U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
WELLSPRING INVESTMENTS, INC.
(Name of small business issuer in its charter)
Delaware 33-0835337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
(Address of principal executive offices) (Zip code)
(949) 719-1977
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
(None)
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001
Title of Class
<PAGE>
TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of
Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial
Owners and Management.
Item 5 Directors, Executive Officers, Promoters and
Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder
Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
The Company was organized under the Laws of the State of Delaware, on October
24, 1994, for the primary purpose of engaging in a merger with, or
acquisition of one or a small number of private firms. Such firms are
expected to be private corporations, partnerships or sole proprietorships.
Since inception, the primary activity of the Company has been directed
towards organizational efforts and obtaining initial financing. The Company
has not engaged in preliminary efforts to identify possible merger or
acquisition candidates and has no market studies available to it. The
Company has no business opportunities under contemplation for acquisitions.
Business Objectives
The Company plans to seek one or more potential businesses that Management
believes warrant the Company's involvement. As a result of its limited
resources, the number of potential businesses available will be extremely
limited. The Company will not restrict its search to any particular
industry. Nevertheless, Management does not intend to become involved with a
company that is an "investment company" under the Investment Company Act of
1940; with a company that is a broker or dealer of investment securities or
commodities; or with any company in which the officers, directors or
shareholders of the target company are officers or directors of the Company.
These business objectives are extremely general and are not intended to be
restrictive upon the discretion of Management. Except for the general
limitations contained above, management has not developed and does not intend to
develop specific criteria to be followed in the search for and selection of a
business acquisition. Investors will therefore have extremely limited
information as to Management's specific intentions and investors will be
unable to determine even the industries which Management might consider.
The target company may be (I) in its preliminary or developmental stage, (ii) a
"financially troubled" business or (iii) a going concern. It is impossible
to determine the capital requirements of the target business or whether such
business may require additional capital. Some target companies may seek to
establish a public trading market for their securities.
The analysis of potential business endeavors will be undertaken by or under
the supervision of Management. Management is comprised of individuals of
varying business experience, and Management will rely on its own collective
business judgment in evaluating businesses that the Company may acquire or
participate. See "Item 5 - Directors, Executive Officers, Promoters and
Control Persons." Locating and investigating specific business proposals may
take an extended period of time. If a business is located, the negotiation,
drafting, and execution of relevant agreements, disclosure documents and
other instruments will require substantial time, effort, and expense. The
time periods of these subsequent steps cannot be determined. If a specific
business endeavor cannot be located the costs incurred in the investigation
are not likely to be recovered. The failure to consummate an attempted
transaction would likely result in the loss of the costs incurred.
Applicable regulations require the reporting of certain information regarding
businesses acquired, including the filing of certified financial statements
of such companies. Thus, if during the pendency of this registration
statement, the Company determines that a material acquisition is probable,
this document will be appropriately revised, including the addition of
audited financial statements of the business to be acquired. Consequently, a
target company that does not have, or cannot obtain, certified financial
statements will not likely be considered by Management.
Shareholders of the Company are relying totally upon the business judgment of
Management. Shareholders will not likely be consulted in connection with any
acquisition engaged in by the Company, unless required by law.
Competition
Inherent difficulties exist for any new company seeking to enter an
established field. The Company will remain an insignificant participant
among the firms which engage in mergers with and acquisitions of privately
financed entities. There are many established venture capital and financial
concerns which have significantly greater financial and personnel resources,
technical expertise and experience than the Company. The Company is also
subject to
<PAGE>
competition from numerous other recently formed public and private
entities with business objective similar to those of the Company.
Regulation
The Investment Company Act of 1940 ("Investment Act") defines an investment
company as an issuer which is or holds itself out as being engaged primarily
in the business of investing, reinvesting or trading of securities. The
Company does not intend to engage primarily in the activities of purchasing,
trading or selling securities and intends to conduct its activities so as to
avoid being classified as an "investment company" under the Investment Act. The
Company could be expected to incur significant registration and compliance
costs if required under the Investment Act, and the regulations promulgated
thereunder.
Section 3(a) of the Investment Act provides exclusions from its application
for companies which are not primarily engaged in the business of investing,
reinvesting or trading in "investment securities". Management intends to
implement its business plan in a manner which will result in the availability
of this exception from the definition of "investment company". Accordingly,
Management will continue to review the Company's activities from time to time
with a view toward reducing the likelihood that the Company could be
classified as an "investment company".
The Company's plan of business may involve changes in its capital structure,
management, control, and business, especially if it consummates its plan to
acquire or merge with another entity. Each of these areas are regulated by
the Investment Act, which regulations have the purported purpose of
protecting purchasers of investment company securities. Since the Company
will not register as an investment company, its shareholders will not be
afforded these purported protections.
Even if the Company restricts its activities as described above, it is
possible that it may be classified as an inadvertent investment company.
This would be most likely to occur if significant delays are experienced in
locating a business opportunity.
The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from
application of the Investment Act, including an exception which allows an
entity a one-time option during any three (3) year period to claim an
exemption as a "transient" investment company. The necessity of asserting
any such contention, or making any other claim of exemption, could be time
consuming, costly or even prohibitive, given the Company's limited resources.
The Company intends to structure a merger or acquisition in such a manner as
to minimize Federal and state tax consequences to the Company and its
shareholders, and to any target company and its shareholders. Under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"), a
statutory merger or consolidation is an exempt transaction and may be tax
free to the companies and their shareholders if effected in accordance with
state law. A tax free reorganization may require the Company to issue a
substantial portion of its securities in exchange for the securities or
assets of a target firm. Consequently, a tax free reorganization may result
in substantial dilution of the ownership interests of the present
shareholders of the Company. Even if a merger or consolidation is undertaken
in accordance with the Code, there is no assurance that tax regulations will
not change and result in the Company or its shareholders incurring a
significant tax liability.
Employees
The Company presently has no employees other than its officers. Each of the
officers has employment and/or other business associations elsewhere. None
of the officers has allocated more than a minimal amount of time to the
affairs of the Company.
Facilities
Since its inception, the Company has maintained its offices rent free at the
office of its President, M. Richard Cutler, 610 Newport Center Drive, Suite
800, Newport Beach, CA 92660. Mr. Cutler has agreed that the Company may
remain for at least one year or until consummation of a Business Combination,
whichever shall first occur. The Company will utilize a minimal amount of
space.
<PAGE>
Year 2000 Compliance
As the Company does not have any material assets nor any computer systems, it
has not done an evaluation of its Year 2000 compliance. Management does not
anticipate that there will be any consequences, material or immaterial,
negative or positive, to the Company as a result of the Year 2000 computer
problem. As a result of a Business Combination or merger, however, the
Company may inherit computer systems that are not Year 2000 compliant, or
enter into contracts or business dealings with suppliers, contractors, or
others that are not Year 2000 compliant. Management cannot anticipate the
impact of such future occurrences. Failure to satisfactorily address the
Year 2000 issue could have a material adverse effect on the Company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Management believes that the Company has minimal cash requirements during the
next 12 months. The Company does not anticipate any significant changes in
the number of its employees, does not plan to engage in research and
development and does not plan to purchase or sell plant or equipment.
The Company expects to concentrate primarily on the identification and
evaluation of prospective merger or acquisition "target" entities including
private corporations, partnerships or sole proprietorships. Management believes
that target companies will be limited to privately financed companies and
expects to be precluded from other public companies.
Management intends to identify prospects through present associations such as
its officers and directors, attorneys, and similar persons. The Company does
not anticipate engaging the services of professional firms that specialize
in business acquisitions and reorganizations.
Management does not intend to hire independent consultants or advisors.
Management expects to conduct a preliminary evaluation of target companies.
Such preliminary evaluations are not expected to be an in-depth evaluation of
the target company's operations. Nevertheless, this evaluation should
provide a sufficient overview to eliminate many prospects from further
consideration.
The specific method or form by which a Business Combination may be structured
cannot be determined at this time. It could involve a merger or
consolidation; merger or consolidation of the acquired business into a
subsidiary of the Company; an exchange of shares of stock, with or without
payment in cash; or an acquisition of assets.
A merger will likely be made through the exchange of the Company's stock which
has been authorized but unissued (and perhaps the balance of the Company's
assets) for stock of the target company. The Company has not established a
specific minimum level of earnings or assets which a target company must
satisfy. Moreover, Management may identify a target company which is
generating losses or which has negative equity, which may have a material
adverse effect on the price of the Company's common shares.
Negotiations with target company management can be expected to focus on the
percentage of the Company which target company shareholders would acquire in
exchange for their shareholdings in the target company. The Company's
shareholders will, in all likelihood, hold no more than a relatively small
percentage of the common shares of the Company following any merger or
acquisition. This percentage may be subject to even further reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilative effect on the percentage of shares held by the Company's
then shareholders, including purchasers in this Offering.
The exact terms and format of any acquisition will be determined by the
Company's Management and, unless required by law, the Company's shareholders
will not have the opportunity to vote on the acquisition. The Company may be
required to file or maintain a registration statement to register any
securities to be issued in connection with any acquisition.
<PAGE>
There are no plans, proposals, arrangements or understandings with respect to
the sale of additional securities to affiliates or others following the
registered distribution but prior to the location of a business opportunity.
If the Company does not consummate a transaction after expenditure of time and
funds in investigation and analysis of a business opportunity, the losses
incurred may adversely affect the Company's ability to carry out its business
objectives. It is also possible that the Company may expend all of its cash
without ever successfully acquiring any business opportunity.
Some target companies may not need additional capital but may desire to merge
with the Company for purpose of establishing a public trading market for its
shares. In such event, Management of the target company may desire to avoid
the delays, expenses, and other perceived adverse consequences of undertaking a
public offering. Such a merger, in all likelihood, would involve the exchange
of the Company's stock, including the authorized but unissued stock with the
outstanding shares of the target company.
As the Company does not have any material assets nor any computer systems,
it has not done an evaluation of its Year 2000 compliance. Management
does not anticipate that there will be any consequences, material or
immaterial, negative or positive, to the Company as a result of the Year 2000
computer problem. As a result of a Business Combination or merger, however,
the Company may inherit computer systems that are not year 2000 compliant,
or enter into contracts or business dealings with suppliers, contractors,
or others that are not Year 2000 compliant. Management cannot anticipate
the impact of such future occurrences. Failure to satisfactorily address
the year 2000 issue could have a material adverse effect on the Company.
ITEM 3 - DESCRIPTION OF PROPERTY
Since its inception, the Company has maintained its offices rent free at the
office of its President, M. Richard Cutler, 610 Newport Center Drive, Suite
800, Newport Beach, CA 92660. Mr. Cutler has agreed that the Company may
remain for at least one year or until consummation of a Business Combination,
whichever shall first occur. The Company will utilize a minimal amount of
space.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 22, 1999, certain information
with respect to the Company's equity securities owned of record or
beneficially by (I) each Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company's outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.
<TABLE>
Title Percent of
of Class Name and Address of Beneficial Owner Common Stock Outstanding
<S> <C> <C> <C>
Common Stock M. Richard Cutler 790,000 79.0%
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
Common Stock Brian A. Lebrecht 190,150 19.0%
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660
All Directors and Officers as a Group (2) 980,150 98.0%
_____________________
</TABLE>
<TABLE>
Title Series A Percent of
of Class Name and Address of Preferred Stock Outstanding
Beneficial Owner
<S> <C> <C> <C>
Series A Pfd Saalib Limited 5,000 100%
East Wing 2nd Level
Hadfield House
Library Street
Gibralter
_____________________
</TABLE>
<PAGE>
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power
with respect to securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed outstanding
for purposes of computing the percentage of the person holding such options or
warrants, but are not deemed outstanding for purposes of computing the
percentage of any other person.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current directors and
executive officers of the Company, the principal offices and positions with
the Company held by each person and the date such person became a director or
executive officer of the Company. The executive officers of the Company are
elected annually by the Board of Directors. The directors serve one year
terms and until their successors are elected. The executive officers
serve terms of one year or until their death, resignation or removal by the
Board of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.
The directors and executive officers of the Company are as follows:
<TABLE>
Name Age Positions
<S> <C> <C>
M. Richard Cutler 41 President, Chief Executive Officer, Secretary,
Director (1994)
Brian A. Lebrecht 29 Vice President (1998)
</TABLE>
M. Richard Cutler, 40, is President, Chief Executive Officer, Secretary and a
Director of the Company. Mr. Cutler founded the Law Offices of M. Richard
Cutler in August 1996. Mr. Cutler has practiced in the general corporate and
securities area since his graduation from law school. Mr. Cutler is a
graduate of Brigham Young University (B.A., magna cum laude, 1981); and
Columbia University School of Law (J.D. 1984). While at Columbia, Mr. Cutler
was honored as a Harlan Fiske Stone Scholar, was Managing Editor of the
Columbia Journal of Law and Social Problems, received a Recognition of
Achievement with Honors in Foreign and International Law, Parker School of
Foreign and Comparative Law and was honored for best senior writing for "United
States v. Ross: A Solution to the Automobile Container Dilemma?" published in
the Columbia Journal of Law & Social Problems in 1983. Mr. Cutler was
admitted to the State Bar of Texas in 1984 and the State Bar of California in
1990. After law school, Mr. Cutler joined the national law firm of Jones,
Day, Reavis & Pogue where he practiced in the corporate, securities and
mergers and acquisitions departments. Mr. Cutler subsequently spent five years
in the corporate and securities department of Akin, Gump, Strauss, Hauer &
Feld, a Dallas law firm. Subsequently, Mr. Cutler was with the Los Angeles
office of Kaye, Scholer, Fierman, Hayes & Handler, a New York based law firm,
where he continued his general business and securities practice. In 1991,
Mr. Cutler founded the law firm of Horwitz, Cutler & Beam, where he practiced
corporate and securities law for five years. Mr. Cutler has been admitted to
the U.S. Federal District Courts, Central and Northern Districts of
California, as well as the U.S. Court of Appeals, Ninth Circuit. Mr. Cutler
is the author of "Comparative Conflicts of Law: Effectiveness of Contractual
Choice of Forum," published in the Texas International Law Journal in 1985.
Mr. Cutler also serves the Company as corporate and securities counsel and, as
such, is expected to be paid legal fees from the proceeds of this Offering.
See "Certain Transactions."
Brian A. Lebrecht, 29, is Vice President of the Company. Mr. Lebrecht joined
the Law Offices of M. Richard Cutler in December 1996, and assists clients
primarily in the areas of corporate finance and mergers and acquisitions,
including private placements, public and private offerings, Securities and
Exchange Commission and Blue Sky compliance and reporting requirements, asset
and stock purchases, and general corporate practice. His clientele includes
emerging growth companies in the areas of health care, finance, clothing and
apparel, Internet commerce, retail, gas and service stations, giftwares,
manufacturers representatives, mail order, high-technology manufacturing,
<PAGE>
and a wide array of service industries. He is an adjunct professor of Business
Law at the University of California, San Diego Extension, is active with the
Service Corps of Retired Executives (SCORE) and the Greater San Diego Chamber
of Commerce Small Business Development Center (SBDC), and is a licensed
California Real Estate Broker. Mr. Lebrecht is a graduate of the University
of San Diego with a Bachelors in Business Administration in 1991, and a J.D.
and M.B.A. in 1995, and is licensed to practice law in the State of California
and the United Stated District Court for the Southern District of California.
Immediately prior to joining the Law Offices of M. Richard Cutler,
Brian was the proprietor of The Law Offices of Brian A. Lebrecht in San Diego,
California, focusing on business transactions, formations, and acquisitions
as well as estate planning. His past experiences include a position in the
legal department of the Federal Home Loan Mortgage Corporation (Freddie Mac) in
Washington, D.C., a position within the General Counsel's office of a major
Southern California construction supplier, and representation of consumer
interests before the California State Contractors License Board and the
California State Banking Department, culminating in published works in the
California Regulatory Law Reporter.
ITEM 6 - EXECUTIVE COMPENSATION
In 1994, M. Richard Cutler was issued 1,000,000 shares of common stock for
services rendered. Otherwise, no remuneration has been paid to date to the
officers or directors of the Company in connection with their capacities
as such. The officers will be reimbursed for their expenses incurred on behalf
of the Company.
The Company's President, M. Richard Cutler, also serves as corporate and
securities counsel to the Company. Mr. Cutler was paid a legal fee of
$10,000.00 for preparation and filing of this registration statement. Mr.
Cutler was also paid a legal fee of $10,000.00 for the preparation and filing
of the Company's prior private placement. See "Item 7 - Certain Relationships
and Related Transactions." Mr. Cutler may also charge the Company fees for
subsequent legal work performed. To the extent that additional filings,
contracts, letters of intent and related legal work is performed by Mr.
Cutler, he will be paid from other funds available to the Company. Any such
fees will be on a basis commensurate with fees charged by Mr. Cutler to
non-affiliated clients, at prevailing rates believed to be substantially
lower than or similar to those charged by licensed attorneys for similar legal
services.
Since the officers and directors are also the current shareholders they may be
expected to receive financial gain if a target company makes arrangements to
acquire a sufficient amount of stock to obtain control of the Company. Since
Management cannot now predict the form or structure of any possible Business
Combination, investors should be aware that additional compensation with
Management could be negotiated in connection with a Business Combination.
These arrangements could include consulting agreements, membership on Boards or
committees, legal services or other arrangements. Consequently, there can be
no present prediction of all compensation that might ultimately be paid to
Management.
Summary Compensation Table
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities during each of the prior three (3) fiscal
years. Other than as set forth herein, no executive officer's salary and bonus
exceeded $100,000 in any of the applicable years. The following information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid or
deferred.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards Options Payouts Compensation
Principal Year ($) ($) ($) ($) SARs(#) ($) ($)
Position
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M. Richard Cutler 1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
Brian A. Lebrecht 1998 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of Securities Percent of Total
Underlying Options/SAR's
Options/SAR's Granted to Employees Exercise of Base Price
Name Granted (#) In Fiscal Year ($/Sh) Expiration Date
<S> <C> <C> <C> <C>
M. Richard Cutler -0- -0- N/A N/A
Brian A. Lebrecht -0- -0- N/A N/A
</TABLE>
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was organized in Delaware on October 24, 1994, with officers,
directors and founders subscribing for 1,000,000 shares at a par value of
$0.0001 per share purchased in exchange for services, of which all shares were
purchased by Management. Certain of these shares were subsequently
transferred to other shareholders. See "Item 4 - Security Ownership of
Certain Beneficial Owners and Management." The Company currently occupies
offices on a rent free basis at the office of the Company's President, M.
Richard Cutler. Mr. Cutler is also the Company's director and a shareholder.
The Company has retained Mr. Cutler to serve as corporate and securities
counsel. Mr. Cutler has been paid an attorney's fee of $10,000.00 for the
preparation and filing of this registration statement. Mr. Cutler was also
paid a legal fee of $10,000.00 for the preparation and filing of the Company's
initial private placement referenced immediately below. Mr. Cutler may also
charge for legal services rendered after the effective date of this Offering.
Mr. Cutler's fees are believed to be typical of rates charged by independent
counsel for similar legal services.
In August 1998 the Company undertook a private placement of its securities,
consisting of 5,000 Units, to one accredited investor. Each Unit consisted
of one (1) share of Series A Convertible Preferred Stock and ten (10)
warrants to purchase one (1) share of Common Stock at an exercise price of
$5.00 per share. See "Item 8 - Description of Securities." The offering was
completed in accordance with the requirements of Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended, and thus the
securities issued are "restricted" in accordance with Rule 144. This
offering resulted in gross proceeds to the Company of $30,000. No commissions
were paid on the sale.
<PAGE>
Certain conflicts of interest now exist and will continue to exist between the
Company and its officers and directors due to the fact that each has other
business interests to which he devotes his primary attention. Each officer and
director may continue to do so notwithstanding the fact that Management time
should be devoted to the business of the Company. Each of the Company's
officers and directors are or may become involved in other personal and
business ventures.
The officers, directors and founders are and may become, in their individual
capacities, controlling shareholders and/or partners of other entities engaged
in a variety of businesses. Thus, there exists potential for conflicts of
interest, including, among other things, time, effort, and corporate oppor-
tunity, involved in anticipation with such other business entities and tran-
sactions. Conflicts may arise if a target company or its principals seek to
acquire some or all of the stock holdings of present Management.
M. Richard Cutler, attorney at law, has acted as corporate and securities
counsel to the corporation. Mr. Cutler owns 790,000 shares of the Company and
is an officer and director. Mr. Cutler will charge the Company his usual and
customary rates for legal services rendered to the Company. Mr. Lebrecht owns
190,150 shares of the Company's common stock and works in the Law Offices of M.
Richard Cutler.
If a prospective Business Combination candidate required the sale of some or
all of the shareholdings of the officers and directors, the officers and
directors would be free to negotiate and effect such sales. Consequently,
the Company's Management would receive pecuniary gain which may not be
available to other shareholders.
The Company has no specified procedure for the resolution of current or
potential conflicts of interest between the Company, its officers, and
directors or affiliated entities. Shareholders who believe that the Company
has been harmed by failure of an officer or director to appropriately resolve
any conflict of interest may be able to bring a suit to enforce their rights
or the Company's rights.
ITEM 8 - DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorize the issuance of 25,000,000
shares of common stock, $0.0001 par value per share. The holders of each
share of common stock (I) have equal rights to dividends from funds legally
available therefore, when, as and if declared by the Company's Board of
Directors, (ii) are entitled to share in all assets of the Company available
for distribution, (iii) do not have pre-emptive, subscription or conversion
rights and (iv) are entitled to one non-cumulative vote at all shareholder
meetings.
All shares of common stock now outstanding are fully paid for and
non-assessable.
Stockholders have no cumulative voting rights, which means that Stockholders
owning more than 50% of the outstanding stock can vote to elect all directors.
Accordingly, the remaining Stockholders would not be able to elect any of the
Company's directors.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of Preferred Stock,
par value $0.0001. The Preferred Stock of the Company can be issued in one or
more series as may be determined from time to time by the Board of Directors
without further stockholder approval. In establishing a series the Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of
shares in such series, and the preferences, rights and restrictions thereof.
All shares of any one series shall be alike in every particular.
The Board of Directors of the Company has established Series A Convertible
Preferred Stock within the class of Preferred Stock.
<PAGE>
Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock
has the following rights, preferences and limitations:
(1) There are reserved for issuance 8,000 shares of Preferred Stock for
issuance as shares of Series A Convertible Preferred Stock. There are
currently issued and outstanding 5,000 shares of Series A Convertible
Preferred Stock.
(2) The shares of Series A Convertible Preferred Stock are entitled to a
dividend in the amount of thirteen percent (13%) per annum, cumulating but
not compounding, and payable quarterly thereafter in shares of Company
Common Stock valued at Five Dollars ($5.00) per share. The Series A
Convertible Preferred Stock shall not have any rights to assets or proceeds
from sale of assets of the Company in the event of liquidation. The Series A
Convertible Preferred Stock shall have no voting rights.
(3) There are reserved for issuance 8,000 shares of Common Stock for issuance
on conversion of issued and outstanding shares of Series A Convertible
Preferred Stock. Shares of Series A Convertible Preferred Stock
shall be convertible to newly issued shares of Common Stock on a one-for-one
basis. The shares of Series A Convertible Preferred Stock would be adjusted
ratably (i.e. non-dilution) with the Common Stock on any forward or
reverse stock split.
(4) Holders' Put Rights. In the event that the Company completes a round of
financing or engages in a business combination transaction, whether through a
private placement in accordance with Regulation D of the 1933 Act, through a
registration statement filed with the Commission, whether on a Form SB-2 or
otherwise, or whether through a statutory or other merger or other
combination transaction, which results in gross proceeds to the Company or
gross assets acquired by the Company of more than One Hundred Fifty Thousand
Dollars ($150,000), the Holders of Series A Convertible Preferred Stock shall
have the right, but not the obligation, to put all or a portion of the Series
A Convertible Preferred Stock back onto the Company at a value of $10.00 per
share. Management anticipates that this payment would result as a consequence
of cash paid to the Company for shares of its capital stock in connection
with a business acquisition.
Warrants
There are currently outstanding an aggregate of 50,000 Warrants issued to a
single investor. Each Warrant entitles the holder thereof to purchase One
share of Common Stock at a price of $5.00 per share. The Warrants are
exercisable for a five (5) year period commencing upon the date of issuance.
Upon expiration, the Warrants will terminate automatically, subject to
certain rights of the Company to extend the warrant term. The exercise price
and the number of shares issuable upon exercise of the warrants thereunder is
not subject to adjustment upon certain events such as stock splits, reverse
stock splits, stock dividends and similar transactions.
Subject to compliance with applicable securities laws, Warrant Certificates may
be transferred or exchanged for new certificates of different denominations
at the offices of the Company. The holders of Warrants, as such, are not
entitled to vote, to receive dividends or to exercise any of the rights of
shareholders for any purpose.
The Warrants may be exercised only upon surrender of the Warrant Certificate at
the offices of the Company with the form of "Election to Purchase" completed
and signed, accompanied by payment of the full exercise price for the number of
Warrants being exercised.
Non-cumulative Voting
The Articles of Incorporation and Bylaws of the Company specify that
shareholders will not have the right to accumulate their shares for the
purpose of electing directors of the Company. Consequently, all directors of
the Company will be elected by the present majority shareholders.
<PAGE>
Common Stock Dividends
The Company does not presently anticipate that it will pay dividends on its
Common Stock at any time in the foreseeable future. The payment of dividends
will depend, among other things, upon the earnings, assets, general financial
condition, and other factors. In the event that the Company successfully
completes a merger or acquisition as contemplated hereunder, the Management
of the acquired company will, in all likelihood, have sole and exclusive
authority to determine whether Common Stock dividends will be paid thereafter.
The Company intends to furnish holders of its common stock annual reports
containing audited financial statements and to make public quarterly reports
containing unaudited financial information.
Transfer Agent
The transfer agent for the common stock is Oxford Transfer and Registrar Agency,
Inc., 317 S.W. Alder, #1120, Portland, Oregon 97204.
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market Information
The Company's securities do not currently, and have not in the past, traded on
any active or liquid public market. Thus, there is currently no market for
the Company's securities and there can be no assurance that a trading market
will develop or, if one develops, that it will continue. Even if a trading
market should develop, the market may be substantially limited or unsustained.
Stockholders
As of February 22, 1999, the Company had 1,000,000 shares of Common Stock
outstanding and held by 43 shareholders of record.
As of February 22, 1999, the Company had 5,000 shares of Preferred Stock
outstanding and held by one shareholder of record.
Dividends
The Company has not paid cash dividends on its Common Stock in the past and does
not anticipate doing so in the foreseeable future.
The Company will pay a dividend on the Series A Convertible Preferred Stock in
the amount of thirteen percent (13%) per annum, cumulating but not
compounding, and payable quarterly thereafter in shares of Company Common
Stock valued at Five Dollars ($5.00) per share. See "Part I, Item 8 -
Description of Securities."
ITEM 2 - LEGAL PROCEEDINGS
The Company is not presently, but may from time to time be involved in various
claims, lawsuits, disputes with third parties, actions involving allegations
of discrimination, or breach of contract actions incidental to the operation of
its business. The Company is not currently involved in any such litigation
which it believes could have a materially adverse effect on its financial
condition or results of operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Effective January 20, 1999, Mendoza, Berger & Co, LLP, Certified Public
Accountants, were engaged by the Company as their principal accountant to
audit the Company's financial statements. There have been no changes
in accountants or disagreements of the type required to be reported under this
Item 3 between the Company and its independent auditors since their date of
engagement.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
In August 1998 the Company undertook a private placement of its securities,
consisting of 5,000 Units, to a total of one accredited investor. Each Unit
consisted of one (1) share of Series A Convertible Preferred Stock and ten (10)
warrants to purchase one (1) share of Common Stock at an exercise price of
$5.00 per share. See "Item 8 - Description of Securities." The offering was
completed in accordance with the requirements of Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended, and thus the
securities issued are "restricted" in accordance with Rule 144. This offering
resulted in gross proceeds to the Company of $30,000. No commissions were
paid on the sale.
<PAGE>
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Delaware and the Company's Bylaws provide
for indemnification of the Company's Directors for liabilities and expenses
that they may incur in such capacities. In general, Directors and Officers
are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, actions that
the indemnitee had no reasonable cause to believe were unlawful. Furthermore,
the personal liability of the Directors is limited as provided in the Company's
Articles of Incorporation.
The Company does not currently maintain a policy of Directors and Officers
Liability Insurance.
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the end of this
report beginning on Page F-1.
PART III
ITEM 1 - INDEX TO EXHIBITS
Exhibit No. Description
3.1 Articles of Incorporation of the Company.
3.2 Certificate of Amendment of Certificate of Incorporation.
3.3 Certificate for Renewal and Revival of Charter.
3.4 Bylaws of the Company.
3.5 Certificate of Designation of the Series A Convertible Preferred
Stock
4.2 Warrant issued in the Company's Private Placement.
23.1 Consent of Mendoza, Berger & Company, LLP, Independent Certified
Public Accountants.
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
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.
Wellspring Investments, Inc.
/s/ M. Richard Cutler
__________________________
By: M. Richard Cutler
Its: President
<PAGE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
Financial Statements as of
December 31, 1998 and the
Period from Inception
(October 24, 1994) through December 31, 1998
<PAGE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
Report of Independent Certified Public Accountants . . . . . . . . . . .F-2
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-3
Statements of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . .F-4
Statements of Changes in Stockholders' Deficit . . . . . . . . . . . . .F-5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . .F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-7
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors
Wellspring Investments, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of Wellspring Investments, Inc.
(a development stage company) as of December 31, 1998, and the related
statements of loss, stockholders' deficit, and cash flows for the period from
inception (October 24, 1994) through December 31, 1998 and for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wellspring Investments, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the period from inception (October 24, 1994) through December 31, 1998 and for
the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has been in the development stage since inception, has not generated
operating revenues to date, and has incurred net losses since its inception.
These conditions raise substantial douobt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters also
are described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Mendoza Berger & Company, LLP
/s/Mendoza Berger & Company, LLP
Laguna Hills, California
January 29, 1999
<PAGE>
<TABLE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<S> <C>
Deferred costs of stock issuance (Note 3) $10,000
Total assets $10,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Due to related party (Note 3) $ 672
Accrued liabilities (Notes 3 and 4) 10,800
Total current liabilities 11,472
Contingencies (Note 2)
Stockholders' deficit:
Preferred stock:
Series A Convertible Preferred Stock, $.0001 par value,
5,000,000 shares authorized: no shares issued and outstanding
(Notes 5 and 8)
Common stock, $.0001 par value, authorized: 25,000,000 shares;
shares issued and outstanding: 1,000,000 shares (Note 3) 100
Deficit accumulated during the development stage (Note 2) (1,572)
Total stockholders' deficit (1,472)
$10,000
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
FOR THE PERIOD FROM INCEPTION (OCTOBER 24, 1994) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Cumulative Year Ended December 31,
Amounts from
Date of Inception _____________________________
to December 31,
1998 1998 1997
___________________ _____________ _________
<S> <C> <C> <C>
Operating expenses:
Taxes and licenses $ 640 $ 265 $ 75
Officer compensation 100 - -
____________________ ____________ _________
Total operating expenses 740 265 75
____________________ ____________ _________
Other expense:
Interest expense 32 - -
____________________ ____________ _________
Total other expense 32 - -
____________________ ____________ _________
Net loss before income taxes (772) (265) (75)
Provision for income taxes (Note 4) (800) (800) -
____________________ ____________ _________
Net loss $ (1,572) $ (1,065) $ (75)
____________________ ____________ _________
Net loss per share (Notes 1 and 8) $ (.001) $ -
____________ __________
Weighted average common shares outstanding 1,000,000 1,000,000
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION
(OCTOBER 24, 1994) THROUGH DECEMBER 31, 1998
Series A Convertible Deficit
Common Stock Preferred Stock Accumulated
_______________________ _______________________ During the
Development
Shares Amount Shares Amount Stage Total
___________ __________ ________ ___________ ___________ _______
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
as compensation for services to stockholder/
director ($.0001 per share) (Note 3) 1,000,000 $100 - $ - $ - $ 100
Net loss for the period from date of
inception (October 24, 1994) to
December 31, 1994 - - - - (216) (216)
___________ __________ ________ ___________ ____________ ________
Balance at December 31, 1994 1,000,000 100 - - (216) (116)
Net loss for the year - - - - (111) (111)
___________ __________ ________ ___________ ____________ ________
Balance at December 31, 1995 1,000,000 100 - - (327) (227)
Net loss for the year - - - - (105) (105)
___________ __________ ________ ___________ ____________
Balance at December 31, 1996 1,000,000 100 - - (432) (332)
Net loss for the year - - - - (75) (75)
___________ __________ ________ ___________ ____________ _______
Balance at December 31, 1997 1,000,000 100 - - (507) (407)
Net loss for the year - - - - (1,065) (1,065)
___________ __________ ________ ___________ ____________ _______
Balance at December 31, 1998 1,000,000 100 - - (1,572) (1,472)
___________ __________ ________ ___________ ____________ _______
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
FOR THE PERIOD FROM INCEPTION (OCTOBER 24, 1994) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
_____________________________________________________________________________________
Year Ended December 31,
Cumulative Amounts ___________________________
From Date of
Inception to 1998 1997
December 31, 1998
____________________ ____________ ___________
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,572) $ (1,065) $ (75)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in deferred costs of stock issuance (10,000) (10,000) -
Advances from related party 672 265 75
Increase in accrued liabilities 10,800 10,800 -
___________________ ______________ __________
Net cash used in operating activities (100) - -
___________________ ______________ __________
Cash flows from financing activities:
Issuance of common stock as compensation
for services to stockholder/director 100 - -
___________________ ______________ __________
Net cash provided by financing activities 100 - -
___________________ ______________ __________
Net increase (decrease) in cash - - -
Cash, beginning of period - - -
___________________ ______________ __________
Cash, end of period $ - $ - -
___________________ ______________ __________
</TABLE>
<TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
_________________________________________________
Cumulative Amounts
From Date of Year Ended December 31,
Inception to ____________________________ 1998 1987
December 31, 1998 1998 1997
__________________ ______________ __________
<S> <C> <C> <C>
Cash paid for interest $ 32 $ - $ -
__________________ ______________ __________
Common stock issued as compensation for
services to stockholder/director $100 $ - $ -
__________________ ______________ __________
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
WELLSPRING INVESTMENTS, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. COMPANY HISTORY AND SUMMARY OF ACCOUNTING POLICIES
Wellspring Investments, Inc. (The Company), is a development
stage enterprise incorporated on October 24, 1994 under the
laws of the State of Delaware. The Company intends to seek
acquisitions or other business endeavors. The Company has had
no operations to date and its activities have been limited to
organizational efforts related to obtaining initial financing.
The Company intends to purchase, merge with or acquire
securities or assets held by target entities via an exchange of
the targeted company's securities or assets for the Company's
cash, securities and/or assets. The Company has not negotiated
with or identified a prospective acquisition candidate and has
not targeted any particular business or industry within which
it will seek acquisitions.
Net Loss Per Share
The Company adopted the provisions of the Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which requires presentation on the face of the income
statement of both basic and diluted earnings per share. Basic
and diluted earnings per share have replaced the previously
presented primary and fully diluted earnings per share. Basic
earnings per share is computed by dividing net income
attributable to common shares by weighted average number of
common shares outstanding during the period. There were no
diluted earnings per share during the periods presented. The
computation of the basic earnings per share is presented on the
face of the Statement of Loss.
Income Taxes
Income taxes are provided based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income
Taxes." Under this approach, deferred income taxes are
recorded to reflect the tax consequences on future years of
differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure contingent assets and
liabilities at the date of the financial statements. Actual
results could differ from those estimates.
2. DEVELOPMENT STAGE OPERATIONS
The Company has been in the development stage since its
inception, October 24, 1994, and has had no operations to date
and its activities have been limited to organizational efforts
related to obtaining initial financing. The Company intends to
seek acquisitions or other business endeavors, as more fully
discussed in Note 1.
<PAGE>
2. DEVELOPMENT STAGE OPERATIONS (Continued)
The accompanying financial statements have been prepared
on a going concern basis which contemplates the
realization of the assets and the satisfaction of
liabilities in the normal course of business. The Company
has suffered recurring losses from operations since its
inception; has not begun operations and has not recorded
any revenues, and continues to rely on its capital raising
efforts or loans from affiliates to fund continuing
operations. These conditions raise substantial doubt as
to the Company's ability to continue as a going concern.
The accompanying financial statements do not include any
adjustments relating to the recoverability and
classification of recorded assets amounts or the amount of
liabilities that may be necessary if the Company is unable
to continue as a going concern.
The Company's continuation is contingent upon the acquisitions
it intends to make and achieving profitable operations. Such
operations will also require management to secure additional
financing for the Company in the form of debt or equity, which
management plans to partially satisfy through the issuance of
shares of its capital stock. Management's plans with regard to
these matters are of follows:
The Company has not engaged in preliminary efforts to identify
possible merger or acquisition candidates and has no market
studies available to it. The Company has no business opportunities
under contemplation for acquisitions. The Company expects to
concentrate primarily on the identification and evaluation of
prospective merger or acquisition "target" entities including
private corporations, partnerships or sole proprietorships.
Management believes that the target companies will be
limited to privately financed companies and expects to be
precluded from other public companies. The specific method or
form by which a business combination may be structured cannot be
determined at this time. It could involve a merger or
consolidation; merger or consolidation of the acquired business
into a subsidiary of the Company; an exchange of shares of stock,
with or without payment in cash; or an acquisition of the
assets. The Company's plan to merge with or acquire
another business or concern would likely result in the
Company issuing securities, including authorized and
unissued common stock, to shareholders or owners of that
concern.
3. RELATED PARTY TRANSACTIONS
During the period from inception to December 31, 1998, the
Company had the following transactions with related parties:
The Company currently occupies an office on a rent free basis
at the office of the Company's President, M. Richard Cutler.
Mr. Cutler is also the Company's sole director, a majority
shareholder and the Company's legal counsel.
On November 11, 1994, the Company issued 1,000,000 shares of
its common stock to Mr. Cutler in exchange for services
rendered. The value of the common stock issued was determined
to be its total par value of $100. On September 12, 1997,
210,000 of Mr. Cutler's shares were transferred to other
individuals in private transactions.
<PAGE>
3. RELATED PARTY TRANSACTIONS (Continued)
The Company has retained Mr. Cutler's law firm, The Law Offices
of M. Richard Cutler, to serve as the Company's corporate and
securities counsel. Mr. Cutler will charge the Company his
usual and customary rates for legal services rendered to the
Company. During fiscal 1998, Mr. Cutler prepared the Company's
private placement offering and was paid an attorneys fee of
$10,000 in January 1999 from the Company's private placement
proceeds. This amount was accrued, outstanding and deferred as
costs related to the stock issuance as of December 31, 1998.
Additionally, Mr. Cutler has advanced funds totaling $672 to
pay for various filing fees and taxes.
Mr. Cutler has also been engaged to prepare and file a Form 10-SB
Registration Statement for which he will also be paid a legal
fee of $10,000 plus expenses, from the proceeds of the private
placement offering. Refer to Note 5.
Mr. Lebrecht, the Company's Vice President, owns 190,150 shares
of the Company's common stock and is also employed by The Law
Offices of M. Richard Cutler.
4. INCOME TAXES
The income tax provision for the year ended December 31, 1998
and 1997 consists of the following:
<TABLE>
DECEMBER 31, DECEMBER 31,
1998 1997
____________ _____________
<S> <C> <C>
Current:
Federal $ - $ -
State 800 -
____________ _____________
800 -
Deferred:
Federal (160) (11)
State (23) (7)
Less: valuation 183 18
allowance ____________ _____________
- -
____________ _____________
$ 800 $ -
</TABLE>
<PAGE>
4. INCOME TAXES (Continued)
Deferred income tax assets were comprised of the following:
<TABLE>
DECEMBER 31, DECEMBER 31,
1998 1997
____________ ____________
<S> <C> <C>
Deferred income tax assets:
Net operating loss
carry forwards $ 305 $ 122
____________ ____________
Less: valuation allowance (305) (122)
____________ ____________
Net deferred income tax
assets $ - -
</TABLE>
Since inception the Company has reported losses for income
tax and financial reporting purposes. Accordingly, no provision
for Federal income tax was provided and State income tax was
provided at the statutory minimum required by state law. A 100%
valuation was provided at December 31, 1998 and 1997 since
management could not determine that it was more likely than not
that the net deferred tax asset would be realized and it was
determined that the amounts were immaterial.
The Company has available at December 31, 1998 unused
operating loss carry forwards that may be applied against future
taxable income and that expire as follows:
<TABLE>
EXPIRES DURING YEAR EXPIRES DURING YEAR
ENDED DECEMBER 31, FEDERAL ENDED DECEMBER 31, STATE
___________________ ___________ ____________________ ________
<S> <C> <C> <C>
2014 $ 217 2009 $ 109
2015 110 2010 55
2016 105 2011 53
2017 75 2012 38
2018 1,065 2013 533
___________ _______
$ 1,572 $ 788
</TABLE>
5. PRIVATE PLACEMENT
On September 8, 1998, the Board of Directors approved a
private placement offering of units, totaling $30,000. The
offering price is $6.00 per unit, 1,000 units ($6,000) minimum
investment. The private placement offering consists of 5,000 units,
each consisting of one share of Series A Convertible
Preferred Stock and ten common stock purchase warrants. These
units were issued on January 6, 1999, refer to Note 8.
<PAGE>
6. PREFERRED STOCK
In 1994, the Company authorized 5,000,000 shares of preferred
stock, par value $.0001 per share. As of December 31, 1998,
the Company had not issued any shares of its preferred stock.
Series A Convertible Preferred Stock
1. There are reserved for issuance 8,000 shares of
Preferred Stock for issuance as shares of Series A
Convertible Preferred Stock.
2. The shares of Series A Convertible Preferred Stock
entitle the holder to a dividend in the amount of
thirteen percent (13%) per annum, cumulating but not
compounding, and payable quarterly in shares of Company's
common Stock valued at five dollars ($5.00) per share.
The Series A Convertible Preferred Stock shall not have
any rights to assets or proceeds from sale of assets of
the Company in the event of liquidation. The Series A
Convertible Preferred Stock has no voting rights.
3. The shares of Series A Convertible Preferred Stock
shall be convertible, at the option of its holder at
anytime, into newly issued shares of common stock on a
one-for-one basis. The shares of Series A Convertible
Preferred Stock would be adjusted ratably with the common
stock on any forward or reverse stock split.
4. Holders' Put Rights. In the event that the Company
completes a round of financing or engages in a business
combination transaction, whether through a private
placement in accordance with Regulation D of the 1933 Act,
through a registration statement filed with the Commission,
whether on a Form SB-2 or otherwise, or whether
through a statutory or other merger or other combination
transaction, which results in gross proceeds to the
Company or gross assets acquired by the Company of more than
$150,000, the holder of Series A Convertible Preferred Stock
shall have the right, but not the obligation, to put all or a
portion of the Series A Convertible Preferred Stock
back onto the Company at a value of $10 per share.
Management anticipates that this payment would result as
a consequence of cash paid to the Company for shares
of its capital stock in connection with a business acquisition.
As of December 31, 1998, no shares of Series A Convertible Preferred
Stock were issued and outstanding. Refer to Note 8 for subsequent
issuance of the Series A Convertible Preferred Stock.
<PAGE>
7. WARRANTS
In connection with the private placement, discussed in Note 5,
of 5,000 shares of Series A Preferred Stock exercisable at
$5.00 per share, the Company also offered 10 common stock purchase
warrants, each convertible into one share of common stock for every
share of Series a Preferred Stock, or 50,000 warrants. The
warrants are exercisable for a five (5) year period commencing on
the date of issuance. As of December 31, 1998, no warrants were
issued and outstanding. Refer to Note 8 for subsequent issuance of
warrants.
8. SUBSEQUENT EVENT
The following transactions occurred after December 31, 1998,
which, had they taken place during fiscal 1998, would have changed
the number of shares used in the computation of earnings per
share.
On January 6, 1999, the Company completed the private
placement which consisted of the following:
The Company issued 5,000 shares of Series A
Convertible Preferred Stock.
The Company issued 50,000 warrants which entitle the
holders to purchase one share of common stock at
$5.00 per share.
The offering was completed in accordance with the requirements of
Rule 506 of Regulation D promulgated under the Securities Act of
1933, as amended, and thus the securities issued are "restricted" in
accordance with Rule 144. The private placement raised a total of
$30,000 from a single unaffiliated investor. The majority of the
proceeds from the offering were used to pay for Company legal and
accounting fees.
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/24/1994
944202265-2448754
CERTIFICATE OF INCORPORATION
OF
WELLSPRING INVESTMENTS, INC.
(A DELAWARE CORPORATION)
The undersigned, in order to form a corporation pursuant to the
General Corporation Law of the State of Delaware, does hereby
certify as follows:
I.
The name of the corporation is WELLSPRING INVESTMENTS, INC.
(hereinafter "Corporation").
II.
The address of the Corporation's registered office (in
Delaware: include county) is 1209 Orange Street, City of Wilmington,
County of Newcastle, Postal Code 19801. The name of its registered
agent at this address is The Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
IV.
The Corporation is authorized to issue one class of shares of
stock to be designated as "Common Stock." The total number of
shares which this Corporation is authorized to issue is 1,000,000
shares. The shares will have par value of $.0001 each.
V.
The initial directors of the Corporation shall be M. Richard
Cutler, Lawrence W. Horwitz, R. Troy Mikulka and Kevin L. Woodbridge.
<PAGE>
VI.
A director of the Corporation shall not be personally liable
for monetary damages to the Corporation or its stockholders for
breach of any fiduciary duty as a director except for liability (I)
for any breach of the director's duty of loyalty to the Corporation
or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derives an improper
personal benefit.
VII.
The Corporation shall indemnify and hold harmless its officers,
directors and agents to the extent provided by Section 145 of the
Delaware General Corporation Law. Additional rights of
indemnification or advancement of expenses may be granted under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
VIII.
A director or officer of the Corporation shall not be
disqualified by his or her office from dealing or contracting with
the Corporation as a vendor, purchaser, employee, agent or
otherwise. No transaction, contract or act of the Corporation shall
be void or voidable or in any way affected or invalidated by reason
of the fact that any director or officer of the Corporation is a
member of any firm, a stock holder, director or officer of any
corporation or trustee or beneficiary of any trust that is in any
way interested in such transaction, contract or act. No director or
officer shall be accountable or responsible to the Corporation for
or in respect to any transaction, contract or act of the Corporation
nor for any gain or profit directly or indirectly realized by him or
her by reason of the fact that he or she or any firm in which he or
she is a member of any corporation of which he or she is a
stockholder, director, or officer, or any trust of which he or she
is a trustee, or beneficiary, is interested in such transaction,
contract or act; provided that fact that such director or officer or
such firm, corporation, trustee or beneficiary of such trust, is so
interested shall have been disclosed or shall have been known to the
members of the board of directors as shall be present at any meeting
at which upon such contract, transaction or act shall have been
taken. Any director may be counted in determining the existence of
a quorum at any meeting of the board of directors which shall
authorize or take action in respect to any such contract,
transaction or act, and may vote thereat to authorize, ratify or
approve any such contract, transaction or act, and any officer of
the Corporation may take any action within the scope of his or her
authority, respecting such contract transaction or act with like
force and effect as if he or she or any firm of which he or she is a
member, or any corporation of which he or she is a stockholder,
director or officer, or any trust of which he or she is a trustee or
beneficiary, were not interested in such transaction, contract, or
act. Without limiting or qualifying the foregoing, if in any
judicial or other inquiry, suit, cause or proceeding, the question
of whether a director or officer of the Corporation has acted in
good faith is material, and notwithstanding any statute or rule of
law or equity to the contrary (if any there be) his or her good
faith shall be presumed in the absence of proof to the contrary by
clear and convincing evidence.
<PAGE>
IX.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor
or stockholder thereof or on the application of any receiver or
receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of
creditors, and/or of the stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class
of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on
the Corporation.
X.
The Corporation reserves the right to amend and repeal any
provision contained in the Certificate of Incorporation in the
manner prescribed by the laws of the State of Delaware. All rights
herein conferred are granted subject to this reservation.
XI.
In furtherance, and not in limitation of, the powers conferred
by statute, the board of directors is expressly authorized to make,
repeal, alter, amend and rescind the bylaws of the Corporation.
XII.
The incorporator is M. Richard Cutler whose mailing address is
Two Venture Plaza, Suite 380, Irvine, California 92718.
I, the undersigned, being the incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware, do
make, file and record this Certificate of Incorporation, do certify
that the facts herein stated are true and, accordingly, have
hereunto set my hand this 19th day of October, 1994
/s/M. Richard Cutler
____________________
M. Richard Cutler
Incorporator
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 03/03/1998
981082590 - 2448754
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WELLSPRING INVESTMENTS, INC.
(A DELAWARE CORPORATION)
I, M. Richard Cutler, hereby certify that:
1. I am the Secretary and President of Wellspring
Investments, Inc., a Delaware corporation (the "Corporation").
2. Article IV of the Certificate of Incorporation filed with
the Office of the Secretary of State of Delaware on October 24,
1994, is hereby amended to read as follows:
"IV.
A. This Corporation is authorized to issue two
classes of shares of stock to be designated respectively
"Common Stock" and "Preferred Stock". The total number of
shares of Common Stock this Corporation is authorized to
issue is Twenty Five Million (25,000,000), par value
$0.0001, and the total number of shares of Preferred
Stock this Corporation is authorized to issue is Five
Million (5,000,000), par value $0.0001.
B. The shares of Preferred Stock may be issued from
time to time in one or more series. The Board of
Directors of the Corporation (the "Board of Directors") is
expressly authorized to provide for the issue of all or
any of the shares of the Preferred Stock in one or more
series, and to fix the number of shares and to determine
or alter for each such series, such voting powers, full or
limited, or no voting powers, and such designations,
preferences, and relative, participating, optional, or
other rights and such qualifications, limitations, or
restrictions thereof, as shall be stated and expressed in
the resolution or resolutions adopted by the Board of
Directors providing for the issue of such shares (a
"Preferred Stock Designation") and as may be permitted by
the Delaware Corporation Laws. The Board of Directors is
also expressly authorized to increase or decrease (but not
below the number of shares of such series then
outstanding) the number of shares of any series subsequent
to the issue of shares of that series. In case the number
of shares of any such series shall be so
<PAGE>
decreased, the shares constituting such decrease shall resume
the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series."
3. Article V of the Certificate of Incorporation filed with
the Office of the Secretary of State of Delaware on October 24,
1994, is hereby amended to read as follows:
"V.
The number and identity of the Directors of the
Corporation shall be as set forth in the bylaws of the
Corporation."
4. The foregoing amendment of Certificate of Incorporation
has been duly approved by the Board of Directors of the Corporation.
5. The foregoing amendment of Certificate of Incorporation
has been duly approved by all of the shareholders of the Corporation.
I further declare under penalty of perjury under the laws of
the State of Delaware that the matters set forth in this certificate
are true and correct of my own knowledge.
Dated: February 11, 1998
/s/M. Richard Cutler
_______________________________
M. RICHARD CUTLER
President and Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/03/1998
981082589 - 2448754
CERTIFICATE FOR
RENEWAL AND REVIVAL OF CHARTER
WELLSPRING INVESTMENTS, INC., a corporation organized under the
laws of the State of Delaware, the charter of which was voided for
non-payment of taxes, now desires a restoration, renewal and revival
of its charter, and hereby certifies as follows:
1. The name of this corporation is Wellspring Investments, Inc.
2. Its registered office and registered agent in the State of
Delaware is The Corporation Trust Company, located at 1209
Orange Street, City of Wilmington, County of Newcastle, Potal
Code 19801.
3. The date of filing of the original Certificate of Incorporation
in Delaware was October 24, 1994.
4. The date when restoration, renewal and revival of the charter
of this company is to commence is February 29, 1996, at which
time its charter became inoperative and void for non-payment of
taxes and this certificate for renewal and revival is filed by
authority of the duly elected Directors of the corporation in
accordance with the laws of the State of Delaware.
5. This corporation was duly organized and carried out the
business authorized by its charter until March 1, 1996, at
which time its charter became inoperative and void for
non-payment of taxes and this certificate for renewal and
revival is filed by authority of the duly elected Directors of
the corporation in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, and in compliance with the provisions of
Section 312 of the General Corporation Law of the State of Delaware,
as amended, providing for the renewal, extension and restoration of
Charters, M. Richard Cutler, President, is an authorized officer and
has hereunto set his hand to this Certificate this 10th of February,
1998.
/s/M. Richard Cutler
_________________________________
M. RICHARD CUTLER, President
ATTEST:
/s/M. Richard Cutler
________________________________
M. RICHARD CUTLER, Secretary
<PAGE>
BYLAWS
OF
WELLSPRING INVESTMENTS, INC.
BYLAWS
OF
WELLSPRING INVESTMENTS, INC.
<PAGE>
BYLAWS
OF
WELLSPRING INVESTMENTS, INC.
ARTICLE I
OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . 1
ARTICLE II
DIRECTORS - MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Powers, Standard of Care . . . . . . . 1
A. Powers. . . . . . . . . . . . . . . . . . . . . . . . 1
B. Standard of Care; Liability . . . . . . . . . . . . . 1
C. Exception for Close Corporation . . . . . . . . . . . 2
Section 2. Number and Qualification of Directors. 2
Section 3. Election and Term of Office of
Directors. . . . . . . . . . . . . . . . . . . 2
Section 4. Vacancies. . . . . . . . . . . . . . . 2
Section 5. Removal of Directors . . . . . . . . . 3
Section 6. Place of Meetings. . . . . . . . . . . 3
Section 7. Annual Meetings. . . . . . . . . . . . 3
Section 8. Other Regular Meetings . . . . . . . . 4
Section 9. Special Meetings/Notices . . . . . . . 4
Section 10. Waiver of Notice . . . . . . . . . . . 4
Section 11. Quorums. . . . . . . . . . . . . . . . 5
Section 12. Adjournment. . . . . . . . . . . . . . 5
Section 13. Notice of Adjournment. . . . . . . . . 5
Section 14. Board of Directors Provided by
Articles or Bylaws . . . . . . . . . . . . . . 5
Section 15. Directors Action by Unanimous Written
Consent. . . . . . . . . . . . . . . . . . . . 5
Section 16. Compensation of Directors. . . . . . . 5
Section 17. Committees . . . . . . . . . . . . . . 5
Section 18. Meetings and Action of Committees. . . 6
Section 19. Advisory Directors . . . . . . . . . . 6
ARTICLE III
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Officers . . . . . . . . . . . . . . . 6
Section 2. Election of Officers . . . . . . . . . 6
Section 3. Subordinate Officers, Etc. . . . . . . 6
Section 4. Removal and Resignation of Officers. . 6
Section 5. Vacancies. . . . . . . . . . . . . . . 7
Section 6. Chairman of the Board. . . . . . . . . 7
Section 7. President and Chief Executive Officer. 7
Section 8. Vice President . . . . . . . . . . . . 7
Section 9. Secretary. . . . . . . . . . . . . . . 8
Section 10. Chief Financial Officer. . . . . . . . 8
ARTICLE IV
SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Place of Meetings. . . . . . . . . . . 8
Section 2. Annual Meeting . . . . . . . . . . . . 9
Section 3. Special Meetings . . . . . . . . . . . 9
Section 4. Notice of Meetings - Reports . . . . . 9
Section 5. Quorum . . . . . . . . . . . . . . . .10
Section 6. Adjourned Meeting and Notice Thereof .10
Section 7. Waiver or Consent by Absent
Shareholders . . . . . . . . . . . . . . . . .11
Section 8. Maintenance and Inspection of Bylaws .11
Section 9. Annual Report to Shareholders. . . . .12
Section 10. Financial Statements . . . . . . . . .12
Section 11. Annual Statement of General
Information13
ARTICLE V
AMENDMENTS TO BYLAWS . . . . . . . . . . . . . . . . . . . . . . . .13
Section 1. Amendment by Shareholders. . . . . . .13
Section 2. Amendment by Directors . . . . . . . .13
Section 3. Record of Amendments . . . . . . . . .13
ARTICLE VI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 1. Shareholders' Agreements . . . . . . .13
Section 2. Effect of Shareholders' Agreements . .14
Section 3. Subsidiary Corporations. . . . . . . .14
Section 4. Accounting Year. . . . . . . . . . . .14
Section 5. Form . . . . . . . . . . . . . . . . .14
<PAGE>
BYLAWS
OF
WELLSPRING INVESTMENTS, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office for
the transaction of business of the Corporation is hereby fixed and
located at Two Venture Plaza, Suite 380, Irvine, California. The
location may be changed by the Board of Directors in their
discretion, and additional offices may be established and maintained
at such other place or places, either within or outside of Delaware,
as the Board of Directors may from time to time designate.
Section 2. Other Offices. Branch or subordinate offices
may at any time be established by the Board of Directors at any
place or places where the Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. Powers, Standard of Care.
A. Powers: Subject to the provisions of the General
Corporation Law of the State of Delaware (hereinafter the "Act"),
and subject to any limitations in the Articles of Incorporation of
the Corporation relating to action required to be approved by the
Shareholders, or by the outstanding shares, the business and affairs
of the Corporation shall be managed and all corporate powers shall
be exercised by or under the direction of the Board of Directors.
The Board of Directors may delegate the management of the day-to-day
operation of the business of the Corporation to a management company
or other persons, provided that the business and affairs of the
Corporation shall be managed, and all corporate powers shall be
exercised, under the ultimate direction of the Board.
B. Standard of Care; Liability:
(i) Each Director shall exercise such powers and
otherwise perform such duties, in good faith, in the matters such
Director believes to be in the best interests of the Corporation,
and with such care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under similar
circumstances.
(ii) In performing the duties of a Director, a
Director shall be entitled to rely on information, opinions,
reports, or statements, including financial statements and other
financial data, in which case prepared or presented by:
<PAGE>
(a) One or more officers or employees of
the Corporation whom the Director believes to be reliable and
competent in the matters presented,
(b) Counsel, independent accountants or
other persons as to which the Director believes to be within such
person's professional or expert competence, or
(c) A Committee of the Board upon which
the Director does not serve, as to matters within its designated
authority, which committee the Director believes to merit
confidence, so long as in any such case the Director acts in good
faith, after reasonable inquiry when the need therefor is indicated
by the circumstances and without knowledge that would cause such
reliance to be unwarranted.
C. Exception for Close Corporation. Notwithstanding the
provisions of Section 1 of this Article, in the event that the
Corporation shall elect to become a close corporation, its
Shareholders may enter into a Shareholders' Agreement. Said
Agreement may provide for the exercise of corporate powers and the
management of the business and affairs of the Corporation by the
Shareholders; provided, however, such agreement shall, to the extent
and so long as the discretion or powers of the Board of Directors in
its management of corporate affairs is controlled by such agreement,
impose upon each Shareholder who is a party hereof, liability for
managerial acts performed or omitted by such person pursuant thereto
otherwise imposed upon Directors; and the Directors shall be
relieved to that extent from such liability.
Section 2. Number and Qualification of Directors. The
authorized number of Directors of the Corporation shall be no less
than one (1) and no more than five (5) until changed by a duly
adopted amendment to the Articles of Incorporation or by an
amendment to this Section 2 of Article II of these Bylaws, adopted
by the vote or written consent of Shareholders entitled to exercise
majority voting power as provided in the Act.
Section 3. Election and Term of Office of Directors.
Directors shall be elected at each annual meeting of the
Shareholders to hold office until the next annual meeting. Each
Director, including a Director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until
a successor has been elected and qualified.
Section 4. Vacancies.
A. Vacancies on the Board of Directors may be filled by
a majority of the remaining Directors, though less than a quorum, or
by a sole remaining Director, except that a vacancy created by the
removal of a Director by the vote or written consent of the
Shareholders, or by a court order, may be filled only by the vote of
a majority of the shares entitled to vote, represented at a duly
held meeting at which a quorum is present, or by the written consent
of holders of the majority of the outstanding shares entitled to
vote. Each Director so elected shall hold office until the next
annual meeting of the Shareholders and until a successor has been
elected and qualified.
B. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in the event of the death, resignation or
removal of any Director, or if the Board of Directors by
<PAGE>
resolution declares vacant the office of a Director who has been declared of
unsound mind by an order of court or convicted of a felony.
C. The Shareholders may elect a Director or Directors at
any time to fill any vacancy or vacancies not filled by the
Directors, but any such election by written consent shall require
the consent of a majority of the outstanding shares entitled to vote.
D. Any Director may resign, effective on giving written
notice to the Chairman of the Board, the President, the Secretary,
or the Board of Directors, unless the notice specifies a later time
for that resignation to become effective. If the resignation of a
Director is effective at a future time, the Board of Directors may,
prior to the effective date of a Director's resignation, elect a
successor to take office when the resignation becomes effective.
E. No reduction of the authorized number of Directors
shall have the effect of removing any Director before that
Director's term of office expires.
Section 5. Removal of Directors.
A. The entire Board of Directors, or any individual
Director, may be removed from office as provided by the Act. In
such case, the remaining members, if any, of the Board of Directors
may elect a successor Director to fill such vacancy for the
remaining unexpired term of the Director so removed.
B. No Director may be removed (unless the entire Board
is removed) when the votes cast against removal or not consenting in
writing to such removal would be sufficient to elect such Director
if voted cumulatively at an election at which the same total number
of votes were cast (or, if such action is taken by written consent,
all shares entitled to vote, were voted) and the entire number of
Directors authorized at the time of the Directors most recent
election were then being elected; and when by the provisions of the
Articles of Incorporation the holders of the shares of any class or
series voting as a class or series are entitled to elect one or more
Directors, any Director so elected may be removed only by the
applicable vote of the holders of the shares of that class or series.
Section 6. Place of Meetings. Regular meetings of the
Board of Directors shall be held at any place within or outside the
state that has been designated from time to time by resolution of
the Board. In the absence of such resolution, regular meetings
shall be held at the principal executive office of the Corporation.
Special meetings of the Board shall be held at any place within or
outside the state that has been designated in the notice of the
meeting, or, if not stated in the notice or there is no notice, at
the principal executive office of the Corporation. Any meeting,
regular or special, may be held by conference telephone or similar
communication equipment, so long as all Directors participating in
such meeting can hear one another, and all such Directors shall be
deemed to have been present in person at such meeting.
Section 7. Annual Meetings. Immediately following each
annual meeting of Shareholders, the Board of Directors shall hold a
regular meeting for the purpose of organization,
<PAGE>
the election of officers and the transaction of other business. Notice of this
meeting shall not be required. Minutes of any meeting of the Board,
or any committee thereof, shall be maintained as required by the Act
by the Secretary or other officer designated for that purpose.
Section 8. Other Regular Meetings.
A. Other regular meetings of the Board of Directors
shall be held without call at such time as shall from time to time
be fixed by the Board of Directors. Such regular meetings may be
held without notice, provided the time and place of such meetings
has been fixed by the Board of Directors, and further provided the
notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the
time shall be given to each Director in the same manner as notice
for such special meetings of the Board of Directors.
B. If said day falls upon a holiday, such meetings shall
be held on the next succeeding day thereafter.
Section 9. Special Meetings/Notices.
A. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by the Chairman of the
Board or the President or any Vice President or the Secretary or any
two Directors.
B. Notice of the time and place for special meetings
shall be delivered personally or by telephone to each Director or
sent by first class mail or telegram, charges prepaid, addressed to
each Director at his or her address as it is shown in the records of
the Corporation. In case such notice is mailed, it shall be
deposited in the United States mail at least four days prior to the
time of holding the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered
personally or be telephone or to the telegram company at least 48
hours prior to the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated to
either the Director or to a person at the office of the Director who
the person giving the notice has reason to believe will promptly
communicate same to the Director. The notice need not specify the
purpose of the meeting, nor the place, if the meeting is to be held
at the principal executive office of the Corporation.
Section 10. Waiver of Notice.
A. The transactions of any meeting of the Board of
Directors, however called, noticed, or wherever held, shall be as
valid as though had at a meeting duly held after the regular call
and notice if a quorum be present and if, either before or after the
meeting, each of the Directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the
minutes thereof. Waivers of notice or consent need not specify the
purposes of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made part of the
minutes of the meeting.
<PAGE>
B. Notice of a meeting shall also be deemed given to any
Director who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such Director.
Section 11. Quorums. A majority of the Directors then in
office shall constitute a quorum for the transaction of business,
except to adjourn as provided in Section 12 of this Article II.
Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum was present shall
be regarded as the act of the Board of Directors, subject to the
provisions of the Act. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the
withdrawal of Directors, if any action taken is approved by at least
a majority of the required quorum for that meeting.
Section 12. Adjournment. A majority of the directors
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 13. Notice of Adjournment. Notice of the time and
place of the holding of an adjourned meeting need not be given,
unless the meeting is adjourned for more than 24 hours, in which
case notice of such time and place shall be given prior to the time
of the adjourned meeting to the Directors who were not present at
the time of the adjournment.
Section 14. Board of Directors Provided by Articles or
Bylaws. In the event only one Director is required by the Bylaws or
the Articles of Incorporation, then any reference herein to notices,
waivers, consents, meetings or other actions by a majority or quorum
of the Board of Directors shall be deemed or referred as such
notice, waiver, etc., by the sole Director, who shall have all
rights and duties and shall be entitled to exercise all of the
powers and shall assume all the responsibilities otherwise herein
described, as given to the Board of Directors.
Section 15. Directors Action by Unanimous Written Consent.
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting and with the same force and
effect as if taken by a unanimous vote of Directors, if authorized
by a writing signed individually or collectively by all members of
the Board of Directors. Such consent shall be filed with the
regular minutes of the Board of Directors.
Section 16. Compensation of Directors. Directors, and
members as such, shall not receive any stated salary for their
services, but by resolution of the Board of Directors, a fixed sum
and expense of attendance, if any, may be allowed for attendance at
each regular and special meeting of the Board of Directors;
provided, however, that nothing contained herein shall be construed
to preclude any Director from serving the Corporation in any other
capacity as an officer, employee or otherwise receiving compensation
for such services.
Section 17. Committees. Committees of the Board of
Directors may be appointed by resolution passed by a majority of the
whole Board. Committees shall be composed of two or more members of
the Board of Directors. The Board may designate one or more
Directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Committees shall
have such powers as those held by the Board of Directors as may be
expressly
<PAGE>
delegated to it by resolution of the Board of Directors,
except those powers expressly made non-delegable by the Act.
Section 18. Meetings and Action of Committees. Meetings
and action of committees shall be governed by, and held and taken in
accordance with, the provisions of Article II, Sections 6, 8, 9, 10,
11, 12, 13 and 15, with such changes in the context of those
Sections as are necessary to substitute the committee and its
members for the Board of Directors and its members, except that the
time of the regular meetings of the committees may be determined by
resolution of the Board of Directors as well as the committee, and
special meetings of committees may also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of
these Bylaws.
Section 19. Advisory Directors. The Board of Directors
from time to time may elect one or more persons to be Advisory
Directors, who shall not by such appointment be members of the Board
of Directors. Advisory Directors shall be available from time to
time to perform special assignments specified by the President, to
attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board of Directors. The period during
which the title shall be held may be prescribed by the Board of
Directors. If no period is prescribed, the title shall be held at
the pleasure of the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Officers. The principal officers of the
Corporation shall be a President, a Secretary, and a Chief Financial
Officer who may also be called Treasurer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the
Board, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of
Section 3 of this Article III. Any number of offices may be held by
the same person.
Section 2. Election of Officers. The principal officers
of the Corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen by the Board of Directors, and each shall
serve at the pleasure of the Board of Directors, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. Subordinate Officers, Etc. The Board of
Directors may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided
in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. Removal and Resignation of Officers.
A. Subject to the rights, if any, of an officer under
any contract of employment, any officer may be removed, either with
or without cause, by a majority of the Directors at that time
<PAGE>
in office, at any regular or special meeting of the Board of Directors,
or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
B. Any officer may resign at any time by giving written
notice to the Board of Directors. Any resignation shall take effect
on the date of the receipt of that notice or at any later time
specified in that notice; and, unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to
make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the
officer is a party.
Section 5. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in the Bylaws for regular
appointments to that office.
Section 6. Chairman of the Board.
A. The Chairman of the Board, if such an officer be
elected, shall, if present, preside at the meetings of the Board of
Directors and exercise and perform such other powers and duties as
may, from time to time, be assigned by the Board of Directors or
prescribed by the Bylaws. If there is no President, the Chairman of
the Board shall, in addition, be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in
Section 7 of this Article III.
Section 7. President and Chief Executive Officer.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there is such an
officer, the President along with the Chief Executive Officer of the
Corporation shall, subject to the control of the Board of Directors,
have general supervision, discretion and control of the business and
officers of the Corporation. The President or the Chief Executive
Officer shall preside at all meetings of the Shareholders and, in
the absence of the Chairman of the Board, or if there be none, at
all meetings of the Board of Directors. The President and Chief
Executive Officer, jointly, shall have the general powers and duties
of management usually vested in the office of President and Chief
Executive Officer of a corporation, each shall be ex officio a
member of all the standing committees, including the Executive
Committee, if any, and shall have such other powers and duties as
may be prescribed by the Board of Directors or the Bylaws.
Section 8. Vice President. In the absence or disability
of the President or Chief Executive Officer, the Vice Presidents, if
any, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President or Chief
Executive Officer, as the case may be, and when so acting, shall
have all the powers of, and be subject to all the restrictions upon,
the President or the Chief Executive Officer. The Vice Presidents
shall have such other powers and perform such other duties as from
time to time may be prescribed for them, respectively, by the Board
of Directors or the Bylaws, the President, the Chief Executive
Officer, or the Chairman of the Board.
<PAGE>
Section 9. Secretary.
A. The Secretary shall keep, or cause to be kept, a book
of minutes of all meetings of the Board of Directors and
Shareholders at the principal office of the Corporation or such
other place as the Board of Directors may order. The minutes shall
include the time and place of holding the meeting, whether regular
or special, and if a special meeting, how authorized, the notice
thereof given, and the names of those present at Directors' and
committee meetings, the number of shares present or represented at
Shareholders' meetings and the proceedings thereof.
B. The Secretary shall keep, or cause to be kept, at the
principal office of the Corporation or at the office of the
Corporation's transfer agent, a share register, or duplicate share
register, showing the names of the Shareholders and their addresses;
the number and classes or shares held by each; the number and date
of certificates issued for the same; and the number and date of
cancellation of every certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given,
notice of all the meetings of the Shareholders and of the Board of
Directors required by the Bylaws or by law to be given. The
Secretary shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the Bylaws.
Section 10. Chief Financial Officer or Treasurer.
A. The Chief Financial Officer shall keep and maintain,
or cause to be kept and maintained, in accordance with generally
accepted accounting principles, adequate and correct accounts of the
properties and business transactions of the Corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, earnings (or surplus) and shares issued. The books
of account shall, at all reasonable times, be open to inspection by
any Director.
B. The Chief Financial Officer shall deposit all monies
and other valuables in the name and to the credit of the Corporation
with such depositaries as may be designated by the Board of
Directors. The Chief Financial Officer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an
account of all of the transactions of the Chief Financial Officer
and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed
by the Board of Directors or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. Meetings of the
Shareholders shall be held at any place within or outside the state
of Delaware designated by the Board of Directors. In the absence of
any such designation, Shareholders' meetings shall be held at the
principal executive office of the Corporation.
<PAGE>
Section 2. Annual Meeting.
A. The annual meeting of the Shareholders shall be held,
each year, as follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: Second Tuesday in September
B. If this day shall be a legal holiday, then the
meeting shall be held on the next succeeding business day, at the
same time. At the annual meeting, the Shareholders shall elect a
Board of Directors, consider reports of the affairs of the
Corporation and transact such other business as may be properly
brought before the meeting.
C. If the above date is inconvenient, the annual meeting
of Shareholders shall be held each year on a date and at a time
designated by the Board of Directors within ninety days of the above
date upon proper notice to all Shareholders.
Section 3. Special Meetings.
A. Special meetings of the Shareholders for any purpose
or purposes whatsoever, may be called at any time by the Board of
Directors, the Chairman of the Board, the President, or by one or
more Shareholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at any such meeting. Except as
provided in paragraph B below of this Section 3, notice shall be
given as for the annual meeting.
B. If a special meeting is called by any person or
persons other than the Board of Directors, the request shall be in
writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board, the President,
any Vice President or the Secretary of the Corporation. The officer
receiving such request shall forthwith cause notice to be given to
the Shareholders entitled to vote, in accordance with the provisions
of Sections 4 and 5 of this Article, indicating that a meeting will
be held at the time requested by the person or persons calling the
meeting, not less than 35 nor more than 60 days after the receipt of
the request. If the notice is not given within 20 days after
receipt of the request, the person or persons requesting the meeting
may give the notice in the manner provided in these Bylaws. Nothing
contained in this paragraph of this Section shall be construed as
limiting, fixing or affecting the time when a meeting of
Shareholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings - Reports.
A. Notice of any Shareholders meetings, annual or
special, shall be given in writing not less than 10 days nor more
than 60 days before the date of the meeting to Shareholders entitled
to vote thereat by the Secretary or the Assistant Secretary, or if
there be no such officer, or in the case of said Secretary or
Assistant Secretary's neglect or refusal, by any Director or
Shareholder.
<PAGE>
B. Such notices or any reports shall be given personally
or by mail or other means of written communication as provided in
the Act and shall be sent to the Shareholder's address appearing on
the books of the Corporation, or supplied by the Shareholder to the
Corporation for the purpose of notice, and in the absence thereof,
as provided in the Act by posting notice at a place where the
principal executive office of the Corporation is located or by
publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located.
C. Notice of any meeting of Shareholders shall specify
the place, the day and the hour of meeting, and (i) in case of a
special meeting, the general nature of the business to be transacted
and that no other business may be transacted, or (ii) in the case of
an annual meeting, those matters which the Board of Directors, at
the date of mailing of notice, intends to present for action by the
Shareholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the
date of notice to be presented for election.
D. Notice shall be deemed given at the time it is
delivered personally or deposited in the mail or sent by other means
of written communication. The officer giving such notice or report
shall prepare and file in the minute book of the Corporation an
affidavit or declaration thereof.
E. If action is proposed to be taken at any meeting for
approval of (i) contracts or transactions in which a Director has a
direct or indirect financial interest, (ii) an amendment to the
Articles of Incorporation, (iii) a reorganization of the
Corporation, (iv) dissolution of the Corporation, or (v) a
distribution to preferred Shareholders, the notice shall also state
the general nature of such proposal.
Section 5. Quorum.
A. The holders of a majority of the shares entitled to
vote at a Shareholders' meeting, present in person, or represented
by proxy, shall constitute a quorum at all meetings of the
Shareholders for the transaction of business except as otherwise
provided by the Act or by these Bylaws.
B. The Shareholders present at a duly called or held
meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by a majority of the shares required
to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
A. Any Shareholders' meeting, annual or special, whether
or not a quorum is present, may be adjourned from time to time by
the vote of the majority of the shares represented at such meeting,
either in person or by proxy, but in the absence of a quorum, no
other business may be transacted at such meeting.
<PAGE>
B. When any meeting of Shareholders, either annual or
special, is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are
announced at a meeting at which the adjournment is taken, unless a
new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than 45 days from the date set for the
original meeting, in which case the Board of Directors shall set a
new record date. Notice of any adjourned meeting shall be given to
each Shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Section 4 of this Article. At
any adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
Section 7. Waiver or Consent by Absent Shareholders.
A. The transactions of any meeting of Shareholders,
either annual or special, however called and noticed, shall be valid
as though had at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of
notice, or a consent to the holding of such meeting or an approval
of the minutes thereof.
B. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any regular
or special meeting of Shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters
specified in Section E of Section 4 of this Article, the waiver of
notice or consent shall state the general nature of such proposal.
All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
C. Attendance of a person at a meeting shall also
constitute a waiver of notice of such meeting, except when the
person objects, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in
the notice. A Shareholder or Shareholders of the Corporation
holding at least 5% in the aggregate of the outstanding voting
shares of the Corporation may (i) inspect, and copy the records of
Shareholders' names and addresses and shareholdings during usual
business hours upon five days prior written demand upon the
Corporation, and/or (ii) obtain from the transfer agent by paying
such transfer agent's usual charges for such a list, a list of the
Shareholders' names and addresses who are entitled to vote for the
election of Directors, and their shareholdings, as of the most
recent record date for which such list has been compiled or as of a
date specified by the Shareholders subsequent to the day of demand.
Such list shall be made available by the transfer agent on or before
the later of five days after the demand is received or the date
specified therein as the date as of which the list is to be
compiled. The record of Shareholders shall also be open to
inspection upon the written demand of any Shareholder or holder of a
voting trust certificate, at any time during usual business hours,
for a purpose reasonably related to such holder's interest as a
Shareholder or as a holder of a voting trust certificate. Any
inspection and copying under this Section may be made in person or
by an agent or attorney of such Shareholder or holder of a voting
trust certificate making such demand.
Section 8. Maintenance and Inspection of Bylaws. The
Corporation shall keep at its principal executive office, or if not
in this state, at its principal business office in this state, the
<PAGE>
original or a copy of the Bylaws amended to date, which shall be
open to inspection by the Shareholders at all reasonable times
during office hours. If the principal executive office of the
Corporation is outside the state and the Corporation has no
principal business office in this state, the Secretary shall, upon
written request of any Shareholder, furnish to such Shareholder a
copy of the Bylaws as amended to date.
Section 9. Annual Report to Shareholders.
A. Provided the Corporation has 100 Shareholders or
less, the Annual Report to Shareholders referred to in the Act is
expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the Board of Directors from issuing annual or other
period reports to Shareholders of the Corporation as they deem
appropriate.
B. Should the Corporation have 100 or more Shareholders,
an Annual Report to Shareholders must be furnished not later than
120 days after the end of each fiscal period. The Annual Report to
Shareholders shall be sent at least 15 days before the annual
meeting of the Shareholders to be held during the next fiscal year
and in the manner specified in Section 4 of Article V of these
Bylaws for giving notice to Shareholders of the Corporation. The
Annual Report to Shareholders shall contain a Balance Sheet as of
the end of the fiscal year and an Income Statement and Statement of
Changes in Financial Position for the fiscal year, accompanied by
any report of independent accountants or, if there is no such
report, the certificate of an authorized officer of the Corporation
that the statements were prepared without audit from the books and
records of the Corporation.
Section 10. Financial Statements.
A. A copy of any annual financial statement and any
Income Statement of the Corporation for each quarterly period of
each fiscal year, and any accompanying Balance Sheet of the
Corporation as of the end of each such period, that has been
prepared by the Corporation shall be kept on file at the principal
executive office of the Corporation for 12 months from the date of
its execution, and each such statement shall be exhibited at all
reasonable times to any Shareholder demanding an examination of such
statement or a copy shall be made for any such Shareholder.
B. If a Shareholder or Shareholders holding at least 5%
of the outstanding shares of any class of stock of the Corporation
make a written request to the Corporation for an Income Statement of
the Corporation for the three month, six month or nine month period
of the then current fiscal year ended more than 30 days prior to the
date of the request, and a Balance Sheet of the Corporation at the
end of such period, the Chief Financial Officer shall cause such
statement to be prepared, if not already prepared, and shall deliver
personally or mail such statement or statements to the person making
the request within 30 days after the receipt of such request. If
the Corporation has not sent to the Shareholders its Annual Report
for the last fiscal year, this report shall likewise be delivered or
mailed to such Shareholder or Shareholders within 30 days after such
request.
C. The Corporation also shall, upon the written request
of any Shareholder, mail to the Shareholder a copy of the last
annual, semi-annual or quarterly Income Statement which it has
<PAGE>
prepared and a Balance Sheet as of the end of such period. This
quarterly Income Statement and Balance Sheet referred to in this
Section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the Corporation or the
certificate of authorized officer of the Corporation such that
financial statements were prepared without audit from the books and
records of the Corporation.
Section 11. Annual Statement of General Information. The
Corporation shall, in a timely manner, in each year, file with the
Secretary of State of Delaware, on the prescribed form, the
statement setting forth the authorized number of Directors, the
names and complete business or residence addresses of all incumbent
Directors, the names and complete business or residence addresses of
the Chief Executive Officer, Secretary and Chief Financial Officer,
the street address of its principal executive office or principal
business office in this state and the general type of business
constituting the principal business activity of the Corporation,
together with a designation of the agent of the Corporation for the
purpose of the service of process, all in compliance with the Act.
ARTICLE V
AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote or
written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the Articles of
Incorporation of the Corporation set forth the number of authorized
Directors of the Corporation, the authorized number of Directors may
be changed only by amendment to the Articles of Incorporation.
Section 2. Amendment by Directors. Subject to the rights
of the Shareholders to adopt, amend or repeal the Bylaws, as
provided in Section 1 of this Article IX, and the limitations of the
Act, the Board of Directors may adopt, amend or repeal any of these
Bylaws other than an amendment to the Bylaws changing the authorized
number of Directors.
Section 3. Record of Amendments. Whenever an amendment
or new Bylaw is adopted, it shall be copies in the corporate book of
Bylaws with the original Bylaws, in the appropriate place. If any
Bylaw is repealed, the fact of repeal with the date of the meeting
at which the repeal was enacted or written assent was filed shall be
stated in the corporate book of Bylaws.
ARTICLE VI
MISCELLANEOUS
Section 1. Shareholders' Agreements. Notwithstanding
anything contained in this Article X to the contrary, in the event
the Corporation elects to become a close corporation, an agreement
between two or more Shareholders thereof, if in writing and signed
by the parties thereto, may provide that in exercising any voting
rights, the shares held by them shall be voted as provided
<PAGE>
therein or in the Act, and may otherwise modify the provisions contained in
Article IV, herein as to Shareholders' meetings and actions.
Section 2. Effect of Shareholders' Agreements. Any
Shareholders' Agreement authorized by the Act, shall only be
effective to modify the terms of these Bylaws if the Corporation
elects to become a close corporation with the appropriate filing of
an amendment to its Articles of Incorporation as required by the Act
and shall terminate when the Corporation ceases to be a close
corporation. Any other provisions of the Act or these Bylaws may be
altered or waived thereby, but to the extent they are not so altered
or waived, these Bylaws shall be applicable.
Section 3. Subsidiary Corporations. Shares of the
Corporation owned by a subsidiary shall not be entitled to vote on
any matter.
Section 4. Accounting Year. The accounting year of the
Corporation shall be fixed by resolution of the Board of Directors.
Section 5. Form. The corporate seal shall be circular in
form, and shall have inscribed thereon the name of the Corporation,
the date of its incorporation, and the word "Delaware" to indicate
the Corporation was incorporated pursuant to the laws of the State
of Delaware.
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting secretary of
Wellspring Investments, Inc., a Delaware corporation; and
2. The foregoing Bylaws, consisting of 15 pages, are the
Bylaws of this Corporation as adopted by the Board of Directors in
accordance with the General Corporation Law of the State of Delaware
and that such Bylaws have not been amended and are in full force and
effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed
the seal of this Corporation on November 11, 1994.
/s/M. Richard Cutler
_________________________________
M. Richard Cutler, Secretary
<PAGE>
WELLSPRING INVESTMENTS, INC.,
CERTIFICATE OF DESIGNATION
SERIES A CONVERTIBLE PREFERRED STOCK
M. Richard Cutler hereby certifies that he is the President and
Secretary of Wellspring Investments, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation" or the "Company");
that, pursuant to the Corporation's Articles of Incorporation, as
amended, and the General Corporation Law of the State of Delaware,
the Board of Directors of the Corporation adopted the following
resolutions on September 8, 1998; and that none of the Series A
Convertible Preferred Stock has been issued.
1. Creation and Designation of Series A Convertible Preferred
Stock. There is hereby created a series of preferred stock
consisting of 8,000 shares and designated as the Series A
Convertible Preferred Stock (the "Shares" or "Preferred Shares"),
having the voting powers, preferences, relative, participating,
optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series A
Convertible Preferred Stock (the "Shareholders" or "holder") shall
be entitled to receive a dividend (the "Dividend") equal to thirteen
percent (13%) per annum, cumulating but not compounding, in Shares
of Company Common Stock (the "Dividend Shares") valued at Five
Dollars ($5.00) per share and payable on March 31, June 30,
September 30, and December 31 of each year. Each share of Series A
Convertible Preferred Stock shall rank on a parity with each other
share of Series A Convertible Preferred Stock with respect to
dividends. Dividend payments to the holders of shares of Series A
Convertible Preferred Stock shall be payable by delivery of a stock
certificate representing the Dividend Shares to each entitled
holder's address which is registered with the Secretary of the Company.
3. Liquidation Provisions. The Series A Convertible
Preferred Stock shall not have any rights to assets or proceeds from
sale of assets of the Company in the event of liquidation.
4. Conversion Provisions. The holders of shares of Series A
Convertible Preferred Stock shall have conversion rights as follows
(the "Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series A Convertible Preferred Stock
(the "Preferred Shares") shall be convertible, at the option of
its holder, at any time, into one (1) share of Common Stock of
the Company (the "Conversion Shares").
Such conversion shall be effectuated by surrendering
the Preferred Shares to be converted (with a copy, by
facsimile or courier, to the Company) to the Company with
notice to the Company evidencing such holder's intention
to convert the Preferred Share(s) or a specified portion
thereof, and accompanied, if required by the Company, by
proper assignment thereof in blank. The date on which
notice of
<PAGE>
conversion (the "Conversion Date") is given
shall be deemed to be the date on which the holder has
delivered the Preferred Shares, with the conversion notice
duly executed, to the Company, the Company shall complete
the issuance of Common Shares within ten (10) business
days of receipt of the conversion form and the Series A
Convertible Preferred Stock Certificates. Purchaser has
the right to convert the Preferred Shares at any time
after acquisition thereof.
(2) No fractional shares of Series A Convertible
Preferred Stock may be converted. No fractional shares of
common stock shall be issued upon conversion of the Series
A Convertible Preferred Stock, instead, shares will be
rounded up if the calculation results in .6 or more shares
and rounded down if the calculation results in .5 or less
shares.
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and Substitution. If
the common stock issuable on conversion of the Series A
Convertible Preferred Stock shall be changed into the same
or a different number of shares of any other class or
classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision
or combination of shares provided for above), the holders
of the Series A Convertible Preferred Stock shall, upon
its conversion, be entitled to receive, in lieu of the
common stock which the holders would have become entitled
to receive but for such change, a number of shares of such
other class or classes of stock that would have been
subject to receipt by the holders if they had exercised
their rights of conversion of the Series A Convertible
Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale
of Assets. If at any time there shall be a capital
reorganization of the Corporation's common stock (other
than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section
(b) or merger of the Corporation into another corporation,
or the sale of the Corporation's properties and assets as,
or substantially as, an entirety to any other person),
then, as a part of such reorganization, merger or sale,
lawful provision shall be made so that the holders of the
Series A Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A
Convertible Preferred Stock, the number of shares of stock
or other securities or property of the Corporation, or of
the successor corporation resulting from such merger, to
which holders of the common stock deliverable upon
conversion of the Series A Convertible Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series A Convertible Preferred Stock
had been converted immediately before that capital
reorganization, merger or sale to the end that the
provisions of this paragraph (b)(2) (including adjustment
of the Conversion Rate then in effect and number of shares
purchasable upon conversion of the Series A Convertible
Preferred Stock) shall be applicable after that event as
nearly equivalently as may be practicable.
<PAGE>
(3) Any adjustments made pursuant to this clause (b)
shall become effective (I) in the case of any such
dividend or distribution, immediately after the close of
business on the record date for the determination of
holders of shares of Common Stock entitled to receive such
dividend or distribution, or (II) in the case of any such
subdivision, reclassification or combination, at the close
of business on the day upon which such corporate action
becomes effective.
(c) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets, merger,
dissolution, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such
action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A
Convertible Preferred Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the conversion rate for
any shares of Series A Convertible Preferred Stock, the
Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of Series A Convertible
Preferred Stock effected thereby a certificate setting forth
such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any
holder of Series A Convertible Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the
conversion rate at the time in effect, and (iii) the number of
shares of common stock and the amount, if any, of other
property which at the time would be received upon the
conversion of such holder's shares of Series A Convertible
Preferred Stock.
(e) Notices of Record Date. In the event of the
establishment by the Corporation of a record of the holders of
any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, the Corporation
shall mail to each holder of Series A Convertible Preferred
Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution
and the amount and character of such dividend or distribution.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of common stock solely
for the purpose of effecting the conversion of the shares of
the Series A Convertible Preferred Stock such number of its
shares of common stock as shall from time to time be sufficient
to effect the conversion of all then outstanding shares of the
Series A Convertible Preferred Stock.
<PAGE>
(g) Registration Rights. If the Company at any time
proposes to register any of its securities under the Act,
including under an SB-2 Registration Statement or otherwise, it
will each such time give written notice to all holders of
outstanding shares and warrants of its intention so to do.
Upon the written request of a holder or holders of any such
Shares or Warrants given within 30 days after receipt of any
such notice, the Company will use its best efforts to cause all
such Shares, the holders of which (or of the Warrants for which
upon exercise thereof the Company will issue Shares) shall have
so requested registration thereof, to be registered under the
Act (with the securities which the Company at the time propose
to register), all to the extent requisite to permit the sale or
other disposition by the prospective Sellers of the Shares so
registered; provided, however, that the Company may, as a
condition precedent to its effective such registration, require
each prospective Seller to agree with the Company and the
managing underwriter or underwriters of the offering to be made
by the Company in connection with such registration that such
Seller will not sell any securities of the same class or
convertible into the same class as those registered by the
Company (including any class into which the securities
registered by the Company are convertible) for such reasonable
period after such registration becomes effective (not exceeding
90 days) as shall then be specified in writing by such
underwriter or underwriters if in the opinion of such
underwriter or underwriters the Company's offering would be
materially adversely affected in the absence of such an
agreement. All expenses incurred by the Company in complying
with this Section, including without limitation all
registration and filing fees, listing fees, printing expenses,
fees and disbursements of all independent accountants, or
counsel for the Company and the expense of any special audits
incident to or required by any such registration and the
expenses of complying with the securities or blue sky laws of
any jurisdiction shall be paid by the Company. Notwithstanding
the foregoing, Sellers shall pay all underwriting discounts or
commissions with respect to shares sold by the Sellers.
5. Holders' Put Rights. In the event that the Company
completes a round of financing or engages in a business combination
transaction, whether through a private placement in accordance with
Regulation D of the Securities Act of 1933, through a registration
statement filed with the Securities and Exchange Commission, whether
on a Form SB-2 or otherwise, or whether through a statutory or other
merger or other combination transaction, which results in gross
proceeds to the Company or gross assets acquired by the Company of
more than One Hundred Fifty Thousand Dollars ($150,000), the Holders
of Series A Convertible Preferred Stock shall have the right, but
not the obligation, to put all or a portion of the Series A
Convertible Preferred Stock back onto the Company at a value of
$10.00 per share.
6. Notices. Any notices required by the provisions of this
Certificate of Designation to be given to the holders of shares of
Series A Convertible Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed
to each holder of record at its address appearing on the books of
the Corporation.
7. Voting Provisions. The shares of Series A Convertible
Preferred Stock shall not have any voting rights.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series A Convertible Preferred Stock to be duly
executed by its President and attested to by its Secretary and has
caused its corporate seal to be affixed hereto this 8th day of
September, 1998.
By: /s/M. Richard Cutler
______________________________
M. Richard Cutler
President and Secretary
<PAGE>
EXHIBIT 1
CONVERSION NOTICE
(To be executed upon Conversion of Series A
Convertible Preferred Stock)
To: Wellspring Investments, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right, represented by that certain Certificate of Designation of
Series A Convertible Preferred Stock (the "Preferred Stock") as
adopted by the Company's Board of Directors on September 8, 1998,
and by Preferred Stock Certificate No. _______, attached hereto, to
convert ______________ shares of Preferred Stock into __________
shares of Common Stock ("Common Stock") of the Company according to
the Conversion Ratio set forth in the Certificate of Designation.
The undersigned requests that certificates for the Common Stock be
registered in the name of ________________________________________ whose
address is ________________________________________________________
and that such certificates be delivered to
_______________________________________________whose address
is_____________________________________________. If said number of
shares of Preferred Stock is less than all of the shares of
Preferred Stock currently held by the undersigned, the undersigned
requests that a new Preferred Stock Certificate representing the
number of shares held by the undersigned after giving effect to the
conversion herein be registered in the name of
___________________________whose address is _______________________________
and that such Preferred Stock Certificate be delivered to
_____________________________whose address
is ___________________________________.
Dated: Signature:_________________________
(Signature must conform in all
respects to name of holder as
specified on the Preferred Stock
Certificate)
<PAGE>
WARRANT
For the Purchase of 50,000
Shares of Common Stock
of
WELLSPRING INVESTMENTS, INC.
A Delaware Corporation
THIS CERTIFIES THAT, for value received, Saalib Limited or
his/her assigns (the "Holder"), is entitled to, within the time
frame set forth in Section 1 below ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive up to Fifty
Thousand (50,000) fully paid and nonassessable shares of the common
stock (the "Common Stock"), of Wellspring Investments, Inc., a
Delaware corporation (the "Company"), at the initial price of $5.00
per share (the "Exercise Price"), upon payment by cashier's check or
wire transfer of the Exercise Price for such shares of the Common
Stock to the Company at the Company's offices.
1. Exercise of Warrant. This Warrant may be exercised
in whole or in part at any time or from time to time before January
6, 2004 and before 5:00 p.m., California Time, by presentation and
surrender hereof to the Company of a notice of election to purchase
duly executed and accompanied by payment by cashier's check or wire
transfer of the Exercise Price for the number of shares specified in
such election.
2. Adjustment in Number of Shares.
The Exercise Price and the number of shares issuable upon
exercise of the warrants hereunder is NOT subject to adjustment upon
certain events such as stock splits, reverse stock splits, stock
dividends and similar transactions.
3. Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued
shares of common stock solely for the purpose of effecting the
exercise of this warrant such number of its shares of common stock
as shall from time to time be sufficient to effect the exercise hereof.
4. Registration Rights. If the Company at any time
proposes to register any of its securities under the Act, including
under an SB-2 Registration Statement or otherwise, it will each such
time give written notice to all holders of outstanding warrants of
its intention so to do. Upon the written request of a holder or
holders of any such warrants given within 30 days after receipt of
any such notice, the Company will use its best efforts to cause all
shares underlying the exercise of such warrants to be registered
under the Act (with the securities which the Company at the time
propose to register); provided, however, that the Company may, as a
condition precedent to its effective such registration, require each
Holder to agree with the Company and the managing underwriter or
underwriters of the offering to be made by the Company in connection
with such registration that such Holder will not sell any securities
of the same class or convertible into the same class as those
registered by the Company (including any class into which the
securities registered by the Company are convertible) for such
reasonable period after such registration becomes effective (not
exceeding 90 days) as shall then be specified in writing by such
underwriter or underwriters if in the opinion of such underwriter or
underwriters the Company's offering would
<PAGE>
be materially adversely affected in the absence of such an agreement. All
expenses incurred by the Company in complying with this Section, including
without limitation all registration and filing fees, listing fees, printing
expenses, fees and disbursements of all independent accountants, or
counsel for the Company and the expense of any special audits
incident to or required by any such registration and the expenses of
complying with the securities or blue sky laws of any jurisdiction
shall be paid by the Company.
5. Notices. All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first
class registered or certified mail, postage prepaid, to the address
set forth in the records of the Company.
6. Change; Waiver. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but
only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is
sought.
7. Law Governing. This Warrant shall be construed and
enforced in accordance with and governed by the laws of California.
Any action or proceeding arising under or pursuant to this Warrant
shall be brought in the appropriate court in the County of Orange,
California.
8. Entire Agreement. This Warrant sets forth and
includes the entire obligation of the Company with respect to any
warrants held or due to Holder as of the date hereof, and any other
agreement, arrangement, writing, contract, letter, or agreement
dated prior to or of even date herewith shall be null and void upon
execution of this Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Warrant
to be signed as of this 6th day of January, 1999.
WELLSPRING INVESTMENTS, INC.
a Delaware Corporation
/s/M. Richard Cutler
_______________________________
By: M. Richard Cutler
Its: President
Acknowledged and Accepted:
Saalib Limited
________________________________
By: __________________________
Its: __________________________
<PAGE>
CONSENT OF MENDOZA BERGER & COMPANY, LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The undersigned independent certified public accounting firm
hereby consents to the inclusion of its report on the financial
statements of Wellspring Investments, Inc. (A Development Stage
Company) as of December 31, 1998 and the period from inception
(October 21, 1994) through December 31, 1998, and for the years
ended December 31, 1997 and 1998 and to the reference to it as
experts in accounting and auditing relating to said financial
statements and under the heading Part II, Item 3 - Changes in and
Disagreements with Accountants in the Registration Statement and
Prospectus on Form 10-SB for Wellspring Investments, Inc., dated
January 29, 1999.
/s/Mendoza Berger & Company, LLP
_____________________________________
Mendoza Berger & Company, LLP
Dated: January 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10000 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 10000 0
<CURRENT-LIABILITIES> 11,472 0
<BONDS> 0 0
0 0
0 0
<COMMON> 100 0
<OTHER-SE> (1572) 0
<TOTAL-LIABILITY-AND-EQUITY> (1472) 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 265 75
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (265) (75)
<INCOME-TAX> (800) 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1065) (75)
<EPS-PRIMARY> (.001) 0
<EPS-DILUTED> 0 0
</TABLE>
