holders of such other issued
and outstanding capital stock, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of such other issued
and outstanding capital stock so as to be and continue to be available
therefor, the holders of the issued and outstanding Preferred Stock shall be
entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the remaining assets of
the Corporation, and, subject to any rights of any other class of capital
stock set forth in the Articles of Incorporation of the Corporation or any
Amendments to the Articles of Incorporation to State Terms of Series Shares
filed by the Corporation, the remaining assets of the Corporation shall be
divided and distributed ratably among the holders of both the Preferred Stock
and the other capital stock then issued and outstanding according to the
proportion by which their respective record ownership of shares of the
Preferred Stock and such capital stock bears to the total number of shares of
the Preferred Stock and such capital stock then issued and outstanding. If,
upon such liquidation, dissolution, or winding up, the assets of the
Corporation distributable, as aforesaid, among the holders of the Preferred
Stock shall be insufficient to permit the payment to them of said amount, the
entire assets shall be distributed ratably among the holders of the Preferred
Stock. A consolidation or merger of the Corporation, a share exchange, a sale,
lease, exchange or transfer of all or substantially all of its assets as an
entirety, or any purchase or redemption of stock of the Corporation of any
class, shall not be regarded as a "liquidation, dissolution, or winding up of
the affairs of the Corporation" within the meaning of this paragraph 4.
5. Conversion Privilege. Preferred Stock shall be convertible into Common
Stock as hereinafter provided and, when so converted, shall be canceled and
retired and shall not be reissued as such:
(A) Any holder of the Preferred Stock may at any time or from time
to time convert such stock into the Common Stock of the Corporation, on
presentation and surrender to the Corporation, of the certificates of the
Preferred Stock to be so converted.
(B) Each holder of Preferred Stock shall have the right to convert
such Preferred Stock on and subject to the following terms and conditions:
<PAGE>
(i) The Preferred Stock shall be converted into Common Stock at
the conversion rate, determined as hereinafter provided, in effect at the time
of conversion. Unless such conversion rate shall be adjusted as hereinafter
provided, the conversion rate shall be one share of Common Stock for each
share of Preferred Stock so converted.
(ii) In order to convert Preferred Stock into Common Stock, the
holder thereof shall on any business day surrender at the executive offices of
the Company at 360 Thames Street, Newport, Rhode Island 02840 the certificate
or certificates representing such shares, duly endorsed to the Corporation or
in blank, and give written notice to the Corporation at said office of the
number of said shares which such holder elects to convert. Preferred Stock
shall be deemed to have been converted immediately prior to the close of
business on the day of such surrender for conversion, and the person or
persons entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Stock at such time. As promptly as practicable on or after the date of
any conversion, the Corporation shall issue and deliver a certificate or
certificates representing the number of shares of Common Stock issuable upon
such conversion, together with cash in lieu of any fraction of a share, as
provided in subparagraph (H) of this paragraph 5, to the person or persons
entitled to receive same. In case of the conversion of only a part of the
shares of any holder of Preferred Stock, the Corporation shall also issue and
deliver to such holder a new certificate of Preferred Stock representing the
number of shares of such Preferred Stock not converted by such holder.
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) pay a distribution in
shares of its capital stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares, (c) combine its outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of its shares of Common Stock any shares of its capital stock, the conversion
rate in effect immediately prior thereto shall be adjusted so that the holder
of a share of Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such event shall be entitled to receive,
upon conversion, the number of shares of Common Stock which such holder would
have owned or have been entitled to receive after the happening of such event
had such share of Preferred Stock been converted immediately prior to the
record date in the case of such dividend or the effective date in the case of
any such subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph 5(C)(i) shall be made whenever any of such
events shall happen, but shall become effective retroactively after such
record date or such effective date, as the case may be, as to shares of
Preferred Stock converted between such record date or effective date and the
date of happening of any such event.
<PAGE>
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share, which, when added to the amount
of consideration received or receivable by the Corporation for such right or
warrant, is less than the current market price (as hereinafter defined) per
share of Common Stock at the record date mentioned below, the conversion rate
shall be adjusted so that thereafter, until further adjusted, each share of
Preferred Stock shall be convertible into that number of shares of Common
Stock determined by multiplying the number of shares of Common Stock into
which such share of Preferred Stock was theretofore convertible by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock issuable upon the exercise of such rights
or warrants, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which an amount equal to the sum of (a) the
aggregate exercise price of the total number of shares of Common Stock
issuable upon the exercise of such rights or warrants, plus (b) the aggregate
amount of consideration, if any, received, or receivable by the Corporation
for any such rights or warrants, would purchase at such current market price.
Such adjustment shall be made whenever such rights or warrants are issued, but
shall also be effective retroactively as to shares of Preferred Stock
converted between the record date for the determination of stockholders
entitled to receive such rights or warrants and the date such rights or
warrants are exercised.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any one or more of the following: (a) evidence of its
indebtedness, (b) assets (excluding cash distributions, distributions made out
of current or retained earnings and distributions of the stock of any
subsidiary), or (c) rights or warrants to subscribe for or purchase securities
issued by, or property of, the Corporation (excluding those referred to in
subparagraph 5(C)(ii) above), then in each such case the conversion rate shall
be adjusted as provided below so that thereafter, until further adjusted, the
number of shares of Common Stock into which each share of Preferred Stock
shall be convertible shall be determined by multiplying the number of shares
of Common Stock into which such share of Preferred Stock was theretofore
convertible by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the date of such distribution, and the
denominator of which shall be such current market price per share of the
Common Stock, less the then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) of the
portion of the assets or evidence of indebtedness so distributed or of such
rights or warrants applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made, but shall
also be effective retroactively as to shares of Preferred Stock converted
between the record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
<PAGE>
(iv) For the purpose of any computation under subparagraphs 5(C)(ii)
and (iii) above, the current market price per share of Common Stock at any
date shall be (a) if the Common Stock is listed on any national securities
exchange, the average of the daily closing prices for the 15 consecutive
business days commencing 20 business days before the day in question (the
"Trading Period"); (b) if the Common Stock is not listed on any national
securities exchange but is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), the average of the high
and low bids as reported on NASDAQ for the Trading Period; and (c) if the
Common Stock is neither listed on any national securities exchange nor quoted
on NASDAQ, the higher of (x) the conversion price then in effect, or (y) the
tangible book value per share as of the end of the Corporation's immediately
preceding fiscal year.
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
subparagraph 5(C)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(C) shall be made to the nearest one-hundredth of a share.
(D) No adjustment of the conversion rate shall be made in any of
the following cases:
(i) upon the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized,
to the extent that the aggregate of the number of shares which may be
purchased under such options and the number of shares issued under such
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the conversion of
Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the
assets of another corporation, and shares issued in connection with the
acquisition by the Corporation or by any subsidiary of the Corporation of 80%
or more of the voting shares of another corporation (including shares issued
in connection with such acquisition of voting shares of such other corporation
subsequent to the acquisition of an aggregate of 80% of such voting shares),
shares issued in a merger of the Corporation or a subsidiary of the
Corporation with another corporation in which the Corporation or the
Corporation's subsidiary is the surviving corporation, and shares issued upon
the conversion of other securities issued in connection with any such
acquisition or in any such merger;
(iv) shares issued by way of dividend or other distribution on
Common Stock excluded from the calculation of the adjustment under this
subparagraph 5(D) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded; or
<PAGE>
(v) shares issued pursuant to all stock options and warrants
outstanding on the date of the filing of these Articles.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based. As promptly
as practicable, the Corporation shall cause a copy of the certificate referred
to in this subparagraph 5(E) to be mailed to each holder of record of issued
and outstanding Preferred Stock at the address of such holder appearing on
the Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Preferred
Stock pursuant hereto, but shall not pay any tax which may be payable with
respect to income or gains of the holder of any Preferred Stock or Common
Stock or any tax which may be payable in respect of any transfer involved in
the issue and delivery of the Common Stock in a name other than that in which
the Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) Upon conversion of any shares of Preferred Stock, the holders of
the shares of Preferred Stock so converted shall not be entitled to receive
any distributions declared with respect to such shares of Preferred Stock
unless such distributions shall have been declared by the Board of Directors
and the record date for such distributions shall have been on or before the
date such shares shall have been converted. No payment or adjustment shall be
made on account of distributions declared and payable to holders of Common
Stock of record on a date prior to the date of conversion.
(H) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of such shares
so surrendered. If the conversion of any share of Preferred Stock results in a
fraction, an amount equal to such fraction multiplied by the current market
price (determined as provided in subparagraph 5(C)(iv) above) of the Common
Stock on the day of conversion shall be paid to such holder in cash by the
Corporation.
(I) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the
purpose of effecting the conversion of the issued and outstanding Preferred
Stock, the full number of shares of Common Stock then deliverable in the event
and upon the conversion of all of the Preferred Stock then issued and
outstanding.
<PAGE>
6. Voting Rights. Except as otherwise provided in this paragraph 6, each
share of Preferred Stock is entitled to one vote, voting together with the
holders of shares of Common Stock and not as a class, on each matter submitted
to a vote at a meeting of stockholders of the Corporation. In the event that
at any time two consecutive semi-annual distributions payable on the Preferred
Stock shall be in default (a "Two Dividend Default"), then immediately upon
the happening of a Two Dividend Default and until the Two Dividend Default and
all defaults in the payment of semi-annual distributions subsequent to the Two
Dividend Default shall be cured, the holders of Preferred Stock shall have the
right, voting separately as a class, to elect one-third of the Directors of
the Corporation. In the event that at any time four consecutive semi-annual
distributions payable on the Preferred Stock shall be in default (a "Four
Dividend Default"), then immediately upon the happening of such Four Dividend
Default and until such Four Dividend Default and all defaults in the payment
of semi-annual distributions subsequent to the Four Dividend Default shall be
cured, the holders of Preferred Stock shall have the right, voting separately
as a class, to elect a majority of the Directors of the Corporation. The
foregoing voting rights are hereinafter collectively referred to as the
"Special Voting Rights." The Special Voting Rights shall be exercised only at
annual meetings of the stockholders of the Corporation, and only if the
holders of a majority of the outstanding shares of Preferred Stock entitled to
such Special Voting Rights are present in person or by proxy. Notwithstanding
the foregoing provisions of this paragraph 6, upon payment in full of all
defaults in the payment of semi-annual distributions subsequent to a Four
Dividend Default and of the distribution which resulted in the Four Dividend
Default, so that no more than three consecutive semi-annual distributions
remain in default, the Special Voting Rights of the holders of Preferred Stock
shall be reduced so that they shall have the right, voting separately as a
class, to elect one-third of the Directors of the Corporation. Notwithstanding
the foregoing provisions of this Paragraph 6, upon payment in full of (i) all
defaults in the payment of semi-annual distributions subsequent to a Two
Dividend Default and of the distribution which resulted in the Two Dividend
Default, or (ii) upon payment in full of all semi-annual distributions
subsequent to a Four Dividend Default and three of the distributions which
resulted in a Four Dividend Default, so that, in each such case, no more than
one semi-annual distribution remains in default, the Special Voting Rights
shall terminate, and the voting power in the election of Directors shall again
be vested equally in the holders of the Preferred Stock and the Common Stock,
who shall each be entitled to one vote per share. Each Director elected by the
holders of shares of Preferred Stock as a result of the Special Voting Rights
set forth above shall serve only until the next annual meeting of
stockholders, or until the date the Special Voting Rights shall have
terminated as provided in this paragraph 6, whichever event first occurs.
7. Registration Rights.
(A) "Piggy-Back" Registration Rights:
<PAGE>
(i) If, at any time and from time to time after the
Corporation's first Public Offering, the Corporation proposes to register any
of its securities on Forms S-1, S-2, S-3 or S-18, or any successor forms,
under the Securities Act of 1933 (the "Act") and applicable state securities
laws (the "State Acts"), the Corporation shall give prompt written notice to
each holder of Preferred Stock (or Common Stock into which it has been
converted) of its intention to do so, and, upon the written request of any
such stockholder made within 30 days after the receipt of any such notice,
which written request shall specify the number of shares such stockholder
desires to be registered, the Corporation shall use its reasonable efforts to
cause all such shares of such stockholder to be registered under the Act and
State Acts to permit the sale of such shares. Notwithstanding anything
contained herein to the contrary, the Corporation shall have the right to
discontinue any registration of such shares of such stockholder at any time
prior to the effective date of such registration if the registration of other
securities giving rise to such registration is discontinued.
(ii) If any stockholder shall request inclusion of any shares
held by such stockholder in the registration of other securities of the
Corporation and such proposed registration by the Corporation is, in whole or
in part, an underwritten Public Offering, and if the managing underwriter
determines and advises the Corporation in writing that inclusion in such
registration of all proposed securities (including securities being offered by
or on behalf of the Corporation and securities covered by requests for
registration) would adversely affect the marketability of the offering of the
securities proposed to be registered by the Corporation, then such stockholder
shall be entitled to participate pro-rata with the other stockholders having
similar incidental registration rights with respect to such registration to
the extent the managing underwriter determines that such shares may be
included without such adverse effect.
(iii) The rights of such stockholders to have their shares
included in such registration shall expire on the first to occur of January 1,
2010, or that date which is 10 years after the Corporation's first Public
Offering.
(B) Demand Registration Rights: At any time after the Corporation's
first Public Offering of its stock, the Corporation shall, upon receipt of a
written request from the holders of at least 25% of the aggregate issued and
outstanding Preferred Stock and the Common Stock into which it has been
converted, prepare and file under the Act a registration statement in respect
of such shares. In the event that not all of such shares have been registered
as herein set forth, the Corporation shall, upon receipt of a written request
from the holders of at least 25% of the aggregate remaining unregistered
Preferred Stock and the Common Stock into which it has been converted, prepare
and file under the Act no more than one additional registration statement to
register the remaining balance of the shares not so registered.
(C) Expenses: The Corporation shall pay all expenses incident to its
performance of or compliance with the provisions of subparagraphs 7(A) and
7(B) hereof, including, without limitation, all registration and filing fees,
fees and expenses of compliance with the Act and State
<PAGE>
Acts, printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Corporation (but not the legal fees of any
such stockholder) and all independent public accountants and other persons
retained by the Corporation, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding underwriting
commissions and discounts).
(D) Obligations of the Corporation: If and whenever the Corporation
is required to use its reasonable efforts to effect or cause the registration
of any shares under the Act as provided in this paragraph 7, the Corporation
shall, as expeditiously as possible:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and such prospectus current for a period not in excess of nine
months as may be necessary in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of such shares such number of
copies of such registration statement and each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus), in conformity with the requirements of the Act, and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the shares owned by such seller;
(iv) use its reasonable efforts to register or qualify such
shares covered by such registration statement under such State Acts as each
seller reasonably requests, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the shares owned by such seller, except
that the Corporation shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction; and
(v) notify each seller of any such securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act or upon the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of
such
<PAGE>
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(E) Indemnification and Notification:
(i) The Corporation shall indemnify and hold harmless each
holder of any shares included in the Corporation's registration statement
pursuant to this paragraph 7, and each person, if any, who controls such
holder within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities (including reasonable
attorneys' fees) caused by any untrue statement of a material fact contained
in any such registration statement, or contained in a prospectus furnished
thereunder, or in any amendment or supplement thereto or caused by any
omission to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, that the foregoing
indemnification and agreement to hold harmless shall not apply insofar as such
losses, claims, damages, expenses, and liabilities are caused by any such
untrue statement or omission is based upon information furnished in writing to
the Corporation by any such holder expressly for use in any registration
statement or prospectus).
(ii) Promptly after receipt by any holder of any shares
included in the Corporation's registration statement pursuant to this
paragraph 7 of notice of the commencement of any action, said holder shall, if
a claim in respect thereof is to be made against the Corporation under this
paragraph 7, notify the Corporation in writing of the commencement thereof,
but the omission so to notify the Corporation shall not relieve it from any
liability which it may have to them under this paragraph 7. In case any such
action is brought against any holder of any shares registered pursuant to this
paragraph 7 and the Corporation is notified of the commencement thereof as
provided herein, the Corporation shall be entitled to participate in, and, to
the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such holder, and after notice from the Corporation
to such holder of the Corporation's election so to assume the defense thereof,
the Corporation shall not be liable under this paragraph 7 for any legal or
other expense subsequently incurred by such holder in connection with the
defense thereof other than reasonable costs of investigation.
(iii) Each holder of any shares registered pursuant to this
paragraph 7 agrees to cooperate fully with the Corporation in effecting
registration and qualification of the Preferred Stock (or the Common Stock
into which it has been converted) and of such distribution, and shall
indemnify and hold harmless the Corporation and each person who may control
the Corporation within the meaning of Section 15 of the Act, each director of
the Corporation, and each officer who signed any registration statement from
and against any and all losses, claims, damages, expenses, and liabilities
(including reasonable attorneys' fees) caused by any untrue statement of a
material fact
<PAGE>
contained in any such registration statement, or contained in a prospectus
furnished thereunder, or any amendment or supplement thereto, or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent that such untrue statement
or omission was made in reliance upon information furnished to the Corporation
by any such holder for inclusion therein.
8. Changes In Terms of Preferred Stock. The terms of the Preferred Stock
may not be amended, altered or repealed, and no class of capital stock or
securities convertible into capital stock shall be authorized which has
superior rights to the Preferred Stock as to distributions, liquidation or
vote, without the consent of the holders of at least two-thirds of the
outstanding shares of Preferred Stock.
9. No Implied Limitations. Except as otherwise provided by express
provisions of these Articles of Incorporation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Articles of
Incorporation of the Corporation.
10. General Provisions. In addition to the above provisions with respect
to the Preferred Stock, such Preferred Stock shall be subject to, and entitled
to the benefits Of, the provisions set forth in the Corporation's Articles of
Incorporation with respect to Preferred Stock generally.
11. Notices. All notices required or permitted to be given by the
Corporation with respect to the Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, to the holders
of the Preferred Stock at their last addresses as they shall appear upon the
books of the Corporation, shall be conclusively presumed to have been duly
given, whether or not the stockholder actually receives such notice; provided,
however, that failure to duly give such notice by mail, or any defect in such
notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares
of Preferred Stock.
ARTICLE VII
"SHARK REPELLANT" PROVISIONS DILUTING THE VOTING POWER OF BENEFICIAL OWNERS
OF MORE THAN 10 PERCENT OF OUTSTANDING SHARES
The total number of shares of all classes of common stock which the
Corporation has authority to issue is 40,000,000 shares, consisting of thirty
million (30,000,000) shares of common stock ("Common Stock") and ten million
(10,000,000) shares of common stock nonvoting ("Common Stock Nonvoting").
<PAGE>
The following is a description of each class of stock of the
Corporation,
including the preferences, conversion and other rights, voting powers,
qualifications, limitations as to distributions, restrictions and terms and
conditions of redemption, in respect to each class:
(a) The Common Stock shall have exclusive voting rights and powers except
as set forth in Subparagraph (c) of this Article; and subject, however, to
the provisions set forth in Subparagraph (b) of this Article.
(b)(1) From and after the date any person first becomes a Substantial
Stockholder (as defined in clause (2)(H) of this Subparagraph) until such time
as such person shall cease to be a Substantial Stockholder, the shares of
Common Stock beneficially owned by the Substantial Stockholder shall have
limited voting rights on any matter requiring their vote or consent. The
voting rights shall be limited as follows:
(A) The Substantial Stockholder (or the record owner(s)
thereof) shall be entitled to one vote for each share beneficially owned by
the Substantial Stockholder not in excess of 10% of the then issued and
outstanding shares of Common Stock.
(B) For all shares of Common Stock beneficially owned by the
Substantial Stockholder in excess of 10% of the then issued and outstanding
shares of Common Stock, the Substantial Stockholder (or the record owner(s)
thereof) shall not be entitled to cast any votes in respect of such shares and
such shares shall be deducted from the total number of shares of Common Stock
outstanding for purposes of determining the proportion of Common Stock
required to approve a matter submitted for stockholder approval or to
constitute a quorum. To the extent that the Substantial Stockholder is
comprised of more than one record owner, the aggregate voting power of the
Substantial Stockholder (or such record owners) so limited for all shares of
Common Stock beneficially owned by the Substantial Stockholder shall be
allocated proportionately among such record owners. For each such record
owner, this allocation shall be accomplished by multiplying the aggregate
voting power of the then outstanding shares of Common Stock owned by the
Substantial Stockholder by a fraction whose numerator is the number of shares
of Common Stock owned of record by such record owner and whose denominator is
the total number of shares of Common Stock beneficially owned by the
Substantial Stockholder. A person who is record owner of shares of Common
Stock that are beneficially owned simultaneously by more than one person shall
have, with respect to such shares, the right to cast the least number of votes
that such person would be entitled to cast under this Subparagraph (b) by
virtue of such shares being so beneficially owned by any of such persons.
(2) For purposes of this Subparagraph (b), the following words have
the meanings indicated:
<PAGE>
(A) "Affiliate," including the term "Affiliated Person," means
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
person, and includes all Associates of such person.
(B) "Associate," when used to indicate a relationship with any
person, means:
(1) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a director or
officer of any corporation controlling, under common control with or
controlled by such person or of any of its Affiliates.
(C) "Beneficial Owner," when used with respect to any Common
Stock, means a person:
(1) That, individually or with any of its Affiliates,
beneficially owns Common Stock, directly or indirectly; or
(2) That, individually or with any of its Affiliates, has:
(i) The right to acquire Common Stock (whether such
right is exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise; or
(ii) The right to vote Common Stock pursuant to any
agreement, arrangement, or understanding; or
(3) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of Common Stock
with any other person that beneficially owns, or whose Affiliates beneficially
own, directly or indirectly, such shares of Common Stock; provided, however,
that for purposes of the definition of Beneficial Owner and beneficial
ownership, (i) no director, officer or employee of the Corporation or any
Subsidiary (nor any Affiliate of any such director, officer or employee) shall
solely by reason of any or all of such directors, officers or employees acting
in their capacities as such (including, without limitation, communicating with
a stockholder by reason of the Board of Directors) be deemed, for any purposes
<PAGE>
hereof, to beneficially own any shares of Common Stock beneficially owned by
any other such director, officer, employee or stockholder (or any Affiliate
thereof); (ii) in the case of any employee stock ownership of similar plan of
the Corporation or of any Subsidiary heretofore or hereafter adopted in which
the beneficiaries thereof possess the right to vote or to direct the voting of
shares of Common Stock held by such plan, no such plan, any entity organized,
appointed or established by the Corporation or any Subsidiary for or pursuant
to any plan, nor any trustee or any member of an administrative committee or
any other representative with respect thereto (nor any Affiliate of such
trustee, administrative committee member or other such representative), solely
by reason of such capacity of such trustee, administrative committee member or
other such representative, shall be deemed, for any purposes hereof, to
beneficially own any shares of Common Stock held under any such plan; (iii) a
person shall not be deemed a beneficial owner of Common Stock solely by reason
of a revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting complying with
applicable rules of the Securities and Exchange Commission or any successor
administrative body, with respect to shares of which neither such person nor
any Affiliate of such person is otherwise deemed the beneficial owner; and
(iv) a person shall not be deemed a beneficial owner of Common Stock solely by
reason of Common Stock being tendered pursuant to a tender or exchange offer
made by such person or such person's Affiliates until such tendered Common
Stock is accepted for purchase or exchange.
(D) "Common Stock" means the 40,000,000 authorized shares of
capital stock of the Corporation entitled to vote generally in the election of
directors and does not mean the authorized shares of Common Stock Nonvoting.
(E) "Control," including the terms "Controlling," "controlled
by" and "under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise, and the beneficial ownership of 10% or more of the
votes entitled to be cast by a corporation's voting stock creates a
presumption of control.
(F) "Person" shall mean any individual, firm, partnership,
corporation or other entity.
(G) "Subsidiary" means any corporation of which voting stock
having a majority of the votes entitled to be cast is owned, directly or
indirectly, by the Corporation.
(H) "Substantial Stockholder" shall mean any person, other than
the Corporation or any Subsidiary, who or which is the Beneficial Owner,
directly or indirectly, of 10% or more of the outstanding shares of Common
Stock (determined solely on the basis of the total number of shares so
beneficially owned and without giving effect to the number of percentage of
votes entitled to be cast in respect of such shares) in relation to the total
number of shares of Common Stock issued and outstanding.
<PAGE>
(4) For purposes of computing the percentage beneficial
ownership of shares of Common Stock of a person in order to determine whether
such person is a Substantial Stockholder, the outstanding shares of Common
Stock shall be deemed to include shares of Common Stock which may be issuable
(except pursuant to clause (7) of this Subparagraph (b)) by the Corporation
pursuant to any agreement, or upon the exercise of conversion rights,
warrants, or options or otherwise and which are deemed owned by such person
through application of the definition of Beneficial Owner but shall not
include any other shares of Common Stock which may be issuable by the
Corporation to others pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise. For all other purposes,
the outstanding shares of Common Stock shall include such shares then
outstanding and shall not include any shares of Common Stock which may be
issuable by the Corporation pursuant to any agreement, or upon the exercise
of conversion rights, warrants or options, or otherwise.
(5) The Board of Directors shall have the power to
determine for the purposes of this Subparagraph (b) on the basis of
information known to them (i) the number of shares of Common Stock
beneficially owned by any person; (ii) whether a person is an Affiliate or
Associate of another; (iii) whether a person has an agreement, arrangement or
understanding with another; (iv) the redemption price as provided for in
clause (8) below; and (v) any other factual matter relating to the
applicability or effect of this Subparagraph (b).
(6) The Corporation shall have the right to demand that
any person who it reasonably believes is a Substantial Stockholder (or holds
record shares of Common Stock beneficially owned by a person reasonably
believed to be a Substantial Stockholder) supply the Corporation with complete
information as to: (i) the record owner(s) of all shares of Common Stock and
Common Stock Nonvoting beneficially owned by such persons; (ii) the number of,
and class of, shares beneficially owned by such person and held of record by
each such record owner and the number(s) of the stock certificate(s)
evidencing such shares; (iii) each date or dates on which such person or the
record owner(s) of such shares purchased the shares; and (iv) any other
factual matter relating to the applicability or effect of this Subparagraph
(b) as may reasonably be requested of such person, and such person shall
furnish such information within 10 days after the receipt of such demand.
(7) Except as otherwise provided by law or as expressly
provided in this clause (7), the presence, in person or by proxy, of the
holders of record of shares of capital stock of the Corporation entitling the
holders thereof to cast a majority of the votes (after giving effect, if any,
to the provisions of this Subparagraph (b)) entitled to be cast by the holders
of shares of capital stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the shareholders, and every reference
in these Articles of Incorporation to a majority or other proportion of
capital stock (or the holders thereof) for purposes of determining any quorum
requirement or any requirement for shareholders' consent or approval shall be
deemed to refer to such majority or other proportion of the votes (or the
holders thereof) then entitled to be cast in respect of such capital
<PAGE>
stock.
(8) All outstanding shares of Common Stock Nonvoting shall
automatically, without any further act or deed on the part of the Corporation
or any other person, be converted into shares of Common Stock on a
share-for-share basis at such time (the "Conversion Date") as any Substantial
Stockholder beneficially owns shares of Common Stock which entitle such
Substantial Stockholder (after giving effect to the provisions of this
Subparagraph (b) other than the conversion contemplated by this clause (7)) to
cast more than 50% of the votes entitled to be cast by the holders of the then
outstanding shares of Common Stock. In the event of an automatic conversion of
Common Stock Nonvoting pursuant to this clause (7), certificates formerly
representing shares of Common Stock Nonvoting will thereafter be deemed to
represent a like number of shares of Common Stock. Effective as of the
Conversion Date, the provisions of these Articles of Incorporation which
provide for the establishment and terms and rights of the Common Stock
Nonvoting shall, without any further action of the Board of Directors or
stockholders of the Corporation or any other person, be of no further force
or effect.
(9) At any time after the Board of Directors determines
that a person is a Substantial Stockholder (the "Determination Date") until
the date on which (i) such person is no longer a Substantial Stockholder; or
(ii) such person beneficially owns more than 90% of the then outstanding
shares of each class of Common Stock of the Corporation, the Corporation shall
have the right to redeem from the record owner or owners, at any time or from
time to time, all or a portion of the shares of Common Stock and Common Stock
Nonvoting beneficially owned by the Substantial Stockholder. The Corporation
shall exercise the right of redemption by written notice (the "Redemption
Notice") to the Substantial Stockholder, which notice shall be signed by the
Chairman of the Board, the President or any Vice President of the Corporation.
During the one-year period commencing on the Determination Date, the
redemption price shall be the lesser of: (i) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date of the Redemption Notice; and (ii) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date on which the Substantial Stockholder first beneficially owned 5% or
more of the outstanding shares of Common Stock, such price to be adjusted for
any stock splits, stock distributions, recapitalizations or the like which
occurred between such date and the date of the Redemption Notice. Subsequent
to the expiration of the one-year period commencing on the Determination Date,
the redemption price shall equal the price determined under clause (i) of the
immediately preceding sentence. The "market price" of shares of Common Stock
(whether Common Stock or Common Stock Nonvoting) shall mean the closing bid
price of the shares of Common Stock Nonvoting, as published by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), (or
such other quotation system of a national securities association then being
used), or if the shares are then traded on a national securities exchange, the
last sale price regular way thereafter as reported in the consolidated
transaction reporting system for
<PAGE>
the shares listed or traded on such exchange. All rights of the Substantial
Stockholder as the beneficial owner of shares of Common Stock (and all rights
of the record owners) shall cease as to the shares which are the subject of a
Redemption Notice. Closing for the purchase of the shares to be redeemed shall
be made within 45 days of the date of the Redemption Notice. If there is more
than one record owner of the shares of Common Stock beneficially owned by the
Substantial Stockholder, the Corporation shall, to the extent the Board of
Directors deems it practicable, redeem the shares of each such class to be
redeemed from each of the record owners on a pro rata basis based on the total
number of shares of the class to be redeemed owned by each such record owner.
(10) Any determinations made by the Board of Directors
pursuant to this Subparagraph (b), in good faith on the basis of such
information and assistance as was then reasonably available for such purpose,
shall be conclusive and binding upon the Corporation and its shareholders,
including any Substantial Stockholder.
(11) Nothing contained in this Subparagraph (b) shall be
construed to relieve any Substantial Stockholder from any fiduciary obligation
imposed by law.
(12) Any amendment, alteration, change or repeal of this
Subparagraph (b) shall, in addition to any other vote or approval required by
law or these Articles of Incorporation, require (i) the affirmative vote of
the holders of at least 80% of the total number of votes entitled to be cast
by the holders of all of the then outstanding shares of Common Stock (as
determined in accordance with the provisions of this Subparagraph (b)), voting
as a single class; and (ii) the affirmative vote of the holders of at least
80% of the then outstanding shares of Common Stock Nonvoting, voting as a
separate class.
(13) Notwithstanding anything to the contrary in these
Articles of Incorporation, in the event that, as a result of the enactment in
the future of any law, rule or regulation binding upon the Corporation, the
shares of Common Stock Nonvoting will become ineligible to be quoted and will
cease to be quoted by NASDAQ or any successor entity and upon such quote
cessation will not be listed or admitted to trading on any national securities
exchange solely due to the vote limitations contained in clause (1) of this
Subparagraph (b), such determination to be made by the Board of Directors of
the Corporation, the provisions of these Articles of Incorporation providing
for the vote limitation on the votes entitled to be cast by a Substantial
Stockholder shall, without further action or deed by the Corporation, its
directors or stockholders or any other person, be of no further force or
effect, effective as of the latest date on which such law, rule or regulation
permits or requires such a provision to become ineffective, to the extent
necessary in order for the Common Stock Nonvoting to remain eligible for
quotation on NASDAQ or any successor entity or be eligible for listing on any
national securities exchange.
<PAGE>
(c) Each share of the Common Stock Nonvoting shall have exactly the same
rights, terms and conditions as each share of Common Stock, except that the
shares of Common Stock Nonvoting shall have no voting rights, except the
Common Stock Nonvoting shall have the right to vote on: (1) a consolidation of
the Corporation with another corporation, (2) a merger of the Corporation into
another corporation, (3) a merger of the Corporation where the Corporation is
the surviving corporation but the capital stock of the Corporation is
converted into other securities or property, (4) a participation by the
Corporation in a statutory share exchange whereby the capital stock of the
Corporation is converted into other securities or property, (5) a dissolution
of the Corporation, (6) a sale of all or substantially all of the assets of
the Corporation not in the ordinary course of business, and (7) any amendment
of these Articles of Incorporation repealing the right of the Common Stock
Nonvoting to vote on any of the matters specified in this Subparagraph. As to
all matters on which the Common Stock Nonvoting is entitled to vote, the
Common Stock Nonvoting shall vote separately as one class, and the Common
Stock shall vote separately as another class. The right of the Common Stock
Nonvoting to vote cannot be repealed except by (a) the affirmative vote of the
holders of a majority of the outstanding shares of the Common Stock Nonvoting,
voting separately as one class; and (b) the affirmative vote of the holders of
a majority of the total number of votes entitled to be cast by the holders of
all the outstanding shares of the Common Stock (after taking into account the
provisions of Subparagraph (b) immediately preceding this Subparagraph(c)),
voting separately as another class. The provisions of this Subparagraph (c)
providing that the Common Stock and the Common Stock Nonvoting vote as
separate classes cannot be amended, altered, changed or repealed except by (i)
the affirmative vote of the holders of at least 80% of the total number of
votes entitled to be cast by the holders of all the then outstanding shares of
Common Stock (after taking into account the provisions of Subparagraph (b)
immediately preceding this Subparagraph (c)), voting separately as one class;
and (ii) the affirmative vote of the holders of at least 80% of the total
number of votes entitled to be cast by the holders of all of the then
outstanding shares of Common Stock Nonvoting, voting separately as another
class. The rights granted to Common Stock Nonvoting are not a limitation of
any kind upon the sole and exclusive voting rights and powers of the Common
Stock except in the limitations before set forth.
ARTICLE VIII
SPECIAL PROVISIONS WHEN TWO CLASSES OF COMMON STOCK ARE
AUTHORIZED IN THE ARTICLES OF INCORPORATION
Election and Filling of Vacancies. With respect to the election of the
Board of Directors of the Corporation:
<PAGE>
(1) the holders of Class A Common Stock (a) shall nominate and elect one
(1) director who shall be known as the Class A Director, and (b) in the event
of the death, disability, removal, resignation or refusal to act of the Class
A Director, the holders of Class A Common Stock, to the exclusion of the
holders of all other classes of stock of the Corporation, shall nominate and
elect a director to fill the vacancy so created by such death, disability,
removal, resignation or refusal to act; and
(2) the holders of Class B Common Stock (a) shall nominate and elect two
(2) directors who shall be known as the Class B Directors, and (b) in the
event of the death, disability, removal, resignation or refusal to act of any
or all of the Class B Directors, the holders of the Class B Common Stock, to
the exclusion of the holders of all other classes of stock of the Corporation,
shall nominate and elect one or more directors to fill the vacancy or
vacancies so created by such death, disability, removal, resignation or
refusal to act.
ARTICLE IX
HIGH QUORUM PROTECTIVE PROVISIONS
Quorum. The presence in person or by proxy of the holders of record of
all of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of the stockholders, except as otherwise provided by the Colorado
Business Corporation Act, by the Articles of Incorporation or by these Bylaws.
If less than a quorum shall be in attendance at the time for which the meeting
shall have been called, the meeting may be adjourned from time to time by a
majority vote of the stockholders present or represented, without any notice
other than by announcement at the meeting, until a quorum shall attend. At any
adjourned meeting at which a quorum shall attend, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
ARTICLE X
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
or preferential right to purchase, subscribe for, or otherwise acquire any
unissued or treasury shares of stock of the corporation, or any options or
warrants to purchase, subscribe for or otherwise acquire any such unissued or
treasury shares, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for
or otherwise acquire any such unissued or treasury shares.
<PAGE>
ARTICLE XI
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE XII
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The board
of directors is hereby authorized on behalf of the corporation to exercise
the corporation's right to so impose such restrictions.
ARTICLE XIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation shall be
17 West Cheyenne Mountain Boulevard, Colorado Springs, CO 80906, and the name
of the initial registered agent at such address is Mark T. Thatcher, Esq.
Either the registered office or the registered agent may be changed in the
manner provided by law.
THE UNDERSIGNED CONSENTS TO THE APPOINTMENT AS THE
INITIAL REGISTERED AGENT
/s/ Mark T. Thatcher
______________________________
REGISTERED AGENT
ARTICLE XIV
INITIAL BOARD OF DIRECTORS
The initial board of directors of the corporation shall consist of two
(2) directors, and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are as follows:
<PAGE>
Name Title Address
Mark T. Thatcher President, 360 Thames Street
Director Newport, RI 02840
Gerard Werner Director 360 Thames Street
Newport, RI 02840
The number of directors shall be fixed in accordance with the bylaws.
So long as the number of directors shall be less than two (2), no shares of
this corporation may be issued and held of record by more shareholders than
there are directors. Any shares issued in violation of this paragraph shall
be null and void. This provision shall also constitute a restriction on the
transfer of shares and a legend shall be conspicuously placed on each
certificate respecting shares preventing transfer of the shares to more
shareholders than there are directors.
ARTICLE XV
INDEMNIFICATION
The corporation may:
(A) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit,
or proceeding, if he acted in good faith and in a manner he reasonably believed
to be in the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in the
best interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe his conduct was unlawful.
<PAGE>
(B) The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in the best
interests of the corporation; but no indemnification shall be made in respect
of any claim, issue, or matter as to which such person has been adjudged to be
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 such action
or suit was brought determines upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which
such court deems proper.
(C) To the extent that a director, officer, employee, fiduciary or
agent of a corporation has been successful on the merits in defense of any
action, suit, or proceeding referred to in (A) or (B) of this Article XI or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney fees) actually and reasonably incurred
by him in connection therewith.
(D) Any indemnification under (A) or (B) of this Article XI (unless
ordered by a court) and as distinguished from (C) of this Article shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
fiduciary or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in (A) or (B) above. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding, or, if such a quorum is not obtainable or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or by the shareholders.
(E) Expenses (including attorney fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
(C) or (D) of this Article XI upon receipt of an undertaking by or on behalf
of the director, officer, employee, fiduciary or agent to repay such amount
unless it is ultimately determined that he is entitled to be indemnified by
the corporation as authorized in this Article XI.
(F) The indemnification provided by this Article XI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, and any procedure provided for by any of the foregoing, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, fiduciary or agent and shall inure to the
benefit of heirs, executors, and administrators of such a person.
<PAGE>
(G) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation or who is or was serving at the request of the corporation as
a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under provisions of this Article XI.
ARTICLE XVI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other corporation, firm, association, or entity
in which one (1) or more of its directors are directors or officers or are
financially interested shall be either void or voidable solely because of such
relationship or interest, or solely because such directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or solely because their
votes are counted for such purpose if:
(A) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors;
(B) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(C) The contract or transaction is fair and reasonable to the
corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or a committee
thereof which authorizes, approves, or ratifies such contract or
transaction.
ARTICLE XVII
VOTING OF SHAREHOLDERS
If a quorum is present, the affirmative vote of a majority of the
outstanding shares represented at the meeting and entitled to vote thereon,
or of any class or series, shall be the act of the shareholders.
<PAGE>
ARTICLE XVIII
INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
Mark T. Thatcher, Esq. 360 Thames Street
Newport, RI 02840
IN WITNESS WHEREOF, the above named incorporator signed these Articles
of Incorporation on May 1, 1998.
/s/ Mark T. Thatcher
______________________________
MARK T. THATCHER,
Incorporator
BYLAWS
OF
OAK BROOK CAPITAL I, INC.
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the corporation in
the State of Colorado shall be located in the City of Newport, Rhode Island.
The corporation may have such other offices, either within or outside of the
State of Colorado, as the Board of Directors may designate, or as the
business of the corporation may require from time to time.
<PAGE>
Section 1.2 REGISTERED OFFICE. The registered office of the corporation,
required by the Colorado Business Corporation Act to be maintained in the
State of Colorado, may be, but need not be, identical with the principal
office in the State of Colorado, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the last Tuesday of April in each year, commencing with the year
1998, at the hour of 10:00 A.M., or at such other time on such other day as
shall be fixed by the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holiday
in the State of Colorado, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as may be
convenient.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call or of proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation pursuant to
C.R.S. Sec. 7-107-102(1)(b), or the special meeting was not held in
accordance with the notice.
<PAGE>
Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President upon the receipt of one or more written demands for a special
meeting, stating the purpose or purposes for which it is to be held, signed
and dated by the holders of shares representing at least ten percent of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 2.3 PLACE OF MEETINGS. The Board of Directors may designate any
place, either within or outside of the State of Colorado, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation
in the State of Colorado.
Section 2.4 NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that if the number of authorized shares is to be
increased, at least thirty days' notice shall be given.
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation Act.
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Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed and if in a comprehensible form,
such notice shall be deemed to be given and effective when deposited in the
United States mail, addressed to the shareholder at his address as it appears
in the corporation's current record of shareholders, with postage prepaid. If
notice is given other than by mail, and provided that such notice is in a
comprehensible form, the notice is given and effective on the date received
by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
notice shall be given at corporate expense.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless
the shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of
notice or defective notice. By attending the meeting, the shareholder also
waives any objection to consideration in the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
No notice need be sent to any shareholder if three successive notices
mailed to the last known address of such shareholder have been returned as
undeliverable until such time as another address for such shareholder is made
known to the corporation by such shareholder. In order to be entitled to
<PAGE>
receive notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown on the
corporation's books and records.
Section 2.5 MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or outside of the State of Colorado,
and consent to the holding of a meeting at such time and place, such meeting
shall be valid without call or notice, and at such meeting any corporate
action may be taken.
Section 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any distribution, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, seventy days. If the share transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than seventy days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a distribution,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution is adopted,
as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the meeting is
adjourned to a date more than one hundred twenty days after the date fixed for
the original meeting, in which case the Board of Directors shall make a new
determination as provided in this section.
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Section 2.7 VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged by voting groups and within each voting group by
class or series of shares, in alphabetical order within each class or series,
with the address of and the number of shares held by each shareholder in each
class or series. For a period beginning the earlier of ten days before the
meeting for which the record was prepared or two business days after notice of
the meeting is given and continuing through the meeting, the record shall be
kept on file at the principal office of the corporation or at a place
identified in the notice of the meeting in the city where the meeting will be
held, whether within or outside of the State of Colorado, and shall be subject
to inspection by any shareholder upon written demand at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or
to vote at any meeting of shareholders.
Section 2.8 QUORUM. A majority of the votes entitled to be cast on the
matter by a voting group, represented in person or by proxy, constitutes a
quorum of that voting group for action on that matter. If no specific voting
group is designated in the Articles of Incorporation or under the Colorado
Business Corporation Act for a particular matter, all outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a voting group. In the absence of a quorum at any such meeting, a
majority of the shares so represented may adjourn the meeting from time to
time for a period not to exceed one hundred twenty days without further
notice. However, if the adjournment is for more than one hundred twenty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record entitled to vote at the meeting.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during such meeting of that number of
<PAGE>
shareholders whose absence would cause there to be less than a quorum.
Section 2.9 MANNER OF ACTING. If a quorum is present, an action is
approved if the votes cast favoring the action exceed the votes cast within
the voting group opposing the action and such action shall be the act of the
shareholders, unless the vote of a greater proportion or number or voting by
groups is otherwise required by the Colorado Business Corporation Act, the
Articles of Incorporation or these Bylaws.
Section 2.10 PROXIES. At all meetings of shareholders a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his or her duly authorized attorney-in-fact. A shareholder
may also appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his or her authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his or her authority under the appointment.
Other notice of revocation may, in the discretion of the corporation, be
deemed to include the appearance at a shareholders' meeting of the shareholder
who granted the proxy and his or her voting in person on any matter subject
<PAGE>
to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
or her authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the shareholder
who granted the proxy) either personally or by his or her attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Section 2.11 VOTING OF SHARES. Unless otherwise provided by these Bylaws
or the Articles of Incorporation, each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders, and each fractional share shall be entitled to a
corresponding fractional vote on each such matter. Only shares are entitled
to vote.
Section 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS. If the name on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity;
<PAGE>
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants
or fiduciaries, and the person signing appears to be acting on behalf of all
the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by
the corporation that are not inconsistent with this Section 2.12.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor any of its directors, officers employees, or
agents who accepts or rejects a vote, consent, waiver, proxy appointment or
proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
<PAGE>
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders of the redemption price on
surrender of the shares.
Section 2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless the
Articles of Incorporation or these Bylaws provide otherwise, action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by each shareholder entitled to vote and delivered to
the Secretary of the corporation for inclusion in the minutes or for filing
with the corporate records. Action taken under this section is effective when
all shareholders entitled to vote have signed the consent, unless the consent
specifies a different effective date.
Any such writing may be received by the corporation by electronically
transmitted facsimile or other form of wire or wireless communication
providing the corporation with a complete copy thereof, including a copy of
the signature thereto. The shareholder so transmitting such a writing shall
furnish an original of such writing to the corporation, but the failure of the
corporation to receive or record such original writing shall not affect the
action so taken.
The record date for determining shareholders entitled to take action
without a meeting shall be the date the written consent is first received by
the corporation.
Section 2.14 VOTING BY BALLOT. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 2.15 NO CUMULATIVE VOTING. No shareholder shall be permitted to
cumulate his or her votes.
Section 2.16 WAIVER OF NOTICE. When any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
<PAGE>
The attendance of a shareholder at any meeting shall constitute a waiver
of notice, waiver of objection to defective notice of such meeting, or a
waiver of objection to the consideration of a particular matter at the
shareholder meeting unless the shareholder, at the beginning of the meeting,
objects to the holding of the meeting, the transaction of business at the
meeting, or the consideration of a particular matter at the time it is
presented at the meeting.
Section 2.17 PARTICIPATION BY ELECTRONIC MEANS. Any shareholder may
participate in any meeting of the shareholders by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 PERFORMANCE OF DUTIES. A director of the corporation shall
perform his or her duties as a director, including his or her duties as a
member of any committee of the board upon which he or she may serve, in good
faith, in a manner he or she reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances. In performing his duties,
a director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by persons and groups listed in paragraphs (a),
(b), and (c) of this Section 3.2; but he or she shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause such reliance to be unwarranted. A person who so
performs his or her other duties shall not have any liability by reason of
being or having been a director of the corporation. Those persons and groups
on whose information, opinions, reports, and statements a director is
entitled to rely are:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
<PAGE>
(b) Legal counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such persons'
professional or expert competence; or
(c) A committee of the board upon which he or she does not serve, duly
designated in accordance with the provision of the Articles of Incorporation
or the Bylaws, as to matters within its designated authority, which committee
the director reasonably believes to merit confidence.
Section 3.3 NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be fixed from time to time by resolution of the Board
of Directors, but in no instance shall there be less than one director. Each
director shall hold office as prescribed by written agreement, or until the
next annual meeting of shareholders, or until his or her successor shall have
been elected and qualified. Directors need not be residents of the State of
Colorado or shareholders of the corporation.
There shall be a Chairman of the Board, who has been elected from among
the directors. He or she shall preside at all meetings of the stockholders and
of the Board of Directors. He or she shall have such other powers and duties
as may be prescribed by the Board of Directors.
There shall be at least two (2) independent directors as defined by the
Colorado Business Corporation Act of 1994, as amended.
Section 3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Colorado, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Colorado,
as the place for holding any special meeting of the Board of Directors called
by them.
<PAGE>
Section 3.6 NOTICE. Written notice of any special meeting of directors
shall be given as follows:
By mail to each director at his or her business address at least two
days prior to the meeting; or
By personal delivery, facsimile or telegram at least twenty-four hours
prior to the meeting to the business address of each director, or in the event
such notice is given on a Saturday, Sunday or holiday, to the residence
address of each director. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, so addressed, with postage
thereon prepaid. If notice is given by facsimile, such notice shall be deemed
to be delivered when a confirmation of the transmission of the facsimile has
been received by the sender. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company.
Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
When any notice is required to be given to a director, a waiver thereof
in writing signed by such director, whether before, at or after the time
stated therein, shall constitute the giving of such notice.
Section 3.7 QUORUM. A majority of the number of directors fixed by or
pursuant to Section 3.2 of this Article III, or if no such number is fixed, a
majority of the number of directors in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
<PAGE>
Section 3.8 MANNER OF ACTING. Except as otherwise required by law or by
the Articles of Incorporation, the affirmative vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 3.9 INFORMAL ACTION BY DIRECTORS OR COMMITTEE MEMBERS. Unless the
Articles of Incorporation or these By-laws provide otherwise, any action
required or permitted to be taken at a meeting of the board of directors or
any committee designated by said board may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by each director or committee member, and delivered to the
Secretary for inclusion in the minutes or for filing with the corporate
records. Action taken under this section is effective when all directors or
committee members have signed the consent, unless the consent specifies a
different effective date. Such consent has the same force and effect as a
unanimous vote of the directors or committee members and may be stated as
such in any document.
Section 3.10 PARTICIPATION BY ELECTRONIC MEANS. Any members of the Board
of Directors or any committee designated by such Board may participate in a
meeting of the Board of Directors or committee by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
Section 3.11 VACANCIES. Any vacancy on the Board of Directors may be
filled by the affirmative vote of a majority of the shareholders or the Board
of Directors. If the directors remaining in office constitute fewer than a
quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected
by the shareholders, the director shall hold office for the unexpired term of
his or her predecessor in office; except that, if the director's predecessor
was elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold the office for the unexpired term of the last
predecessor elected by the shareholders.
<PAGE>
If the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group are entitled to
vote to fill the vacancy if it is filled by the shareholders, and, if one or
more of the remaining directors were elected by the same voting group, only
such directors are entitled to vote to fill the vacancy if it is filled by
the directors.
Section 3.12 RESIGNATION. Any director of the corporation may resign at
any time by giving written notice to the Secretary of the corporation. The
resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective.
Section 3.13 REMOVAL. Subject to any limitations contained in the
Articles of Incorporation, any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Business Corporation Act.
Section 3.14 COMMITTEES. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute
a committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall be
prescribed by the Colorado Business Corporation Act and Article XI of these
Bylaws.
Section 3.15 COMPENSATION. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, or the Board of
Directors, each director may be paid his or her expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board
of Directors or both. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
<PAGE>
Section 3.16 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless (i) the director objects at the beginning
of the meeting, or promptly upon his or her arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his or her dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his or her dissent or abstention as to any
specific action to be received by the presiding officer or the meeting before
its adjournment or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the Board of Directors or a committee of the board shall not be
available to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
Section 4.1 NUMBER. The officers of the corporation shall be a President,
a Secretary, and a Treasurer, each of whom must be a natural person who is
eighteen years or older and shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person.
Section 4.2 ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after the
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
practicable. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his or her death or until
he shall resign or shall have been removed in the manner hereinafter provided.
<PAGE>
Section 4.3 REMOVAL AND RESIGNATION. Any officer or agent may be removed
by the Board of Directors at any time, with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
An officer or agent may resign at any time by giving written notice of
resignation to the Secretary of the corporation. The resignation is effective
when the notice is received by the corporation unless the notice specifies a
later effective date.
Section 4.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 4.5 PRESIDENT. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors,
shall, in general, supervise and control all of the business and affairs of
the corporation. He or she shall, when present, and in the absence of a Chair
of the Board, preside at all meetings of the shareholders and of the Board of
Directors. He or she may sign, with the Secretary or any other proper officer
of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 4.6 VICE PRESIDENT. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his or her
death, inability or refusal to act, perform all duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
<PAGE>
other duties as from time to time may be assigned to him by the President or
by the Board of Directors.
Section 4.7 SECRETARY. The Secretary shall: (a) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation, and a record of all waivers of notice and meetings of
shareholders and of the Board of Directors or any committee thereof (b) ensure
that all notices are duly given in accordance with the provisions of these
Bylaws and as required by law, (c) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the Board of Directors, (d) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held
by, each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (e) maintain at the corporation's
principal office the originals or copies of the corporation's Articles of
Incorporation, Bylaws, minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years,
all written communications within the past three years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the corporation's
assets and liabilities and results of operations for the last three years, (f)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (g) authenticate records of the corporation,
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him by the president
or by the board of the Board of Directors. Assistant Secretaries, if any,
shall have the same duties and powers, subject to supervision by the
Secretary. The directors and/or shareholders may however respectively
designate a person other than the Secretary or Assistant Secretary to keep
the minutes of their respective meetings.
<PAGE>
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a
reasonable time.
Section 4.8 TREASURER. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and
(c) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her by
the President or by the Board of Directors.
Section 4.9 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The Assistant Secretaries, when authorized by the Board of Directors, may sign
with the Chair or Vice Chair of the Board of Directors or the President or a
Vice President certificates for shares of the corporation the issuance of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 4.10 BONDS. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their
respective duties and offices.
Section 4.11 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.
<PAGE>
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
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 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.
Section 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 5.4 DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES
AND TRANSFER OF SHARES
Section 6.1 REGULATION. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 SHARES WITHOUT CERTIFICATES. Unless otherwise provided by the
Articles of Incorporation or these Bylaws, the board of directors may
authorize the issuance of any of its classes or series of shares without
certificates. Such authorization shall not affect shares already represented
by certificates until they are surrendered to the corporation.
<PAGE>
Within a reasonable time following the issue or transfer of shares
without certificates, the corporation shall send the shareholder a complete
written statement of the information required on certificates by the Colorado
Business Corporation Act.
Section 6.3 CERTIFICATES FOR SHARES. If shares of the corporation are
represented by certificates, the certificates shall be respectively numbered
serially for each class of shares, or series thereof, as they are issued,
shall be impressed with the corporate seal or a facsimile thereof, and shall
be signed by the Chair or Vice Chair of the Board of Directors or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer
or by the Secretary or an Assistant Secretary; provided that such signatures
may be facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar other than the corporation itself or its employee.
Each certificate shall state the name of the corporation, the fact that the
corporation is organized or incorporated under the laws of the State of
Colorado, the name of the person to whom issued, the date of issue, the class
(or series of any class), and the number of shares represented thereby. A
statement of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class shall
be set forth in full or summarized on the face or back of the certificates
which the corporation shall issue, or in lieu thereof, the certificate may set
forth that such a statement or summary will be furnished to any shareholder
upon request without charge. Each certificate shall be otherwise in such form
as may be prescribed by the Board of Directors and as shall conform to the
rules of any stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms
and conditions specified by the Board of Directors.
Section 6.4 CANCELLATION OF CERTIFICATES. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificates shall
be issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and canceled, except as herein provided
with respect to lost, stolen or destroyed certificates.
<PAGE>
Section 6.5 LOST, STOLEN OR DESTROYED CERTIFICATES. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the
Secretary of the corporation, accompanied by a signed application for a new
certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation),
a new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.6 TRANSFER OF SHARES. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of
the corporation shall be transferable on the books of the corporation by the
holder thereof in person or by his duly authorized attorney, upon the
surrender and cancellation of a certificate or certificates for a like number
of shares. Upon presentation and surrender of a certificate for shares
properly endorsed and payment of all taxes therefor, the transferee shall be
entitled to a new certificate or certificates in lieu thereof. As against the
corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation shall
be entitled to treat the holder of record of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Colorado.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on the 30th day of June
in each calendar year.
<PAGE>
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time declare, and the corporation
may pay, distributions on its outstanding shares in the manner and upon the
terms and conditions provided by the Colorado Business Corporation Act and
its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE X
The Board of Directors shall have power, to the maximum extent permitted
by the Colorado Business Corporation Act, to make, amend and repeal the Bylaws
of the corporation at any regular or special meeting of the board unless the
shareholders, in making, amending or repealing a particular Bylaw, expressly
provide that the directors may not amend or repeal such Bylaw. The
shareholders also shall have the power to make, amend or repeal the Bylaws of
the corporation at any annual meeting or at any special meeting called for
that purpose.
AMENDMENTS
ARTICLE XI
EXECUTIVE COMMITTEE
Section 11.1 APPOINTMENT. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
<PAGE>
Section 11.2 AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee and
except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to authorizing distributions, filling
vacancies on the Board of Directors, authorizing reacquisition of shares,
authorizing and determining rights for shares, amending the Articles of
Incorporation, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease or other disposition of all or substantially all
of the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, or amending the
Bylaws of the corporation.
Section 11.3 TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his or her designation and until his or her successor
is designated as a member of the Executive Committee and is elected and
qualified.
Section 11.4 MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee
may be called by any member thereof upon not less than one day's notice
stating the place, date and hour of the meeting, which notice may be written
or oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the Executive Committee at his
or her business address. Any member of the Executive Committee may waive
notice of any meeting and no notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the Executive
Committee need not state the business proposed to be transacted at the
meeting.
Section 11.5 QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
<PAGE>
Section 11.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE. Any action required
or permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the Executive Committee entitled to
vote with respect to the subject matter thereof.
Section 11.7 VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 11.8 RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the corporation, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 11.9 PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall
not be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XII
EMERGENCY BY-LAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency in the conduct of the business of the corporation
resulting from a catastrophic event that prevents the normal functioning of
the offices of the Corporation, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
corporation or in the Colorado Business Corporation Act. To the extent not
inconsistent with the provisions of this Article, the Bylaws provided in the
preceding articles shall remain in effect during such emergency and upon its
termination the Emergency Bylaws shall cease to be operative.
<PAGE>
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may
be feasible to reach by any available means of communication. Such notice
shall be given at such time in advance of the meeting as circumstances permit
in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the corporation
shall for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders, but
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances
of the emergency.
<PAGE>
CERTIFICATE
I hereby certify that the foregoing Amended Bylaws, consisting of twenty
(20) pages, including this page, constitute the Bylaws of Oak Brook Capital
I, Inc., adopted by the Board of Directors and Shareholders of the
corporation as of May 1, 1998.
/S/ Mark T. Thatcher, Esq.
_______________________________
MARK T. THATCHER,
President
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Board of Directors of the Corporation is hereby empowered to fix the value
of and to authorize the issuance from time to time of shares of its stock of
any class, whether now or hereafter authorized, or securities convertible
into shares of its stock of any class or classes, whether now or hereafter
authorized.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
_____________________________
MARK T. THATCHER
/s/ Gerard Werner
_____________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Board of Directors may classify or reclassify any unissued stock by
setting or changing in any one or more respects, from time to time before
issuance of such stock, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to distributions, qualifications, and
terms or conditions of redemption of such stock.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
____________________________
MARK T. THATCHER
/s/ Gerard Werner
____________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Corporation shall issue shares of stock of any class now or hereafter
authorized, or any securities exchangeable for, or convertible into such
shares, or warrants or other instruments evidencing rights or options to
subscribe for, or otherwise acquire such shares, only if the issuance of such
shares or such securities exchangeable for, or convertible into such shares,
or such warrants or any other instruments evidencing rights or options to
subscribe for, purchase or otherwise acquire such shares, shall be authorized
by the unanimous vote of all of the directors comprising the Board of
Directors of the Corporation.
In the event that the issuance of such shares, or such securities exchangeable
for, or convertible into such shares, or such warrants or any other
instruments evidencing rights or options to subscribe for, purchase or
otherwise acquire such shares, shall be authorized by the unanimous vote of
all of the directors comprising the Board of Directors of the Corporation, the
issuance of such shares or such securities exchangeable for, or convertible
into such shares, or such warrants or, any other instruments evidencing rights
or options to subscribe for, purchase or otherwise acquire such shares, shall
be made for such consideration as the Board of Directors of the Corporation by
the unanimous vote of all of the directors thereof shall deem advisable.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
____________________________
MARK T. THATCHER
/s/ Gerard Werner
____________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that newly created directorships resulting from any increase of
the authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the remaining
Directors, though less than a quorum, and the Directors so chosen shall hold
office for a term expiring at the next annual meeting of shareholders at which
a successor shall be elected and shall qualify. The shareholders shall not
be entitled to fill a vacancy created on the Board of Directors.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
_________________________
MARK T. THATCHER
/s/ Gerard Werner
_________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that the officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of stockholders,
except where a longer term is expressly provided in an employment contract
duly authorized and approved by the Board of Directors. In any such employment
contract, an officer may be employed for a term in excess of one year and for
so long a term as shall be determined by the Board of Directors otherwise in
accordance with the Colorado Business Corporation Act.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
_________________________
MARK T. THATCHER
/s/ Gerard Werner
_________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance
with the requirements established by law.
2.RESOLVED, that Members of the Board of Directors and the shareholders at any
annual or special meeting may participate in a meeting by means of a
conference telephone, videolink or similar communications equipment if all
persons participating in the meeting can hear and speak to each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
_________________________
MARK T. THATCHER
/s/ Gerard Werner
_________________________
GERARD WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
OAK BROOK CAPITAL I, INC.
May 15, 1998
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of OAK BROOK CAPITAL I, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of May 15, 1998:
WHEREAS, certain individuals have performed useful and valuable services
for and on behalf of the Corporation without remuneration, and the Board of
Directors has determined that it is in the best interest of the Corporation to
issue stock to the individuals who have performed such services for and on
behalf of the Corporation in payment for such services.
1.RESOLVED: That the Corporation issue the following number of shares of
Common Stock to the following named persons, in consideration for past
services performed by such persons for and on behalf of the Corporation, as
described below, which services are deemed by the Board of Directors to have
values of not less than the amounts shown below:
Name Number of Shares Consideration Value
Mark T. Thatcher 500,000 Services Rendered $30,000.00
Gerard Werner 500,000 Services Rendered $30,000.00
2.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of OAK BROOK CAPITAL I, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
/s/ Mark T. Thatcher
_________________________
MARK T. THATCHER
/s/ Gerard Werner
_________________________
GERARD WERNER
May 13, 1999
CONFIDENTIAL
Attn: William Underhill, Esq.
Office of Small Business
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth, N.W.
Washington D.C., 20549
Re: Rule 4(2) of the Securities Act of 1933 (the "Act"), private
issuance of one hundred twenty-eight thousand (128,000) Shares
of Oak Brook Capital I, Inc.
Dear Mr. Underhill:
I render herewith my opinion as to certain matters pursuant to the
"gifting" of one hundred twenty-eight thousand (128,000) shares (the "Shares")
of Oak Brook Capital I, Inc. (hereinafter referred to as "Oak Brook" and/or
"Company"), a Colorado corporation, involved in a private placement of common
shares of the Company.
In rendering my opinion, I have examined and relied upon the following:
(a) The Articles of Incorporation (the "Articles") of the Company, filed
with the State of Colorado;
(b) The materials contained in Amendment No. 1 to the Form 10SB
Registration Statement ("Form 10SB") of the Company, filed March 15, 1999,
Corporate Authorizations, Director Resolutions and Shareholder Ledger dated
September 1, 1998 (the "Confidential Documents") concerning the placement of
the Shares;
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Mr. William Underhill
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(c) The Certificate of Incorporation of the Company. The opinions
expressed in subparagraphs three, four, six, seven, nine and ten below, as
to factual matters, are given in reliance upon the Company's Securities
Certificate;
(d) Such other documents and instruments as I have deemed necessary in
order to enable me to render the opinions expressed herein.
For the purposes of rendering this opinion, I have assumed that no person or
entity has engaged in fraud or misrepresentation regarding the inducement
relating to, or the execution or delivery of, the documents reviewed.
Furthermore, I express no opinion as to the validity of any of the assumptions,
form, or content of any financial or statistical data contained in the
Confidential Documents. I do not assume any obligation to advise your office,
beyond the opinions specifically expressed herein. The terms used in this
opinion shall have the meaning ascribed to them in the Form 10SB and other
documents relied upon in rendering my opinion. As used in paragraphs five and
nine hereof the phrase "of which I have knowledge" means that such knowledge
is based solely upon conversations with representatives of Oak Brook and a
review of my own files.
Based upon the foregoing assumptions, my review of the above documents
and my reliance, as to factual matters, upon the representations in the
Company's Certificate, and subject to the qualifications listed herein, I am of
the opinion that the placement of said Shares has taken place within the
gambit of Rule 4(2) of the Securities Act of 1933 (the "Act"):
I. Overview--The Federal Section 4(2)Exemption:
Section 4(2) of the Securities Act of 1933 exempts "transactions by an issuer
not involving any public offering." The administrative and judicial
interpretations of that provision have focused on five factors in determining
the availability of the exemption:
1. Ability of offerees to fend for themselves,
2. Availability of information,
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Mr. William Underhill
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3. Manner of offering,
4. Number of offerees and purchasers, and
5. Absence of redistribution.
A. Ability of Offerees to Fend for Themselves
The legislative history of the Section 4(2) exemption referred, among other
things, to circumstances "where there is no practical need for the bill's
application." The absence of the need for the protections provided by
registration under the Securities Act, i.e., the ability of
offerees to fend for themselves, has been a touchstone of judicial
interpretation of the exemption.
The seminal case of SEC v. Ralston Purina Co. Focused on the ability of the
offerees to fend for themselves, i.e., whether they needed the protection of
the Act. The Supreme Court also referred to "access" to the "kind of
information which registration would disclose." Access was not defined,
however. Ralston Purina involved a sale of securities under a key executive
stock option plan with several hundred eligible participants. Since many of
the participants appeared to have neither economic bargaining power nor a
relationship to the company that would give them the ability to obtain
necessary information, the Court held that the exemption was unavailable.
The cases since Ralston Purina have not definitively outlined the required
access. Some courts have found the requirement satisfied where the offeree
has a close personal family or employment relationship to the issuer. In
Gilligan, Will & Co. v. SEC., the Second Circuit held that a sale to three
purchasers did not qualify as a private offering because the purchasers lacked
the required relationship to the issuer and the knowledge needed to evaluate
the offering. The Securities and Exchange Commission's litigating position in
its appellate brief in the infamous Continental Tobacco case maintained that
economic bargaining power was not enough to convey access, and that a permitted
private place had to be virtually an insider with respect to the issuer.
In such circumstances where the offerees have a close relationship to the
issuer, the public benefits of requiring registration would be viewed as too
remote.
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Mr. William Underhill
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In 1974, the SEC promulgated Securities Act Rule 146 to provide more objective
standards for the application of the limited offering (or "private placement")
exemption. Since the adoption of former Rule 146, "ability to fend for
themselves" has sometimes been divided into two components: ability to bear
the risk (which the SEC may construe as the investor's ability to afford the
loss of an entire investment, although commentators urge that the probability
of loss also be considered) and "sophistication." The precise definition of
sophistication is not clear, but it has been generally interpreted to mean the
ability to understand the risks of the particular investment. Rule 506
eliminated the economic risk test of Rule 146 but maintains the requirement
of a subjective sophistication determination for non-accredited investors as
to whether such a purchaser, either alone or with a purchaser representative,
is able to evaluate the merits and risks of the investment.
Based upon the foregoing, we are of the opinion that based upon management's
special relationship to each shareholder receiving a gift of securities, the
lack of any monies being invested and the ability to provide the necessary
updated information to each shareholder, the Company has satisfied this element
of the test for availability of its characteristics as they apply to Rule 4(2).
B. Availability of Information
Establishing the statutory 4(2) exemption requires proof that the offerees had
access to registration-type information through economic bargaining position,
family or personal relationship, employment, or by some other means. Former
Rule 146(e) required information or access. Regulation D requires the delivery
of information rather than access to information for investors other than
accredited investors.
Despite judicial suggestions to the contrary, the better view is that the
information provided need not be the same as registration would provide but
should be the same kind of information, i.e., basic information concerning the
issuer's financial condition, results of operations, business, property, and
management. Information should also be given as to the use of proceeds and,
to the extent material, tax considerations and risk factors. In Livens v.
William D. Witter, Inc., the exemption
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Mr. William Underhill
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was held available, although the purchaser did not receive financial statements
because the issuer lacked records from which such statements could be prepared.
The court concluded that, since the purchaser was informed of the deficiency
in the information available(although no one appreciated the significance of
such unavailability) and was willing to proceed with the transaction, the
material information had been given and, under the circumstances, the
omission was not material.
We are of the opinion that each offeree has access to the identical kind of
information which would have been furnished to him by a registration statement
since the Form 10SB, and subsequent amendments, are on file with the
Commission's EDGAR system.
C. Manner of Offering
The manner of offering is an important element in determining the availability
of the statutory 4(2) exemption. Generally, the issuer should offer its
securities through direct communications to offerees or their representatives.
No general solicitation or advertising is permitted. In addition, the number
of offers should be limited as discussed below.
A few courts have de-emphasized the manner of offering element and replaced it
with requirements that focus on the type of offeree being solicited. For
example, in SEC v. Universal Major Industries Corp., the court stated that it
was not the manner of offering but the class of offerees to whom the offering
was made that determined the availability of the exemption. It has
been suggested that the issue of the class of offeree (i.e., a person who has
the ability to fend for himself) should be a separate requirement in addition
to that prescribing the manner of offering.
We are of the opinion that the Company's officers and directors used no
general solicitation or advertising to grant the gifted shares, but rather
specifically chose family members and close friends to receive certain Shares.
Although seventy-seven offerees exist, the Company is of the opinion that
based upon many of the offerees being minor/dependent children or "close"
family members of offerees the Company knows to be "accredited" investors,
the aggregate number of purchasers will actually fall
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Mr. William Underhill
May 13, 1999
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below the thirty-five (35) non-accredited threshold as prescribed by
Regulation D.
D. Number of Offerees and Purchasers
The number of offerees and purchasers is another significant factor affecting
the availability of the Section 4(2) exemption. The Section 4(2) exemption,
unlike Rule 506, is tested against both the number and qualifications of
offerees rather than the number and qualifications of purchasers.
However, the existence of a large number of purchasers in fact (excluding,
however, the large institutional investors) makes it less likely that each
offeree met the qualification criteria and may also be indicative of a general
solicitation.
The Ralston Purina decision states that there is no absolute maximum number of
offerees which would, if exceeded, result in the loss of the exemption. It is
also clear that no permissible minimum number of offerees exists; an offering
to even one person, if that person lacks the requisite qualifications, may
result in a public offering. Nevertheless, securities practitioners long
followed, at least until the advent of former Rule 146, the "Rule of 25"
derived from an early opinion of the SEC's General Counsel, which viewed 25
non-sophisticated offerees as the appropriate ceiling for a statutory private
placement. Former Rule 146 focused attention more on the manner of offering,
to which the numbers of offerees and purchasers may be relevant.
The manner of offering continues to be relevant under Rule 506, although the
elimination of offeree qualification requirements makes the nature of the
offerees less significant. Outside of the institutional private placement
situation, most experienced counsel find their comfort level diminishing as
the number of offerees and purchasers increases, since the likelihood of all
offerees and purchasers meeting the qualification criteria decreases as their
numbers grow.
We are of the opinion that the Company did not solicit any unknown investors
and all communications regarding the "gifted" transactions were made to donees
personally known by the Company, exclusively family members and close friends
who maintain a special relationship to the Company.
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Mr. William Underhill
May 13, 1999
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F. Absence of Redistribution
If the purchaser in an offering immediately resells the securities in a manner
that would transform the overall transaction into a public offering (i.e., if
such purchaser effects a public distribution of the securities), the Section
4(2) exemption is lost. Some consideration of the subjective intent of the
purchaser is unavoidable because of the category of statutory underwriter
created by Section 2(11) of the Securities Act of 1933, which makes someone
who purchases from an issuer with "a view to distribution" an underwriter.
However, the Section 4(2)exemption does not preclude a private resale of
privately placed securities.
The Section 4(2) exemption does not require any particular enforcement devices
to prevent distributions, such as the placement of restrictive legends on
certificates or the issuance of stop transfer instructions to transfer agents.
However, those procedures and receipt of an investment letter buttress the
claim that the transaction was exempt in the view of both the SEC and the
courts.
We are of the opinion that the Company has taken the following action to
ensure that a public re-distribution of the Shares does not take place:
(i) a "restrictive" legend will be placed on each stock certificate
issued to donees in connection with the gifting transactions;
(ii) "stop transfer" order instructions will be placed on each stock
certificate issued to donees in connection with the gifting
transactions;
(iii) donees have been placed on notice that their securities will
need to be sold in compliance with Rule 144 of the Act, and may
not be transferred otherwise;
(iv) disclosure has been set forth throughout the Form 10SB
describing the above restrictions.
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Mr. William Underhill
May 13, 1999
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II. State Exemptions Following the Section 4(2) Exemption:
A number of states exempt from their registration requirements offers and
sales exempt from federal registration by reason of Section 4(2) of the
Securities Act. That provision provides an exemption for transactions not
involving a public offering and constitutes the issuer private placement
exemption. The exemption may explicitly refer to Section 4(2) of the Securities
Act or may exempt non-public offerings. Of course, those jurisdictions
without general securities registration requirements, including Colorado,
District of Columbia, New York, and Nevada may also rely on the Section 4(2)
exemption.
We are of the opinion that the Company may rely on the following state
exemptive provision's that are applicable to the private placement
contemplated herein and that no further requirements are necessary in the
respective jurisdictions to ensure the availability of such states' various
private placement exemptions:
No. Of Shareholders Exemptive
State Receiving Gift Provision
Rhode Island 20 1992 Reenactment,
General Laws of Rhode Island, as
amended, Sec. 7-11-402(10)
Colorado 15 Colorado Rev. Statutes, 192 Laws
1990, H 1222, Sec. 11-51-308
Texas 12 Texas Rev. Statutes, Securities
Act of 1957, Sec. 5(581-5) IC
Georgia 5 Georgia Securities Act of 1973,
Sec. 10-5-9; Subsec. (5)(13)
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Arizona 6 Arizona Rev. Statutes, Sec.
44-1844(1)
Wisconsin 4 Wisconsin Rev. Statutes, 87-
88, Sec. 551-23(11)
Massachusetts 4 General Laws of MA, 1990,
Sec. 402(b)(9)
Minnesota 3 Minnesota Statutes, 86, Sec.
80A-15, subd 2(a)(1)
Maine 3 Maine Rev. Statutes, Sec. 10
502(2Q)
Maryland 2 Annotated Code of Maryland,
Sec. 11-602(9)
New Jersey 1 New Jersey Statutes
Annotated, Sec. 49:3-50(b)9
New York 1 New York Consolidated
Laws, Sec. 352-G
Connecticut 1 Title 366, CT Sec. Law &
Business Opportunity
Investment Act, Sec. 36b-
21(b) 15
Florida 1 Florida Statutes, 1987, Sec.
517.061 11(a)
Illinois 1 Illinois Laws, Sec. 4(514) 6.1
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Mr. William Underhill
May 13, 1999
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We are of the opinion that the Company has confirmed that the following states
have adopted the National Securities Markets Improvement Act of 1996 which
provides for exemptive provisions applicable to the status of secondary
trading in the "gifted" securities following the distribution to the
shareholders:
Section 18(b) of the Securities Act of 1933, i.e., Subsection 18(b)(1),
18(b)(2), 18(b)(3) and 18(b)4 defines a "covered security" or "federal covered
security". Exempt from state regulation are (1) investment companies
registered under the Investment Company Act of 1940; (2) certain securities
listed on nationally-recognized stock exchanges; (3) offers or sales made to
qualified purchasers; (4) certain transactions exempt from registration under
the Securities Act of 1933; (5) investment advisers with assets over
$25,000,000; and (6) Rule 506 offerings. States are still allowed to regulate
smaller offerings, penny stocks, intrastate offerings, and certain limited
offerings. Except for certain exchange-listed securities, the states may
still require notice filings and have the power to require registration or
suspend offerings for which notices have not been filed.
In particular, Section 18(b)(4)(A) provides that a security is a covered
security with respect to a transaction that is exempt from registration
pursuant to paragraph (1) or (3) of Section 4, and the issuer of such
security files reports with the Commission pursuant to Section 13 or 15(d)
of the securities Exchange Act of 1934.
Section 4(1) exempts transactions by any person other than an issuer,
underwriter, or dealer.
Section 4(3) exempts transactions by a dealer (including an underwriter no
longer acting as an underwriter in respect of the security involved in such
transaction), except--
(A) transactions taking place prior to the expiration of 40 days after the
first date upon which the security was bona fide offered to the public by the
issuer or by or through an underwriter;
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Mr. William Underhill
May 13, 1999
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(B) transactions in a security as to which a registration statement has been
filed taking place prior to the expiration of 40 days.
The following states have adopted laws and/or regulations addressing Section
(b)(4)(A) of NSMIA:
Arizona Georgia
Illinois Maine
Maryland Minnesota
New Jersey Rhode Island
Texas Wisconsin
Based upon the foregoing. We are of the opinion that "secondary trading"
opportunities will exist pursuant to Sections 18(b)(4)(A), 4(1), 4(3) or 4(4)
of the Act, in the states referenced above, provided that the Company
continues to timely files reports required under Section 13 or 15(d) of
the Exchange Act and effectuate any filings that may be required in each
respective state listed above, if any.
Colorado: To obtain the exemption for "non-issuer" secondary trading
(Colorado Rev. Statutes Sec. 11-51-308(1)(b)(V)), the Company
will be required to file Form ST with the Securities
Commissioner in order for the transactional securities
registration exemption to apply.
Connecticut: Section 4(1), 4(3) ane 4(4) of the Act have ben adopted
and provide an exemption for "non-issuer", secondary trading
transactions. Regulations also provide an exemption for sales
made through registered "broker/dealers".
Florida: Sec. 517.061, Florida Statutes provides that the offer or sale
of securities in a transaction exempt under Section 4(1) of the
Act is an exempt transaction, so long as the person has owned
the securities for at least one (1) year.
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Mr. William Underhill
May 13, 1999
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Massachusetts: Section 4(1), 4(3) ane 4(4) of the Act have been adopted and
provide an exemption for "non-issuer", secondary trading
transactions. Regulations also provide an exemption for sales
made through registered "broker/dealers".
New York: Sec. 352-g of the New York Consolidated Laws, provides an
exemption for "secondary trading"
Although the above information provides "secondary trading" exemptions for the
donees, provided they sell in full compliance with Rule 144 of the Act,
nonetheless, the Company must still timely file the reports required to be
filed as prescribed by Section 13 or 15(d) of the Exchange Act and must file
any required material with each respective state authority:
Redistribution - Rule 144
Rule 144 of the Securities Act lists criteria under which
restricted securities and securities held by affiliates or
control persons may be resold without registration. The rule
prevents the creation of public markets in securities when the
issuers have not made adequate current information available to
the public. Preliminary Note to Securities Act Rule 144. The
requirements of Rule 144(b) through (i) include provisions that:
1) current public information be available regarding
the issuer of the securities;
2) at least one year elapse between the time the
securities are acquired from an issuer or affiliate and
the date the securities are resold under the rule;
3) the amount of securities able to be sold is limited,
depending on whether the sale is by an affiliate or
not;
4) the securities be sold in brokers' transactions or
with a market maker;
5) Commission Form 144 be filed depending on the size
of the transaction; and
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Mr. William Underhill
May 13, 1999
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6) the person filing the form has a bona fide intention
to sell the securities within a reasonable time.
III. Secondary 4(2) Analysis-
Strengths/Weaknesses for Reliance
Offerees
1. Do the offerees need information in order to make an informed
investment decision?
Provided the receipt of a gift of stock in Oak Brook could be
interpreted as an investment decision, information will be available
through Exchange Act filings and personal representative discussions.
Strength
2. Are solicitations or offers made to an unrestricted number of
persons or an unrelated group of persons?
No
Strength
3. Are the offerees all stockholders, employees, or promoters?
No, however each offeree maintains a "special relationship" to the
Company
Weakness
4. Do the offerees have access to the same kind of information that
registration would provide?
Yes
Strength
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Mr. William Underhill
May 13, 1999
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5. Is the number of offerees greater than 25?
Yes
Weakness
6. Are the offerees sophisticated investors and business people of
experience?
Yes
Strength
7. Have there been prior dealings among the parties?
Yes
Strength
8. Is there a preexisting relationship between the offeror and the
purchasers?
Yes
Strength
9. Have the purchasers had an opportunity to inspect the issuer's
records and to verify statements made to induce them to buy?
There has been no inducement to buy
Strength
10. Are the offerees insiders?
Yes, so long as the present Board of Directors remains the same
Strength
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Mr. William Underhill
May 13, 1999
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11. Are the offerees assisted by an attorney and/or an accountant?
Yes
Strength
Manner of Offering
1. Does the issuer deal directly with purchasers rather than through
the facilities of a security exchange, investment bankers, or by
any other means of public distribution?
Yes
Strength
2. Is the offering conducted without the use of general solicitations
or advertising?
Yes
Strength
"Coming to Rest"
1. Are the purchasers buying with the intent of disposing of their
securities or otherwise acting as "conduits for wider distribution"?
No
Strength
2. Has the issuer obtained a statement of investment intent from the
purchasers?
No
Weakness
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Mr. William Underhill
May 13, 1999
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3. Has a legend been placed on the certificates that the security was
purchased for investment purposes?
Yes
Strength
4. Have stop transfer orders been given to the transfer agent?
Yes
Strength
5. Is the nature of the purchaser's past investment and trading
practices compatible with the purchase of securities for
investment purposes?
Yes
Strength
Historically, the private placement exemption has served a vital function--it
has permitted the issuance of securities in transactions in which registration
should not be reasonably required and for which no other exemption is
available, including
(A) transactions in which the dollar amount involved does not warrant the
effort or expense required to effect registration;
(B) transactions involving the sale of securities to insiders or its
affiliates by an issuer that prefers not to make public disclosure of its
internal affairs; or
(C) transactions in which the securities are being acquired by a limited
number of persons who are, or are represented by persons who are, sufficiently
sophisticated so that registration would not produce benefits justifying the
effort and expense involved.
Based upon the responses above, the Company is of the opinion that the private
placement of shares via "gift" comes within the gambit of Rule 4(2) of the Act.
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Mr. William Underhill
May 13, 1999
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IV. Conclusory Statements for Oak Brook
Specific Circumstances
Access to information may exist for family members, close friends and
relations of the issuer's principal officers or promoters. See Doran v.
Petroleum Management Crop., 545F2d 893, 903 (CA5 1977). Because of the
personal relationship, it would be overly strict to insist that issuer
provide these persons with all of the information given to others. See
American Bar Association Position Paper on the Section 4(2) Exemption,
31 Bus Law 485, 491 (1975)
Sophistication is generally overcome if the offeree is related and informed.
See SEC Rel No. 33-4552, Non-Public Offering Exemption, (Nov. 6, 1992)
Vol 1, Fed Sec L Rep (CCH). Sophistication is also generally overcome if
there is a special knowledge of the issuer. See SEC Rel. No. 33-285,
Factors Involved in Determining Whether Transaction is Public Offering.
All shareholders of the Company will be directed to the filing on EDGAR and
are therebysupplied with the kind of information that registration would
disclose and should be able "to fend for themselves".
Personal Representative Considerations
Provided any participant in the offering failed to meet the "sophistication"
requirements, Rule 506 sanctions the use of a representative who advises
unsophisticated participants in the offering and thus furnishes the business
sophistication required by Section 4(2) that the participants lack
personally. Because of the safe-harbor character of the rules and because
no-action positions generally are unavailable under Section 4(2), the Division
will not express a view whether the use of a purchaser or offeree
representative outside Rule 506 is an acceptable method to provide the
sophistication requirement of Section 4(2) as construed by the courts and
the Commission. Nonetheless, Oak Brook is of the opinion that its principal
officers and directors maintain this offeree representative status, based upon
their role as counsel to each and everyone of the related shareholders as such
shareholders are either family or close friends.
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Mr. William Underhill
May 13, 1999
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V. Securities Exchange Act of 1934 Release No. 32669
We have carefully reviewed Release No. 32669 and hereby provide the
following opinion with respect to the "gifting of shares" in connection with
the Section 4(2) private placement contemplated hereby. Based upon our
examination of Exchange Act Release No. 32669, please be advised of the
following:
1. All stock certificates for the "gifted" shares reflect restrictive
legends and stop orders, while the Form 10SB discloses the restrictive
nature of the "gifted" shares and various selections of Rule 144 of
the Act;
2. The Form 10SB filed by the Company has adequately disclosed the existence
of certain restrictions, filing requirements and opinions related to
secondary transactions in Oak Brook's shares;
3. We are aware that the sale of securities of corporations controlled by an
issuer in which such issuer has made a public distribution by gifting may
not be eligible for an exemption to registration. We maintain that every
effort has been made to rely on the Section 4(2) exemption or its
equivalent on a state-by-state basis, with said analysis set forth
throughout this opinion. Furthermore, we remain of the opinion that the
purpose of the "gifts" was not to create a "public" company, but rather
to involve a foundation of related, controlled shareholders that could be
beneficial for a business combination candidate to meet certain criteria
with respect to the NASDAQ SmallCap market. We now realize that the
Staff may be of the opinion that the business combination target
company may receive some value from the "gifting" distribution, therefore
disallowing the legal foundations that were initially considered and set
forth hereto at Exhibit 1. Therefore, the Company has elected to rely on
the section 4(2) exemption, but remains willing to immediately eradicate
the "gifted" shares at the instruction of the Staff, provided doubt
remains as to the availability of the exemption, or some other concern is
maintained;
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Mr. William Underhill
May 13, 1999
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4. Under no circumstances were the "gifted" distributions made to create a
public market in the Company's securities, nor was the increased
shareholder base utilized so that the Company could be sold to a target
company for greater consideration. The Company has included disclosure
at Part II, Item 1 confirming that (i) the potential value of satisfying
one element of the NASDAQ SmallCap listing requirement was not to be a
determining factor in the valuation of the Company; (ii) a target company
should not rely on the disclosure as significant; and (iii) there are no
assurances or representations with respect to the "gifted" transactions
that a target company could obtain NASDAQ SmallCap listing on the basis
of such transactions;
5. Finally, the Company has no intention of utilizing the "gifted"
transaction to create a public trading market, and, in fact, has on
several occasions reminded shareholders throughout the Form 10SB that
said securities are restricted within the meaning of Rule 144 of the
Act and may not be re-sold without comprehensive compliance with the rule.
As a result, we are of the opinion that the Company has no intention of
utilizing the "gifted" shares as the basis for a Form 211 filing, pursuant
to Rule 15c2-11 of the Exchange Act.
VI. General Interpretation
1. Oak Brook is a duly organized and validly existing corporation under
the laws of the State of Colorado, and upon the filing of required state
documents with the appropriate authorities, is fully authorized to transact
the business in which it is engaged in accordance with the Form 10SB and as
described in the Confidential Documents.
2. The Confidential Documents have been duly authorized, executed and
delivered by Oak Brook and are valid and binding agreements of Oak Brook,
having adequate authorization and having taken all Company action necessary to
authorize the indemnification provisions contained therein; provided, however,
that no opinion is rendered as to the validity or enforceability of such
indemnification provisions insofar as they are or may be
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Mr. William Underhill
May 13, 1999
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held to be violative of public policy (under either state or federal law)
against such types of provisions in the context of the offer, offer for sale,
or sale of securities.
3. The Shares, when issued, will be validly and legally issued under the
laws of the States referenced above. The Shares, when issued, will be fully
paid and non-assessable.
4. The Shares, when issued by Oak Brook, will conform in all material
respects to all statements concerning them contained in the Confidential
Documents.
5. The consummation of the transaction discussed in the Confidential
Documents by Oak Brook will not result in any breach of any of the terms of,
or constitute a default under, any mortgage, loan commitment, indenture, deed
of trust, agreement or other instrument to which Oak Brook is a party and of
which we have knowledge, or violate, insofar as it is directed to Oak
Brook, any order of any court or any federal or state regulatory body or
administrative agency having jurisdiction over it or over its property and of
which we have knowledge.
6. To the best of our knowledge after making reasonable inquiry, there
is not in existence, pending or threatened any action, suit or proceeding to
which Oak Brook is a party, except as set forth in the Confidential Documents,
before any court or governmental agency or body, which might, if decided
adversely, materially affect the subject matter of the Agreement or
the financial condition, business or prospects of Oak Brook.
7. Oak Brook has been duly organized and is a validly existing
corporation formed under the laws of the State of Colorado with full power
and authority to own its properties and conduct its business as described in
the Confidential Documents.
8. The disclosures contained in the Confidential Documents, taken
together with Oak Brook's gift to the offerees, provides access to additional
information sufficient to satisfy the "information requirements" of the
registration exemptions under the Act, as amended, assuming the receipt by
the Investor of a copy of the Confidential Documents.
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Mr. William Underhill
May 13, 1999
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9. The descriptions in the Confidential Documents of statutes and of
contracts and all other documents are accurate and fairly represent the
information required to be shown when exempting a private placement from the
registration provisions of the Act, as amended. Based upon Oak Brook's
Certificate, we are unaware of any legal or governmental proceedings required
to be described in the Confidential Documents which are not described therein
or any contracts or documents of any character required to be described in
the Confidential Documents which are not described as required.
10. Based upon, and assuming the accuracy and verity of, the
representations prepared and maintained by Oak Brook pursuant to the "gifted"
transaction and the executed Stock Certificate in the form included in the
Agreement and accompanying the Confidential Documents, we are of the opinion
that the sophistication of recipients of the Shares, as well as the general
solicitation "threshold" is in compliance with the requirements exempting an
offer and sale from the registration provisions of the Act, as amended.
Nothing herein shall constitute an opinion as to the laws of any state or
jurisdiction other than the laws of the States of Rhode Island, Texas,
Georgia, Arizona, Wisconsin, Massachusetts, Minnesota, Maine, Maryland,
New Jersey, Connecticut, New York, Colorado, Florida and Illinois and
federal law regardless of the selected choice of law stated in any document
discussed in this letter.
Our opinions are limited to the specific opinions expressed above. No
other opinions are intended to be inferred therefrom. This opinion is
addressed to and is for the benefit solely of the Staff and the Company, and
no other person or persons shall be furnished a copy of this opinion
or are entitled to rely on the contents herein without our express written
consent; provided, however, that the Board of Directors of the Company shall
be entitled to rely on this opinion. In the event that any of the facts are
different from those which have been furnished to us and upon which we have
relied, the conclusions as set forth above cannot be relied upon.
Page 22
Mr. William Underhill
May 13, 1999
______________________
The opinions contained in this letter are rendered as of the date hereof,
and we undertake no, and hereby disclaim any, obligation to advise you of any
changes in or any new developments which might affect any matters or opinions
set forth herein.
Very truly yours,
/S/ Mark T. Thatcher
Mark T. Thatcher, Esq.
MTT/jet
4(2)
cc: Gerard Werner, Esq.
Dennis W. Bersch, CPA
James D. Prescott, CPA
<PAGE>
Exhibit 1
In General
Given the existence of a security, what constitutes an "offer" or
"sale" of that security is of paramount importance. There must be
an "offer" or "sale" of a security for a transaction to come
within the scope of the blue sky laws. The "offer" or "sale" of
a security must be within a state for that particular state's
securities laws to apply.
An "offer" not followed by a "sale" has consequences under the
blue sky laws. For instance, criminal liability under the blue
sky laws may attach to an "offer" of a security in violation of
the law as well as to a completed sale in violation of the law.
Furthermore, fraud in connection with the "offer" of a security
will subject the party committing the fraud to many of the same
potential consequences (i.e., civil injunction, criminal
prosecution) as fraud in connection with the completed sale of a
security. Also, offers to sell securities for which a
registration statement has been filed (usually with the SEC as
well as with the state) may be exempt transactions during the
waiting period before the registration statement becomes
effective. However, civil liability will not attach to an offer
only, because there is no injury upon which civil liability may
be based.
The terms "offer" and "sale" are broadly defined in the Uniform
Securities Act. Consequently, the definition of these terms in
common law contracts does not apply for blue sky law purposes.
Statutory Definitions of "Offer" and "Sale"
The Uniform Securities Act definition of "sale" has been adopted
by a number of states. The transfer of the security, or security
interest, must be "for value." Outright gifts of securities are
not sales within the meaning of the Uniform Act definition and
are therefore excluded from the scope of the blue sky laws. Even
states that have adopted "sale" definitions different from the
Uniform Act provision are in accord with this principle.
<PAGE>
To have their securities acts cover both sales and offers, a
number of states have broadened their definition of "sale" to
include offers or offers to sell. The Uniform Securities Act and
jurisdictions following its example have rejected this approach
and instead contain a separate definition of "offer."
Again, the definition does not apply to offers of absolute gifts
of securities. Further, the provision does not apply to buyers of
securities. Hence, if a person in the market to buy securities
makes an offer to buy, it is not an "offer" within the definition
unless the offer has been solicited by the seller. This principle
is also applicable in states not adopting the Uniform Act
definition. That the offer is made by the purchaser does not
exclude the transaction from being a sale once the sale is
consummated or a contract to sell is executed.
In certain cases, it has been held that transfers not involving
consideration were not sales. What type of consideration will
bring a transaction within the definition of a sale of securities
has been addressed by the blue sky statutes: every state defining
"offer" or "sale" requires that the sale or offer be in exchange
for some value. In the early days of blue sky regulation it was
contended in one state that an exchange or trade of securities
constituted a barter and was not a sale encompassed by the
statute. The view was rejected and the decision that security
trades were sales was followed in other states. Today, a number
of states specifically include exchanges of securities as sales
in the statutes, although it is unlikely that the omission of
such phrasing (as in the Uniform Securities Act) would remove
barters from the scope of the blue sky laws.
Statutory Inclusions Within the Definitions of "Offer" and "Sale"
In addition to the basic definition of "offer" and "sale" the
blue sky laws of most jurisdictions also define certain types of
dispositions of securities (such as securities given as bonuses,
gifts of assessable stock, warrants, subscriptions, and
convertible securities) as an offer and sale. Many of the
statutory inclusions within the definition of "offer" and "sale,"
such as a security given as a bonus, as well as many of the
statutory exclusions from those definitions, such as stock
dividends, result from a determination that the disposition has
been made either for value or not for value.
<PAGE>
Gifts of Assessable Stock
When a corporation has the power to have its stockholders pay
additional sums for their stock, the stock is referred to as
"assessable." The word "assessable" is used in connection with
corporate stock to mean that the corporation has the right to
demand that shareholders pay additional amounts on fully paid
stock. Assessments may be enforced by suits against the
stockholder or by forced sale of the stock. Unpaid stock subject
to call is sometimes said to be subject to assessment.
Under the provisions of the Uniform Securities Act and the
statutes of a number of states, gifts of assessable stock are
transactions involving an offer and sale. This is entirely
consistent with the statutory definitions of "offer" and "sale,"
since stock recipients must pay value to retain their securities.
Offer of Rescission
Pennsylvania has a unique provision that includes an offer of
rescission within its definition of offer and sale. A rescission
offer may be made by a buyer or seller as a defense against a
civil action for violation of the registration or antifraud
provisions. The offer must be sent before suit is commenced and
(1) state the respect in which liability arises; (2) advise the
potential plaintiff of his rights; (3) state the terms of the
rescission and restitution offer regarding the security and the
consideration; and (4) provide that the offer may be accepted
within thirty days or such shorter period as the Commission may
prescribe.
Rescission offers are processed in the same way as offerings to
be registered by qualification; there are no exemptions from
registration for rescission offers.
Section 2 [15 U.S.C. § 77b] Definitions
(a) Definitions
When used in this subchapter, unless the context otherwise
requires--
<PAGE>
(1) The term "security" means any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral
rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof),
or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to foreign currency, or,
in general, any interest or instrument commonly known as a
"security", or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of,
or warrant or right to subscribe to or purchase, any of the
foregoing.
(2) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political
subdivision thereof. As used in this paragraph the term "trust"
shall include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(3) The term "sale" or "sell" shall include every contract of
sale or disposition of a security or interest in a security, for
value. The term "offer to sell", "offer for sale", or "offer"
shall include every attempt or offer to dispose of, or
solicitation of an offer to buy, a security or interest in a
security, for value. The terms defined in this paragraph and the
term "offer to buy" as used in subsection (c) of section 77e of
this title shall not include preliminary negotiations or
agreements between an issuer (or any person directly or
indirectly controlling or controlled by an issuer, or under
direct or indirect common control with an issuer) and any
underwriter or among underwriters who are or are to be in privity
of contract with an issuer (or any person directly or indirectly
controlling or controlled by an issuer, or under direct or
indirect common control with an issuer). Any security given or
delivered with, or as a bonus on account of, any purchase of
securities or any other thing, shall be conclusively presumed to
constitute a part of the subject of such purchase and to have
<PAGE>
been offered and sold for value. The issue or transfer of a right
or privilege, when originally issued or transferred with a
security, giving the holder of such security the right to convert
such security into another security of the same issuer or of
another person, or giving a right to subscribe to another
security of the same issuer or of another person, which right
cannot be exercised until some future date, shall not be deemed
to be an offer or sale of such other security; but the issue or
transfer of such other security upon the exercise of such right
of conversion or subscription shall be deemed a sale of such
other security.
(4) The term "issuer" means every person who issues or proposes
to issue any security; except that with respect to certificates
of deposit, voting-trust certificates, or collateral-trust
certificates, or with respect to certificates of interest or
shares in an unincorporated investment trust not having a board
of directors (or persons performing similar functions) or of the
fixed, restricted management, or unit type, the term "issuer"
means the person or persons performing the acts and assuming the
duties of depositor or manager pursuant to the provisions of the
trust or other agreement or instrument under which such
securities are issued; except that in the case of an
unincorporated association which provides by its articles for
limited liability of any or all of its members, or in the case of
a trust, committee, or other legal entity, the trustees or
members thereof shall not be individually liable as issuers of
any security issued by the association, trust, committee, or
other legal entity; except that with respect to equipment-trust
certificates or like securities, the term "issuer" means the
person by whom the equipment or property is or is to be used; and
except that with respect to fractional undivided interests in
oil, gas, or other mineral rights, the term "issuer" means the
owner of any such right or of any interest in such right (whether
whole or fractional) who creates fractional interests therein for
the purpose of public offering.
(5) The term "Commission" means the Securities and Exchange
Commission.
(6) The term "Territory" means Puerto Rico, the Virgin Islands,
and the insular possessions of the United States.
<PAGE>
(7) The term "interstate commerce" means trade or commerce in
securities or any transportation or communication relating
thereto among the several States or between the District of
Columbia or any Territory of the United States and any State or
other Territory, or between any foreign country and any State,
Territory, or the District of Columbia, or within the District of
Columbia.
(8) The term "registration statement" means the statement
provided for in section 77f of this title, and includes any
amendment thereto and any report, document, or memorandum filed
as part of such statement or incorporated therein by reference.
(9) The term "write" or "written" shall include printed,
lithographed, or any means of graphic communication.
(10) The term "prospectus" means any prospectus, notice,
circular, advertisement, letter, or communication, written or by
radio or television, which offers any security for sale or
confirms the sale of any security; except that (a) a
communication sent or given after the effective date of the
registration statement (other than a prospectus permitted under
subsection (b) of section 77j of this title) shall not be deemed
a prospectus if it is proved that prior to or at the same time
with such communication a written prospectus meeting the
requirements of subsection (a) of section 77j of this title at
the time of 1 such communication was sent or given to the person
to whom the communication was made, and (b) a notice, circular,
advertisement, letter, or communication in respect of a security
shall not be deemed to be a prospectus if it states from whom a
written prospectus meeting the requirements of section 77j of
this title may be obtained and, in addition, does no more than
identify the security, state the price thereof, state by whom
orders will be executed, and contain such other information as
the Commission, by rules or regulations deemed necessary or
appropriate in the public interest and for the protection of
investors, and subject to such terms and conditions as may be
prescribed therein, may permit.
(11) The term "underwriter" means any person who has purchased
from an issuer with a view to, or offers or sells for an issuer
in connection with, the distribution of any security, or
participates or has a direct or indirect participation in any
<PAGE>
such undertaking, or participates or has a participation in the
direct or indirect underwriting of any such undertaking; but such
term shall not include a person whose interest is limited to a
commission from an underwriter or dealer not in excess of the
usual and customary distributors' or sellers' commission. As
used in this paragraph the term "issuer" shall include, in
addition to an issuer, any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer.
(12) The term "dealer" means any person who engages either for
all or part of his time, directly or indirectly, as agent,
broker, or principal, in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by
another person.
(13) The term "insurance company" means a company which is
organized as an insurance company, whose primary and predominant
business activity is the writing of insurance or the reinsuring
of risks underwritten by insurance companies, and which is
subject to supervision by the insurance commissioner, or a
similar official or agency, of a State or territory or the
District of Columbia; or any receiver or similar official or any
liquidating agent for such company, in his capacity as such.
(14) The term "separate account" means an account established and
maintained by an insurance company pursuant to the laws of any
State or territory of the United States, the District of
Columbia, or of Canada or any province thereof, under which
income, gains and losses, whether or not realized, from assets
allocated to such account, are, in accordance with the applicable
contract, credited to or charged against such account without
regard to other income, gains, or losses of the insurance
company.
(15) The term "accredited investor" shall mean--
(i) a bank as defined in section 77c(a)(2) of this title whether
acting in its individual or fiduciary capacity; an insurance
company as defined in paragraph (13); an investment company
registered under the Investment Company Act of 1940 [15 U.S.C.
80a-1 et seq.] or a business development company as defined in
section 2(a)(48) of that Act [15 U.S.C. 80a-2(a)(48)]; a Small
<PAGE>
Business Investment Company licensed by the Small Business
Administration; or an employee benefit plan, including an
individual retirement account, which is subject to the provisions
of the Employee Retirement Income Security Act of 1974 [29 U.S.C.
1001 et seq.], if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act [29 U.S.C.
1002(21)], which is either a bank, insurance company, or
registered investment adviser; or
(ii) any person who, on the basis of such factors as financial
sophistication, net worth, knowledge, and experience in financial
matters, or amount of assets under management qualifies as an
accredited investor under rules and regulations which the
Commission shall prescribe.
(b) Consideration of promotion of efficiency, competition and
capital formation. Whenever pursuant to this title the
Commission is engaged in rulemaking and is required to consider
or determine whether an action is necessary or appropriate in the
public interest, the Commission shall also consider, in addition
to the protection of investors, whether the action will promote
efficiency, competition, and capital formation.
OAK BROOK CAPITAL I, INC.
THIS PRE-INCORPORATION CONSULTATION AND
SUBSCRIPTION AGREEMENT ("Agreement") is made and entered into
this 15th day of May, 1998, by and between Gerard Werner and
Mark T. Thatcher.
WHEREAS, the parties desire to form a corporation pursuant to
the laws of the State of Colorado, under the name of Oak Brook Capital
I, Inc. (the "Company"), to engage, in the business of acting as a
capital market access vehicle by registering its securities with the U.S.
Securities and Exchange Commission under the Securities Exchange Act
of 1934, and thereafter seeking to acquire one or more existing businesses
through merger or acquisition; and
WHEREAS, the parties desire to subscribe for the acquisition of
stock to be issued upon formation of the Company, and have mutually
agreed that the consideration for the issuance of such shares shall be pre-
incorporation services and assistance to the Company relating to its
formation, determination of an appropriate capital structure, and in
developing its business plan.
NOW, THEREFORE, in consideration of the foregoing, and in
consideration of the mutual covenants and promises hereinafter set forth,
it is agreed as follows:
1. Agreement to Form Corporation. The undersigned parties hereby
agree to form a corporation pursuant to the laws of the State of Colorado,
under the name of OAK BROOK CAPITAL I, INC. (the "Company"). The
corporation shall be formed for the purpose of acting as a capital market
access vehicle by registering its securities with the U.S. Securities and
Exchange Commission under the Securities Exchange Act of 1934, and
thereafter seeking to acquire one or more existing businesses through
merger or acquisition.
2. Preincorporation Services. By execution of this Agreement, each of
the undersigned hereby agrees to provide such services as may be
necessary or appropriate prior to the incorporation of the Company, for
purposes of determining the feasibility of, and completing, the Company's
business plan, including, but not limited to, determining the Company's
capital needs, establishing an appropriate capital structure, investigating
the likelihood of finding a suitable merger or acquisition target, reviewing
applicable legal and regulatory restrictions imposed by the Securities and
Exchange Commission, the National Association of Securities Dealers,
and other governmental or regulatory organizations, and the like.
3. Agreement to Serve as Incorporator. By execution of this Agreement,
Mark T. Thatcher hereby agrees to serve as incorporator of the Company and
to provide services in conjunction with its incorporation and in
conjunction with the preparation of all necessary organizational
documents, including, but not limited to, articles of incorporation, bylaws,
subscription agreements, organizational meeting minutes, and the like.
4. Agreement to Serve as Officers and Directors. By execution of this
Agreement, Mark T. Thatcher and Gerard Werner hereby agree to serve as
officers and directors of the Company following its incorporation, and in
that capacity, to assume responsibility for implementation of the
Company's business plan.
5. Consideration. As consideration for the services described herein,
upon formation of the Company, the undersigned shall cause the
Company to issue and deliver to each of the parties hereto, and each of
the parties hereto hereby agrees to accept the following as full
consideration for the services rendered:
<TABLE>
<CAPTION>
Description of
Name Securities Value
<S> <C> <C>
Mark T. Thatcher 552,600 Units<F1> $30,000<F2>
Gerard Werner 552,600 Units $30,000
Total 1,000,000 Units $60,000.00
<FN>
<F1>Each unit consists of one share of Common Stock.
<F2>The agreed upon fair market value of the Units for purposes of this
Agreement is $0.0038 per Unit. Accordingly, upon issuance such Units
shall be valued on the books of the Company at $0.0038 per Unit.
</FN>
</TABLE>
6. Exemption from Registration. The parties hereto intend and agree that
this Agreement shall serve as a written compensatory contract which,
upon formation of the Company, satisfies the requirements of Rule 701
adopted by the Securities and Exchange Commission under the Securities
Act of 1933, as amended. Accordingly, it is the intent of the parties that
the exemption from registration provided by Rule 701 shall be applicable
to the issuance of the Units.
7. Representations and Acknowledgments. The parties hereto make the
following representations and acknowledgments:
(a) Neither the Units, nor the underlying securities shall, upon
issuance, have been registered under the Securities Act of 1933, as
amended (the "Act"), or under any State Blue Sky or securities laws and
only the Company can register such securities under the Act or under
applicable State Blue Sky or securities laws.
(b) Upon issuance, the Units and the underlying securities shall
constitute "restricted securities" as that term is defined in Rule 144 under
the Act.
(c) Following issuance, neither the Units nor the underlying securities
may be sold or transferred for value without registration under the
Securities Act of 1933, as amended, or under applicable State blue sky or
securities laws, or in the absence of an opinion of counsel acceptable to
the Company that such registration is not required under such Act or
Acts, and it is not anticipated that the Company will, at any time, seek to
register the Units or the underlying securities under the Act or under any
applicable state blue sky or securities laws.
(d) Following its formation and the issuance of the Units, the
Company may, from time to time, make stop transfer notations in the
Company's records to assure compliance with the Act and any applicable
State blue sky or securities laws.
(e) In accordance with the foregoing restrictions, the parties hereby
agree that a legend substantially to the effect of the following may be
placed upon all certificates representing the shares and the warrants
comprising the Units:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER
OTHER SECURITIES LAWS. SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (i)
THEY SHALL HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE
SECURITIES ACT, OR (ii) THE COMPANY SHALL HAVE BEEN
FURNISHED WITH AN OPINION OF COUNSEL, SATISFACTORY
TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER ANY OF SUCH ACTS."
(f) The parties hereto are acquiring the Units upon issuance solely for
their own account and not on behalf of any other person.
(g) The parties hereto are acquiring the Units upon issuance for
investment purposes and not with the present intent of reselling or
otherwise distributing the Units or the underlying securities.
(h) By execution of this Agreement, the parties hereto agree to
execute and deliver to the Company, following its formation, any
document, or do any other act or thing, which the Company may
reasonably request in connection with the acquisition of the Units.
8. Assignment. None of the parties hereto, or their heirs, executors,
representatives or assigns shall sell, assign, create a security interest in,
pledge, or otherwise transfer or encumber the Units to be issued
hereunder, or the underlying securities, without the express prior written
consent of each of the other parties hereto.
9. Colorado Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Colorado.
10. Binding Effect. This Agreement shall inure to the benefit of, and be
binding upon the parties, and their respective heirs, executors,
representatives and permitted assigns.
11. Entire Agreement. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There
are no other understandings or agreements between the parties.
IN WITNESS WHEREOF, this Preincorporation Consultation and
Subscription Agreement Regarding OAK BROOK CAPITAL I, INC., has been
executed as of the day and year first above written.
/s/Mark T. Thatcher
/s/Gerard Werner
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Form
10SB12G Registration Statement filed pursuant to Section 12 of the
Securities Exchange Act of 1934 by OAK BROOK CAPITAL I, INC.
MARK T. THATCHER, P.C.
/s/ Mark T. Thatcher
By:___________________
MARK T. THATCHER, ESQ.
Newport, RI
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,200
<PP&E> 0
<DEPRECIATION> (525)
<TOTAL-ASSETS> 3,675
<CURRENT-LIABILITIES> 7,725
<BONDS> 0
0
0
<COMMON> 4,200
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,675
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,725
<OTHER-EXPENSES> 525
<LOSS-PROVISION> (8,250)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,250)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Oak Brook Capital I, Inc. ("Oak Brook" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe
harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Oak Brook. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Oak Brook undertakes no obligation
to update or revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.