<PAGE>
As filed with the Securities and Exchange Commission on March 30, 1999.
Registration No. 333-_________
==============================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
R & R RANCHING, INC.
--------------------
(Name of small business issuer in its charter)
Nevada 0279 87-0616524
------ ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
899 South Artistic Circle
Springville, Utah 84663
(801) 489-3238
--------------
(Address and telephone number of principal executive offices)
RR1
Carvel, Alberta T0E 0H0
Canada
------
(Address of principal place of business
or intended principal place of business)
William R. Davidson
899 South Artistic Circle
Springville, Utah 84663
(801) 489-3238
--------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 500
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
==============================================================================
CALCULATION OF REGISTRATION FEE
<TABLE>
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registration
Registered Registered Unit/Share Price Fee
- ---------- ---------- ---------- ----- ---
<S> <C> <C> <C> <C>
Units(1) . . . . .100,000 $1.25 $125,000 (2)
Units
Common Stock . .100,000 $1.25 $125,000 $ 34.75
Shares
A Warrants . . .100,000 $0.00 --
Warrants
Common Stock
Underlying A
Warrants (3) .100,000 $2.50 $250,000 $ 69.50
Shares
B Warrants . . .100,000 $0.00 --
Warrants
Common Stock
Underlying B
Warrants (3) .100,000 $5.00 $500,000 $139.00
Shares
TOTAL. . . . . . . $243.25
</TABLE>
==============================================================================
(1) Each consisting of one share of Common Stock, one A Warrant and one B
Warrant.
(2) A separate registration fee is payable on the shares of Common Stock
comprising the Units; therefore, no registration fee is payable on the Units.
(3) In accordance with Rule 416 under the Securities Act of 1933, as
amended, a presently indeterminable number of shares of Common Stock are
registered hereunder which may be issued in the event the anti-dilution
provision of the A and B Warrants becomes operative.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
R & R RANCHING, INC.
899 South Artistic Circle
Mapleton, Utah 84663
(801) 489-3238
R & R Ranching, Inc., a Nevada corporation (the "Company"), is
offering 100,000 Units. Each Unit consists of:
one share of the Company's one mill ($0.001) par value
common stock;
one A Warrant to purchase one share of common stock at a
price of $2.50; and
one B Warrant to purchase one share of common stock at a
price of $5.00.
The Warrants are exercisable for five years. The Company may call
the Warrants at their exercise price on 30 days' notice at any time after
issuance and prior to the expiration date of the Warrants. Warrants may be
exercised or redeemed if a current prospectus is in effect. For a complete
description of the securities being offered, see the caption "Description of
Securities."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE THE CAPTION
"RISK FACTORS," BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
There is no public market for the Units or any securities of which
they are comprised.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
Underwriting Proceeds to Issuer
Price to Discounts and or Other Public Persons
Public Commissions(1) (2)
- ------------------------------------------------------------------------------
Per Unit $1.25 $0 $1.25
Total Maximum $125,000 $0 $125,000
- ------------------------------------------------------------------------------
(1) The Units will be sold by the Company's directors and
executive officers on a "best efforts" basis. The offering will end on
_________, 1999. The Company's directors may extend the offering period to
________, 1999, in their sole discretion. Each purchaser must buy a minimum
of 800 Units, although the Company's directors and executive officers may let
any purchaser buy less than the minimum subscription amount, in their sole
discretion. The proceeds of this offering will not be placed in escrow and
will be available for the Company's use immediately after they are received.
(2) Before deducting estimated expenses of $15,000, all of which will be
paid by the Company.
The date of this Prospectus is ____________.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Determination of Offering Price . . . . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers, Promoters and Control Persons . . . . . .
Security Ownership of Certain Beneficial Owners and Management . . . . .
Description of Securities . . . . . . . . . . . . . . . . . . . . . . .
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .
Disclosure of Commission Position on Indemnification for Securities . . .
Act Liabilities
Organization Within Last Five Years . . . . . . . . . . . . . . . . . . .
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis or Plan of Operation . . . . . . . . .
Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions . . . . . . . . . . . . . .
Market for Common Equity and Related Stockholder Matters . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and . . . . . .
Financial Disclosure
<PAGE>
PROSPECTUS SUMMARY
------------------
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN THESE SECURITIES. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF INVESTING IN THE SECURITIES, AS
DISCUSSED UNDER THE CAPTION "RISK FACTORS."
All references to the "Company" refer to R & R Ranching, Inc., a
Nevada corporation.
The Company
------------
The Company was formed on August 3, 1998, and has only recently
begun minimal operations.
The purposes of the Company are to operate a ranch which will
produce, raise and market bison. Management plans to engage in the business
of raising bison for sale as breeding stock or as a meat product to a bison
meat retailer. The Company intends to become active in national and local
bison associations to develop the networking contacts to market its products.
The Company has purchased 20 mature cow buffalo from Diving
Buffalo Ranch, Inc., of Harlowton, Montana ("Diving Buffalo"). This purchase
was made with the proceeds of a $70,000 loan from Libco Equities Inc., a
corporation organized under the laws of the Province of Alberta, Canada
("Libco"). Libco is controlled by William R. Davidson, the Company's
President and director. Allyson R. N. Davidson, the Company's
Secretary/Treasurer, is also an executive officer of Libco. See the Risk
Factor "Repayment of Loan; Related Party Transaction" and the captions "Use of
Proceeds"; "Organization Within Last Five Years"; "Description of Business";
and "Management's Discussion and Analysis or Plan of Operation."
The Offering
------------
<TABLE>
<S> <C>
Securities Offered . . . . . .100,000 Units, each consisting of one share
of common stock, one A Warrant to purchase one
share of common stock at a price of $2.50 and
one B Warrant to purchase one share of common
stock at a price of $5.00. The Units will be
represented by three separate certificates: one
representing shares of common stock; one
representing A Warrants; and one representing B
Warrants. See "Description of Securities."
Offering Price . . . . . . . .$1.25 per Unit.
Plan of Distribution . . . . .The Company's directors and executive officers
will offer the Units on a "best efforts" basis.
The Company does not need to receive any minimum
gross proceeds, and all proceeds will be
available for immediate use. See the Risk
Factor "'Best Efforts' Offering."
Securities Outstanding . . . .The Company is authorized to issue 50,000,000
shares of one mill ($0.001) par value common
stock and 10,000,000 shares of one mill ($0.001)
par value preferred stock. As of the date of
this Prospectus, 1,000,000 shares of common
stock and no shares of preferred stock are
outstanding. The Company has reserved 200,000
shares of common stock for issuance upon
exercise of the Warrants. See "Description of
Securities."
Warrants . . . . . . . . . . .Each Warrant entitles the holder to purchase one
share of common stock. A Warrants are exercisable at $2.50 per share and B Warrants
are exercisable at $5.00 per share. The Company can call the Warrants at any time prior
to their expiration by giving 30 days' notice
and paying the holders $0.01 per Warrant. The
exercise prices for the Warrants may be adjusted
in certain events. See "Description of Securities."
Use of Proceeds . . . . . . . The Company has allocated the net proceeds of
this offering as set forth under "Use of Proceeds."
The Company can give no assurance
as to the actual amount of proceeds that it will
receive under this offering.
Transfer Agent . . . . . . . .Interwest Transfer Company, Inc., 19891 East
Murray-Holladay Road, Holladay, Utah 84117 (801)
272-9294, serves as the Company's transfer agent
and registrar for its outstanding securities.
</TABLE>
FORWARD-LOOKING STATEMENTS
--------------------------
This Prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the "1933
Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the
"1934 Act"). Such statements can be identified by the use of the forward-
looking words "anticipate," "estimate," "project," "likely," "believe,"
"intend," "expect," or similar words. These statements discuss future
expectations, contain projections regarding future developments, operations,
or financial conditions, or state other forward-looking information. When
considering such forward-looking statements, you should keep in mind the risk
factors noted in this section and other cautionary statements throughout this
Prospectus, any prospectus supplement, and the Company's periodic filings with
the Securities and Exchange Commission (the "Commission") that are
incorporated herein by reference. You should also keep in mind that all
forward-looking statements are based on management's existing beliefs about
present and future events outside of management's control and on assumptions
that may prove to be incorrect. If one or more risks identified in this
Prospectus, a prospectus supplement, or any applicable filings materializes,
or any other underlying assumptions prove incorrect, the Company's actual
results may vary materially from those anticipated, estimated, projected or
intended.
Among the key factors that may have a direct bearing on the
Company's operating results are risks and uncertainties described under "Risk
Factors," including, for example, those attributable to market acceptance of
the Company's product line; the lack of organized markets for such products;
and currency risks with respect to the Canadian dollar.
RISK FACTORS
------------
An investment in the Company's Units is very speculative and
involves substantial risks. In addition to the general investment risks and
other information in this Prospectus, you should carefully consider the
following factors in deciding whether to invest in the Units.
EARLY STAGE OF DEVELOPMENT
The Company was formed in August, 1998, and is at a very early
stage of development. It has recently purchased 20 mature buffalo cows for
its proposed business of producing, raising and marketing bison. The Company
is subject to all of the risks inherent in any new business. These risks
include:
the need for substantial capital to support its development
efforts;
the need to attract and retain qualified personnel and
experienced management;
the need for good breeding stock;
herd health;
volatile supply costs;
losses associated with start-up;
competition;
the arbitrary determination of the offering price for the
Units;
dilution;
government regulation; and
the other risks described in this Prospectus.
BREEDING STOCK
The Company must be able to get enough genetically consistent
breeding stock on reasonable terms and at reasonable prices in order to
succeed. The Company can not guarantee that it will be able to do this. See
"Description of Business."
HERD HEALTH
The health of the Company's breeding herd and bison will have a
great impact on its profits. If its breeding herd or bison population
contracts a disease causing it to breed less productively, or which kills many
of its bison, the Company's business operations will be damaged. In addition,
many bison will be raised together, which will make them more vulnerable to
contagious disease. The Company can not guarantee that it will be able to
avoid herd health problems. See "Description of Business."
VOLATILE SUPPLY COSTS
The Company's profitability is extremely sensitive to changes in
the cost of supplies because the cost of feed and other supplies are a large
part of the cost of producing bison. These costs are affected by regional and
seasonal availability and demand. Crop conditions, weather and other factors
may make feed and supplies more expensive. Increased expense or a large
decline in the availability of these supplies could have a negative effect on
the Company. See "Description of Business."
LOSSES ASSOCIATED WITH START-UP
The Company was formed recently and has no operating history. The
purchase of breeding stock requires large up front expenditures and working
capital during the initial start-up period. The Company expects that its
initial expenses will result in losses early in its development. It can not
guarantee that it will become profitable after it completes its initial
purchases. See "Management's Discussion and Analysis or Plan of Operation."
COMPETITION
Many of its current and potential competitors have much more
financial, technical and personnel resources than the Company. The Company can
not guarantee that its competitors will not be more successful in developing
and improving bison production technologies and raising consistently high
quality bison that are more economical to raise than the Company's bison.
Also, as additional competitors begin operations, the supply of bison may
exceed demand and result in lower market prices for bison. The Company's
competitive position in the buffalo ranching industry is extremely small.
ARBITRARY DETERMINATION OF OFFERING PRICE; DILUTION
The Company has set the price for the Units arbitrarily. The
price is not based on any recognized criteria of value, such as assets, book
value or net worth. You should not consider the offering price to be an
indication of the Company's value. Management expects that purchasers of
Units in this offering will experience immediate and substantial dilution in
net tangible book value. See "Plan of Distribution."
GOVERNMENT REGULATION
The Company is subject to federal, state, provincial and local
government regulations, including those restricting certain types of
investor-owned livestock production operations and those concerning
occupational safety and health, and zoning. The Company will attempt to comply
with all applicable regulations. However, it can not guarantee that it will
satisfy all regulations or obtain all required approvals. Failure to comply
with applicable regulations can, among other things, result in fines,
suspensions of regulatory approvals, operating restrictions, and criminal
prosecution. Changes in or additions to applicable regulations could also have
a negative effect on the Company and its
business. See "Description of Business."
HIGH CAPITAL COSTS
Bison operations require expensive capital assets such as:
land;
handling facilities and fences;
equipment and breeding stock;
operating funds; and
labor and management.
For a typical 40-cow bison operation, the cost of these capital
assets can be as high as $300,000. This high initial investment prevents many
small investors from entering the bison industry.
REPAYMENT OF LOAN
Approximately $73,000 of the proceeds from this offering will be
used to repay the loan from Libco, and will not be available for the Company's
future operations. The Company's President, William R. Davidson, is the
President, sole stockholder and a director of Libco; the Company's
Secretary/Treasurer, Allyson R. N. Davidson, is also an executive officer of
Libco. Due to his control of Libco, approximately 67% of the net proceeds of
this offering will be paid indirectly to Mr. Davidson.
MARKET ACCEPTANCE OF PRODUCT LINE
The North American meat industry is dominated by producers of
beef, pork and chicken. Bison is not a mainstream meat product, and the
Company can not guarantee that the public will want to purchase bison meat in
sufficient amounts to make the Company's operations profitable. Producers of
ostrich, another non-mainstream meat, have found it very difficult to gain
large-scale access to consumers. The ostrich meat industry was also
disadvantaged by the higher prices being paid for live ostriches as breeding
stock, as compared to the relatively low price per pound for ostrich meat.
When it became clear that no large-scale meat market would develop in the
foreseeable future, the prices of ostrich breeding stock fell to meat market
prices. The bison industry is likely to face similar difficulties.
LACK OF INDUSTRY ORGANIZATION AND INFORMATION
Accurate data about various facets of the bison industry is very
difficult to obtain, and organized or aggregate information for the most part
simply does not exist. This lack of industry organization and information
prevents many investors from entering the bison industry.
LACK OF ORGANIZED MARKETS
The bison production industry lacks well-defined and established
channels of product distribution because it is a new industry. There is no
large-scale, organized system for wholesaling or retailing buffalo products.
CURRENCY RISK
The Company will be conducting its principal operations in Canada.
It will pay most of its operating expenses and receive most of the proceeds
from its bison sales in Canadian dollars. If the Canadian dollar strengthens
relative to the U.S. dollar, the Company's earnings may be adversely affected
when converted from Canadian dollars into U.S. dollars.
DIVIDENDS
The Company does not expect to pay dividends on its common stock
in the foreseeable future. Future dividends, if any, will depend upon the
Company's earnings, if any. Purchasers who will need cash dividends from
their investment should not purchase the Units.
NO PUBLIC MARKET FOR THE COMPANY'S SECURITIES
There is no public market for the Company's securities. The
Company can not guarantee that any public market will develop after the
offering. As a result, purchasers of the Units may not be able to sell their
investment readily, if at all.
"BEST EFFORTS" OFFERING
The Company is offering the Units on a "best efforts" basis. No
individual, firm or corporation has agreed to buy any of the Units, and the
Company can give no assurance that it will be able to sell any of the Units.
No minimum number of Units must be sold before the Company will have access to
any offering proceeds, and proceeds will not be placed in escrow pending the
receipt of any minimum amount. All proceeds will be available for the
Company's use as soon as the Company receives them.
PENNY STOCK
The shares of common stock that make up the Units are "penny
stock" as defined in Rule 3a51-1 of the Commission. This designation may
adversely affect the development of any public market for the Company's shares
of common stock or, if such a market develops, its continuation. Broker-
dealers are required to personally determine whether an investment in "penny
stock" is suitable for customers.
Penny stocks are securities (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national
exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation
system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv)
of an issuer with net tangible assets less than $2,000,000 (if the issuer has
been in continuous operation for at least three years) or $5,000,000 (if in
continuous operation for less than three years), or with average annual
revenues of less than $6,000,000 for the last three years.
Section 15(g) of the 1934 Act, and Rule 15g-2 of the Commission
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors
in the Company's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Rule 15g-9 of the Commission requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks
of penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy of such
statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more difficult for
purchasers of the Company's common stock to resell their shares to third
parties or to otherwise dispose of them.
VOTING CONTROL
William R. Davidson can elect all of the Company's directors, who
in turn appoint all executive officers, without regard to the votes of other
stockholders. Mr. Davidson will have absolute control over the management and
affairs of the Company, even if this offering is successful. Mr. Davidson
currently owns all of the Company's outstanding voting securities and will own
approximately 91% of the outstanding voting securities upon completion of this
offering (not taking into account the exercise of any of the Warrants). See
"Security Ownership of Certain Beneficial Owners and Management."
NO UNDERWRITER
The Company is not using an underwriter for this offering. The
"due diligence" review that an underwriter would customarily perform has not
been performed for this offering. The Company's directors and officers are
conducting the offering, which makes it less likely that a public market will
develop for the Company's securities.
EXERCISABILITY OF WARRANTS
The value of the Warrants lies in the possibility that the price
of the Company's common stock may someday exceed the exercise price of the
Warrants. There is currently no market for the Company's common stock. The
Company can not guarantee that any market will ever exist or that, if it does,
the market price of the common stock will exceed the exercise price of the
Warrants. If the market price does not exceed $2.50 per share (for the A
Warrants) or $5.00 per share (for the B Warrants) during the five-year term of
the Warrants, they will become worthless.
CURRENT PROSPECTUS AND REGISTRATION REQUIRED FOR EXERCISE
Holders of the Warrants will only be able to exercise them if the
Company maintains a current prospectus in effect and the exercise is qualified
or exempt from qualification under applicable securities laws of the Warrant
holders' states of residence. Although the Company intends to use reasonable
efforts to update this prospectus as necessary to maintain a current
prospectus and federal and state registration or qualification for the
exercise of the Warrants, it can not assure investors that it will be able to
do so when the investors wish to exercise the Warrants. The value of the
Warrants will decrease greatly if the Company does not maintain a current
prospectus and registration or qualification.
WARRANTS REDEEMABLE
If the Company maintains a current prospectus in effect, it may
redeem each of the Warrants at a price of one cent ($0.01) per Warrant upon 30
days' notice at any time that the Warrants are exercisable. If the Company
calls the Warrants, investors will have only 30 days to exercise them; if they
do not, the Company will pay them the nominal price of one cent ($0.01) per
Warrant.
SALE OF "RESTRICTED" SHARES
All of the 1,000,000 outstanding shares of the Company's common
stock are "restricted" securities within the meaning of Rule 144 of the 1933
Act. If a market for the Company's common stock ever develops, the holders of
these shares may begin selling them as early as August, 1999. Such sales may
have a negative effect on the Company's stock price. Mr. Davidson currently
owns all of the 1,000,000 shares of common stock that are currently
outstanding.
USE OF PROCEEDS
---------------
The Company estimates that its net proceeds from this offering will be
$110,000, after deducting estimated offering expenses of $15,000. The Company
plans to use these net proceeds as follows:
Assuming
Maximum
Units
Item Sold(1)
---- ----
Secure lease on 1/4 Section of
land in Alberta, Canada for one year $ 2,800
Fence leased land 7,000
Repay loan from Libco(2) 73,169.44
Feed, including hay, grain,
water, minerals and salt for
one year (3) 2,520
Management fees to Blue Sky
Bison Ranch, Ltd., for one year(4) 4,824
Membership fees for bison
associations in U.S. and
Canada for one year 400
Accounting, attorney's and
incorporation fees 10,000
Travel 1,750
Office expenses (telephone, 1,200
photocopies, postage)
Working capital 6,336.56
Total $110,000
(1) These expenditures are estimates based on the Company's present
intentions. None of these items is a firm commitment by the Company.
All figures are in U.S. dollars.
(2) On October 5, 1998, the Company entered into a Buffalo Sale and
Purchase Agreement with Diving Buffalo, under which the Company agreed
to buy 20 mature cow bison for $84,000 ($4,200 per head) (the "Purchase
Agreement"). This purchase was completed, and the buffalo were
delivered to the Company on January 19, 1999. In order to close the
purchase and begin operations without having to wait for the receipt of
proceeds under this offering, the Company borrowed $70,000 from Libco,
which is controlled by the Company's President, William R. Davidson.
The repayment figure assumes a payoff date of July 1, 1999, with payment
of the principal amount of the note and accrued interest, at a rate of
10% per year. Libco has the option to convert the outstanding principal
and interest on the Note into "unregistered" and "restricted" shares of
the Company's common stock on a $1.00 per share basis. If Libco elects
to convert the debt into equity before the Company is able to repay the
Note with the proceeds of this offering, the Company will use the
proceeds allocated to the Note to purchase 15 bison cows at $4,000, with
the rest of those proceeds allocated to working capital. See
"Organization Within Last Five Years"; "Description of Business"; and
"Management's Discussion and Analysis or Plan of Operation."
(3) This amount has been allocated for the Company's second year of
operations. The Management Agreement with Blue Sky provides for Blue
Sky to feed the Company's herd during the one year term of that
agreement. See footnote 4, below.
(4) On December 1, 1998, the Company and Blue Sky Bison Ranch Ltd., of
Carvel, Alberta, Canada ("Blue Sky") entered into an agreement under
which Blue Sky agreed to house, feed, manage and market the Company's
bison for a period of one year, commencing January 1, 1999 (the
"Management Agreement"). The Company is responsible for a monthly
management fee of $500 (Canadian), together with one-fourth (1/4) of the
sales proceeds from bison from its herd in 1999. At the current
exchange rate of approximately US$ 0.67 per Canadian dollar, the monthly
and annual management fees are approximately US$ 335 and US$ 4,020,
respectively. W. Malcolm C. Davidson, Blue Sky's President, director
and controlling stockholder, is the father of William R. Davidson, the
Company's President. See "Description of Business."
The net proceeds from this offering will fund the Company's
operations for one year without the receipt of any operating revenues. If
less than the maximum offering is sold and no Warrants are exercised, the net
proceeds will fund the Company for a shorter time. The Company will need to
be operating profitably within one year from the completion of the offering in
order to fund its operations from cash flow. Otherwise, it will have to seek
additional debt or equity funding (including the exercise of the Warrants
being sold as part of the Units). The Company can give no assurance that its
stock price will become high enough to induce Warrant holders to exercise
their Warrants, or that it will be able to obtain additional financing from
other sources.
DETERMINATION OF OFFERING PRICE
-------------------------------
There is no public market for the Units or the Warrants and common
stock comprising the Units. The Company has arbitrarily determined the price
of the common stock based on the amount of net proceeds it needs to repay the
Libco loan and start its operations (approximately $110,000) and the
percentage ownership interest in the Company that William R. Davidson is
willing to give up. If the maximum offering is sold and none of the Warrants
are exercised, Mr. Davidson will have a 91% ownership interest in the Company.
If the maximum offering is sold and all of the Warrants are exercised, Mr.
Davidson will still retain a 77% interest in the Company.
The Company has arbitrarily valued the Warrants; they do not bear
any relationship to its current book value, revenues, earnings, or any other
customary measure of value.
The Company can not assure that any public market that develops
for its common stock will equal or exceed the offering price or the exercise
price of the Warrants. Purchasers of the Units face the risk that their
shares will not be worth what they paid for them at the time that the
purchasers decide to sell them. Purchasers also face the risk that their
Warrants will become worthless if the market price of the Company's common
stock is less than the exercise price of the Warrants for the entire five-year
term of the Warrants. See the Risk Factor "Exercisability of Warrants."
DILUTION
--------
Purchasers of the Units will likely experience immediate and
substantial dilution in the value of the Company's common stock. The net
tangible book value of the Company as of January 31, 1999, was approximately
$22,918, or $0.046 per share. Retroactively taking into account the two-for-
one forward split of the Company's common stock on March 3, 1999, the net
tangible book value was $0.023 per share. Net tangible book value per share
is determined by subtracting the Company's total liabilities from its total
tangible assets and dividing the remainder by the number of shares of common
stock outstanding.
If the Company sells all 100,000 Units being offered in this
offering (at a price of $1.25 per Unit), and after deduction of offering
expenses of $15,000, and taking into account the above-referenced forward
split, the net tangible book value of the Company as of January 31, 1999,
would have been $132,918, equaling $0.121 per share. This amount represents
an immediate increase of $0.098 per share (or approximately 526%) to William
R. Davidson, the Company's sole existing stockholder, and an immediate
dilution in net tangible book value of $1.129 per share (or approximately 90%)
to purchasers of Units in this offering. The following table illustrates this
dilution:
<TABLE>
<S> <C> Assuming
Maximum
Shares
Sold(1)
----
Initial public offering price per Unit(2)..$1.25
Net tangible book value per share
before offering...........................$0.023
Increase per share due to new investors...$0.098
(approximately 526% increase) ------
Net tangible book value per share
after offering(3).........................$0.121
------
Dilution per share purchased by new
investors.................................$1.129
(approximately 90% decrease)
(1) These calculations do not take into account the potential exercise
of any of the Warrants.
(2) Offering price per share before deduction of offering expenses.
(3) After deduction of offering expenses estimated at $15,000.
</TABLE>
The following table shows the number of Units purchased from the
Company, the total cash paid to the Company, and the average price that the
existing stockholder and purchasers under this offering paid for their shares:
<TABLE>
Shares Purchased(1) Total Consideration
---------------- -------------------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Existing stockholder....1,000,000 91% $ 25,000(2) 17%
New investors........... 100,000 9% $125,000(3) 83%
------- ------- ------- -------
Total.............1,100,000 100% $150,000 100%
--------- ------- -------- -------
(1) Assumes the sale of the maximum offering, without taking
into account the exercise of any of the Warrants.
(2) Considers only the cash contribution paid by the existing
stockholder, and does not take into account other contributions such as
services contributed.
(3) Before deduction of offering expenses estimated at $15,000.
</TABLE>
SELLING SECURITY HOLDERS
------------------------
No security holder of the Company is offering any securities under this
offering. The Company is selling all of the Units under this offering.
PLAN OF DISTRIBUTION
--------------------
General
- -------
The Company is offering its Units to the public on a "best
efforts" basis, with no minimum number of Units which must be sold. The
Company can provide no assurance that it will be able to sell any of the
Units. There is no provision for the escrow of offering proceeds pending the
receipt of any minimum proceeds; all proceeds will be immediately available
for the Company's use. The offering will continue for a period of three
months from the date of this Prospectus or until all offered Units are sold,
or until terminated by the Company, whichever occurs first. The Company's
Board of Directors can extend the offering period for an additional two months
in its sole discretion.
All subscription payments shall be made payable to "R & R
Ranching, Inc."
The Units will be offered and sold by the Company's directors and
executive officers; they will receive no compensation except for reimbursement
of expenses actually incurred in connection with offering activities. The
Company has no plans, proposals, arrangements or understandings with any
potential sales agent with respect to participation in the distribution of the
Company's securities. If the Company later decides to seek the participation
of any potential sales agent, the Registration Statement of which this
Prospectus is a part will be appropriately amended to identify such persons.
There are no formal arrangements between the Company and its
directors and executive officers pursuant to which Units will be reserved for
sales to persons designated by such directors and executive officers or their
affiliates. Directors and executive officers and their affiliates may
purchase Units under this offering, but it is unlikely that they will purchase
any Units.
The Company is not using the services of an underwriter for the
offer and sale of the Units; the independent "due diligence" review of the
Company and its affairs and financial condition which is usually performed by
the underwriter has not been performed. The Company can give no assurance
that any market for its securities will develop after the offering or that, if
such a market does develop, it will be maintained. Since the offering is not
being underwritten by a broker-dealer that would ordinarily be expected to
publish quotations for and make a market in the offered securities following
the offering, the Company has not had any discussions with any broker-dealer
firms regarding the possibility of making a market in its securities after the
offering.
Prior to this offering, there has been no public market for the
securities of the Company. All dealers effecting transactions in the
securities being offered, whether or not the dealers are participating in this
distribution, may be required to deliver a Prospectus until the later of the
termination of this offering or ___________, 1999 (90 days after the date of
this Prospectus). This is in addition to the obligation of dealers to deliver
a Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Warrant Exercise Procedures
- ---------------------------
Warrant holders may exercise all or part of their Warrants by
delivering the completed and signed Warrant Exercise Form attached to each
Warrant to the Company's transfer agent, Interwest Transfer Company, Inc.,
1981 East Murray-Holladay Road, Holladay, Utah 84117, along with the exercise
price for the number of shares being purchased. The Warrant Holder must pay
the exercise price in lawful money of the United States by wire transfer or
check payable to the order of "R & R Ranching, Inc.," and must also deliver to
the transfer agent the Warrant Certificate representing the Warrants being
exercised. Once the transfer agent has received each of these items, it will
deliver the checks or other funds to the Company and will promptly issue
certificates for the number of shares being purchased.
LEGAL PROCEEDINGS
-----------------
The Company is not a party to any pending legal proceeding. To
the knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or affiliate of the Company or owner of record or
beneficially of more than five percent of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders (held on the third Wednesday of August
of each year) or until their successors are elected or appointed and
qualified, or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
William R. Davidson President 8/98 *
Director 8/98 *
Allyson R.N. Davidson Secretary/ 8/98 *
Treasurer 8/98 *
</TABLE>
* These persons presently serve in the capacities
indicated.
Business Experience.
- --------------------
William R. Davidson, Director and President. Mr. Davidson, age 25,
is a 1998 graduate of Brigham Young University ("BYU"), where he received a
degree in accounting. He owned and operated his own commercial cattle
operation from 1992 to 1995. Mr. Davidson was an Office Trainer at the Senior
Missionary Training Center at BYU, from April, 1995, through August, 1997.
For the eight months ending April, 1998, Mr. Davidson was employed in the
Controller's Division of the Finance/Records Department of the LDS Church.
Since April, 1998, he has been the President of Libco, a closely-held
consulting firm. Mr. Davidson is a member of the Institute of Management
Accountants.
Allyson R. N. Davidson, Secretary/Treasurer. Ms. Davidson is 24
years of age. From 1992 to 1994, Ms. Davidson was a student body officer at
BYU, where she was an undergraduate student. From May, 1995, to December,
1996, Ms. Davidson studied Hungarian language and worked in Budapest, Hungary.
She has also taught Hungarian language and culture to students at BYU. Ms.
Davidson has been an executive officer of Libco since July, 1998, and is
currently a student at BYU's J. Reuben Clark Law School.
Significant Employees.
- ----------------------
The Company does not employ any non-officers who are expected to
make a significant contribution to its business. However, on December 1,
1998, the Company entered into the Management Agreement with Blue Sky, under
which Blue Sky is to provide range, feed, care and management of the Company's
bison. Management expects that Blue Sky and W. Malcolm C. Davidson will have
a significant effect on the Company's business. Mr. Davidson has significant
experience in the bison industry and is the father of the Company's President,
William R. Davidson. The Company expects that Mr. Davidson will consult with
the Company informally to help it during the start-up phase of operations.
See "Organization Within Last Five Years" and "Description of Business."
Family Relationships.
- ---------------------
William R. Davidson and Allyson R. N. Davidson are husband and wife.
W. Malcolm C. Davidson, Blue Sky's President, director and controlling
stockholder, is William R. Davidson's father and Allyson R. N. Davidson's
father-in-law.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of
the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the shareholdings of William R.
Davidson, the Company's only stockholder, as of February 1, 1999. Mr.
Davidson has sole investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- --------
<S> <C> <C>
William R. Davidson 1,000,000* 100%
1310 East 1600 South
Mapleton, Utah 84664
-------- -----
TOTALS 1,000,000* 100%
</TABLE>
* This amount takes into account the forward split of the Company's
outstanding shares in the ratio of two for one, which became effective as of
March 3, 1999.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as of February 1, 1999. Each of these
persons has sole investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- ----------
<S> <C> <C>
William R. Davidson 1,000,000(1) 100%
1310 East 1600 South
Mapleton, Utah 84664
Allyson R. N. Davidson (2) -0- -0-
1310 East 1600 South
Mapleton, Utah 84664
-------- -----
All directors and executive
officers as a group
(2 persons) 1,000,000(1) 100%
</TABLE>
(1) This figure takes into account the forward split of the Company's
outstanding shares in the ratio of two for one, which became effective as of
March 3, 1999.
(2) Ms. Davidson may also be considered to beneficially own Mr.
Davidson's shares.
See the caption "Directors, Executive Officers, Promoters and
Control Persons," of this Prospectus, for information about the offices or
other capacities in which William R. Davidson and Allyson R. N. Davidson serve
with the Company.
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
- ------------
The Company has the authority to issue 50,000,000 shares of one
mill ($0.001) par value common voting stock. The holders of the Company's
common stock are entitled to one vote per share on each matter submitted to a
vote at a meeting of stockholders. The shares of common stock do not carry
cumulative voting rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is
not subject to redemption rights and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of common
stock are entitled to share equally in corporate assets after satisfaction of
all liabilities. All shares of the common stock now outstanding are fully
paid and non-assessable.
The Company's Bylaws authorize the Board of Directors to vote to
declare dividends from surplus profits whenever they believe it to be
expedient.
The common stock holders are not personally liable for the payment
of the Company's debts.
Preferred Stock
- ---------------
The Company is also authorized to issue 10,000,000 shares of
preferred stock, with a par value of one mill ($0.001) per share. The
preferred stock may be issued in series, with such values, rights and
preferences as the Board of Directors shall determine. The Company has not
designated the value, rights or preferences of the preferred stock, and no
such shares are issued or outstanding as of the date of this Prospectus.
On August 10, 1998, the Company's Board of Directors and its sole
stockholder voted to adopt a 1998 Stock Option Plan (the "1998 Plan"), in
which it reserved 1,000,000 shares of common stock for issuance to officers,
key employees, directors, consultants, advisors and sales representatives who
meet certain performance goals to be established by the Board or the Company's
Stock Option Committee. The Board of Directors has not designated the members
of the Committee and no options or shares of common stock have been awarded
under the 1998 Plan as of the date of this Prospectus. There are no
outstanding options, warrants or calls to purchase any of the Company's
authorized securities.
There is no provision in the Company's Articles of Incorporation
or Bylaws that would delay, defer, or prevent a change in control of the
Company.
Units
- -----
The Company is offering 100,000 Units. Each Unit is comprised of:
one share of common stock;
one "A" Warrant to purchase one share of common stock at a
price of $2.50; and
one "B" Warrant to purchase one share of common stock at a
price of $5.00.
Each Warrant is exercisable for five years, and the Company has an
option to call the Warrants and redeem them at a price of $0.01 per Warrant on
30 days' notice. The Company can call the Warrants at any time after they are
issued and before they expire.
From the date of call specified in the notice (unless the Company
defaults in paying for the Warrants being redeemed), all rights of the
Warrant holder as a Warrant holder of the Company shall cease, except for
the right to receive the price of $0.01 per Warrant, without interest; the
Warrant being redeemed shall no longer be treated as outstanding.
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
The financial statements of the Company as of October 31, 1998,
and for the three-month period ended January 31, 1999, have been included
herein in reliance on the report of Pritchett, Siler & Hardy, P.C.,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The Company has not hired any expert or counsel on a contingent
basis. No expert or counsel will receive a direct or indirect interest in the
Company, and no such person was a promoter, underwriter, voting trustee,
director, officer or employee of the Company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Neither the Company's Articles of Incorporation nor its Bylaws
specifically provide for indemnification of directors, officers or controlling
persons against liability under the 1933 Act. However, Article X of the
Articles of Incorporation provides for:
elimination of directors' liability for breach of fiduciary
duty to the Company;
Company indemnification of any corporate agent in connection
with matters in which the agent acted in good faith and, in
criminal matters, in which he or she had no reason to
believe the conduct was unlawful;
no indemnification when the agent is adjudged liable for
gross negligence or wilful misconduct;
mandatory indemnification by the Company for costs and
expenses when the agent has been successful on the merits of
the case;
the Company to advance the agent's costs upon receipt of the
agent's undertaking to repay all amounts paid if he or she
is not entitled to indemnification; and
the Company to purchase liability insurance for agents, at
its discretion.
Article VIII of the Company's Bylaws provides for mandatory
indemnification by the Company of expenses incurred by directors, executive
officers and employees in cases in which they are not found liable for
negligence or misconduct.
This is only a summary of the indemnification provisions of the
Company's Articles of Incorporation and Bylaws. You are urged to review each
of these documents for the actual text of their indemnification provisions.
See the Exhibit Index.
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
-----------------------------------
On December 1, 1998, the Company and Blue Sky entered into the
Management Agreement, which provides for Blue Sky to manage the Company's herd
of bison for a period of one year, beginning January 1, 1999. The Management
Agreement provides for a monthly payment of $500 (Canadian) for Blue Sky's
management services. At the current exchange rate of approximately US$ 0.67
per Canadian dollar, the monthly and annual management fees are approximately
US$ 335 and US$ 4,020, respectively. If the Management Agreement is terminated
early, the Company will be liable for boarding fees for the remainder of the
term at the rate of $1,200 (Canadian) (approximately US$ 804) per bison per
year. For a more complete description of the Management Agreement, see
"Description of Business."
W. Malcolm C. Davidson, Blue Sky's President, director and
controlling stockholder, is the father of William R. Davidson, the Company's
President, and is the father-in-law of Allyson R. N. Davidson, its
Secretary/Treasurer. W. Malcolm C. Davidson has significant experience in the
bison industry and will be available for informal consultation with the
Company as needed. Mr. Davidson will not charge the Company for consultation
that is outside the scope of the Management Agreement.
William R. Davidson is the President, a director and the sole
stockholder of Libco; Allyson R. N. Davidson, the Company's
Secretary/Treasurer, is also an executive officer of Libco. W. Malcolm C.
Davidson is a director of Libco. Approximately $73,169.44 (67%) of the net
proceeds of this offering will be used to pay the Libco loan.
The Company has no parents, except to the extent that William R.
Davidson may be deemed to be its parent due to his ownership of 100% of the
outstanding shares of common stock. Mr. Davidson paid $25,000 to the Company
for 1,000,000 post-split shares of the Company at inception.
DESCRIPTION OF BUSINESS
-----------------------
GENERAL
The Company is a Nevada corporation organized for the purpose of
breeding and raising bison. It is conducting this offering to raise funding
to pay off the Libco loan and to commence ranching operations in Alberta,
Canada.
On October 5, 1998, the Company executed the Purchase Agreement
under which it agreed to purchase from Diving Buffalo 20 mature bison cows at
a price of $84,000 ($4,200 per head). In order to complete the purchase and
begin operations without waiting for the proceeds from this offering, Libco
loaned $70,000 to the Company. The loan is evidenced by an unsecured
Promissory Note dated January 19, 1999 (the "Note"). The Note is for a term
of one year and bears an interest rate of 10% per year. The Company may call
the Note at its option 30 days after the effective date of the Registration
Statement on Form SB-2 of which this Prospectus is a part. Libco also has the
option to convert the outstanding principal and interest on the Note into
"unregistered" and "restricted" shares of the Company's common stock at a
conversion price of $1.00 per share.
On December 1, 1998, the Company and Blue Sky entered into the
Management Agreement, under which Blue Sky agreed to provide bison management
services for the Company's bison for a period of one year, beginning January
1, 1999. The Management Agreement provides for Blue Sky to provide grazing
lands; winter feed, hay, straw, grains, minerals and water; veterinary care;
handling facilities and handling labor; identification tagging and records
management; and herd bulls for breeding. Blue Sky also agreed to market the
Company's yearly calf crop at Blue Sky's expense and to assist in marketing,
selling and transporting its breeding stock at the Company's expense. The
Company is required to pay a management fee of $500 (Canadian) (approximately
US$ 335) per month, with Blue Sky to have a lien on the Company's bison for
payment of such fees. In addition, the Company will pay to Blue Sky one-
fourth (1/4) of the proceeds from the sale of the Company's bulls and heifers
in 1999. The Company will be liable for boarding fees over the remaining term
of the Management Agreement at a rate of $1200 (Canadian) (approximately US$
804) per bison per year if the Management Agreement is prematurely terminated.
A total of $73,169.44 of the proceeds being sought under this
offering has been allocated toward repayment of the Note and payment of the
Company's liabilities under the Management Agreement. The remainder will be
used for:
the leasing and fencing of as yet unidentified 1/4 section
(160 acre) of land for grazing of the Company's herd;
purchase of feed for second year of operations;
corporate expenses;
membership fees in American and Canadian bison associations;
payment of attorney's and accountant's fees for the next 12
months;
travel;
office expenses; and
working capital.
See "Use of Proceeds."
PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Bison, or American Plains Buffalo, are native to the American and
Canadian plains. Although they were slaughtered near the point of extinction
in the late 19th century, recent estimates have suggested that there are now
approximately 150,000 bison in the United States and Canada.
The principal market for bison is as meat, but the heads, bones
and hides are also sold to novelty shops and to individual buyers. Animals
are also sold for organized bison hunts and to public game reserves and zoos.
Bulls and heifers are also sold to other producers as breeding stock.
About 7,500,000 pounds of meat from approximately 15,000 bison are
sold in the United States each year. The Meat and Poultry Inspection
Directory of the U.S. Department of Agriculture lists about 100 bison-
processing facilities in the United States.
Bison meat has a low fat content (less than 3%) and a cholesterol
content that is lower than beef, chicken or pork.
Nutrient Composition
(per 100 grams of cooked lean meat)(1)
-----------------------------------
Fat Calories Cholesterol
Species (Grams) (Kcal) (Mg.)
------- ------- ------ -----
Bison 2.42 143 82
Beef 9.3 211 86
Chicken 7.41 190 89
(Skinless)
(1) Source: USDA Handbook.
Many people believe bison to have a richer flavor than beef. It
is prepared much the same as beef, without special handling. It also has a
high proportion of protein, minerals and fatty acids in relation to its
caloric value. Unlike beef, bison spend very little time in the feedlot and
are not generally subjected to drugs, chemicals or hormones. For all these
reasons, bison is often considered a superior alternative to beef.
Bison meat is available in the form of steaks, patties, rib roast,
short rib, sausage and jerkey. Principal markets include wholesalers,
restaurants, custom meat stores and mail-order or on-the-farm sales to the
general public.
The commercial bison market is very young. At present, the demand
for breeding stock is high, and it is expected to remain high as producers
attempt to increase the size of the American and Canadian herds. Because
females are currently more valuable as breeding stock than as meat, the
Company expects that its herd will be used for breeding. Unless a substantial
market for buffalo meat develops, the market for breeding stock will likely
follow the same downward pattern as it has in the ostrich industry. See the
Risk Factor "Market Acceptance of Product Line."
The bison breeding season begins in August and continues into
October, with calving season running from May to July. Cows can begin
breeding at age two and can reproduce every year up to age 15 and every other
year to age 25. Bulls can also begin breeding at two years of age.
Although they are generally disease resistant, bison are closely
related to cattle and are subject to may of the same diseases. Brucellosis is
a contagious disease of cattle and buffalo that can cause spontaneous
abortion. The Company will be required to test its Canadian herd for
tuberculosis and brucellosis. If either disease is found, the infected
animals will have to be culled, which could have an adverse effect on the
Company's profitability.
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
Bison products have historically been marketed directly from the
farm or in specialty markets such as health food stores and gourmet stores.
Several U.S. producers have also established successful mail order markets.
Bison pelts, heads and skulls are typically marketed through Western-themed
retailers or directly by the producer.
Breeding stock is generally marketed to other bison producers in
bison-related publications such as the Western Livestock Journal and BisonWorld,
the official publication of the National Bison Association (the "NBA").
Local newspapers and agricultural publications are also common marketing
methods. In addition, state and national bison associations often have booths
and provide marketing information at agricultural events.
Under the Management Agreement, Blue Sky has agreed to assist in
marketing, selling and transporting the Company's breeding stock at the
Company's expense, and to market and sell the Company's yearly calf crop at
Blue Sky's expense. A representative of Diving Buffalo has also verbally told
the Company's President that Diving Buffalo will assist the Company in selling
its bison at the Company's request. However, Diving Buffalo is not
contractually committed to give the Company any marketing assistance.
The Company has no plans to advertise its products in the
foreseeable future. William R. Davidson intends to become active in national
and local bison associations in order to develop the networking contacts
necessary to market the products. There can be no assurance that the Company
will be able to successfully produce or market enough animals to make its
operations profitable.
COMPETITIVE BUSINESS CONDITIONS
The bison industry is diffuse; this is the case with most
agricultural industries. The NBA estimates that in 1998, approximately
250,000 head were being raised by over 2,200 producers in the United States
and Canada. Bison producers range in size from hobby farmers who maintain a
few animals as a side interest or tourist attraction to large producers owning
several hundred to several thousand bison.
The Company will begin operations with a herd of only 20 mature
cows. Because of the large number of producers in North America, many of
which will have substantially larger herds and facilities, management expects
that its operations will be a very small part of the overall bison industry.
The Company hopes to develop a reputation as a breeder of high quality stock,
which it believes will enhance its competitive position in the industry.
However, even if its operations are successful, the Company will almost
certainly remain a small player.
The principal market for bison cows is as breeding stock. As
additional producers enter the market and begin breeding operations, supply
will almost certainly increase, making the Company's role in the bison
industry even less significant. In addition, overproduction of bison cows may
result in lower market prices for the Company's products, which would reduce
its profitability.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Feed is the largest operating cost of a bison operation. In
Alberta, Canada, pasture grazing is generally sufficient for nine months of
the year. In the winter months, hay must often be used to supplement the
herd's diet. Cows will eat 15 to 25 pounds of hay per day, with weaned calves
and bulls consuming 10 pounds and 20 to 30 pounds per day, respectively. Hay
in Alberta is plentiful but, as with all agricultural crops, is subject to
significant price fluctuations.
Oats are used to supplement hay and to flush bison cows during
breeding time (to ensure a high conception rate). Other raw materials used in
the bison industry include salt and minerals, water, deworming medication,
antibiotics, and miscellaneous items required to repair fences, vehicles and
handling facilities. Management believes that each of these materials will be
available in sufficient quantities. Blue Sky will provide feed for the
Company's bison during the one-year term of the Management Agreement. The
Company has budgeted $2,520 for feed costs in the second year of operations.
See "Use of Proceeds."
Once the Company identifies a suitable property for its own bison
facility, it will be responsible for providing all of the raw materials
necessary to maintain its herd.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
Management believes that the pool of potential purchasers of its
breeding stock is large because of the diffuse nature of the bison production
industry. Bison can be shipped over long distances, so the market for the
Company's animals will not necessarily be limited to Alberta.
The Company may also make a portion of its herd available for
slaughter, although it will focus primarily on the production of breeding
stock. Prudent herd management requires the frequent culling of less
desirable breeding stock; the Company believes that demand for bison meat is
high enough to absorb the supply of culled animals. There is a slaughterhouse
approximately two to three hours from Blue Sky's ranch in Alberta, Canada.
This slaughterhouse is devoted exclusively to the slaughter of bison.
Management believes that this facility has enough capacity to all bison that
the Company sends to slaughter, whether directly or through third party
purchasers.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR
LABOR CONTRACTS
The Company is at a very early stage of development. Other than
the Purchase Agreement, the Management Agreement and the 1998 Stock Option
Plan, it has no contracts in place. The Company's plan of operation calls for
it to lease a 1/4 section (160 acres)of pasture land for its bison, but as of
the date of this Prospectus, the Company has not yet identified a suitable
property. See "Management's Discussion and Analysis of Plan of Operation."
NEED FOR GOVERNMENTAL APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
The Canadian Health of Animals Branch of Agriculture and Agri-food
Canada requires all stock to be certified free of tuberculosis and
brucellosis. This involves compulsory testing for all captive bison two years
old and older. Under the Management Agreement, Blue Sky will handle all
veterinary care for the Company's herd.
The U. S. Department of Agriculture ("USDA") does not currently
require inspection of bison meat. However, because consumers believe that
USDA inspection provides an assurance of quality, many bison producers have
decided to seek USDA approval of their products voluntarily. This requires
the producer to arrange for slaughter and processing of its animals at a
packing house that the USDA has designated as an "Official Bison
Establishment." Bison that are slaughtered at an Official Bison Establishment
may be branded with a USDA inspection brand.
The Company plans to raise its bison in Canada and to focus on the
production of bison for breeding. Therefore, management does not believe that
obtaining USDA approval of its animals will be necessary.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
Veterinary care is one of Blue Sky's management responsibilities
under the Management Agreement, and compliance with the Canadian disease-
certification regulations will be included. If and when the Company moves its
operations to its own facilities, it will take over testing responsibilities.
If any of the Company's animals are found to be infected with tuberculosis or
brucellosis, they will have to be destroyed. Large-scale infections will
require the destruction of a large portion of the Company's herd and may have
a serious negative effect on its operations and profitability.
RESEARCH AND DEVELOPMENT
The Company does not expect that research and development will be
a significant part of its operations, other than using well-established
selective breeding techniques to ensure the quality of its herd.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Management does not believe that compliance with environmental
laws will require a significant portion of its resources.
NUMBER OF EMPLOYEES
Management of the Company's herd will be the responsibility of
Blue Sky, and will be handled through its own employees until December 21,
1999. The Company will become responsible for herd management if it is able
to identify a suitable location for its own facility. The Company expects
that these duties will be delegated to experienced, competent contractors.
The Company's executive officers will manage its operations on a part-time
basis and will not receive any salary or wages for the foreseeable future.
Directors and executive officers will be compensated for travel and out-of-
pocket expenditures.
REPORTS TO SECURITY HOLDERS
The Company is not a reporting issuer under the 1934 Act. As a
result of this offering, the Company will become subject to the informational
requirements of the 1934 Act for a period of at least one fiscal year. As of
the fiscal year ending October 31, 1999 (the Company having amended its Bylaws
on March 30, 1999, to change its fiscal year from December 31 to October 31),
the Company may be required to register the common stock being offered
hereunder, under the 1934 Act, and continue to file annual and quarterly
reports.
The National Association of Securities Dealers, Inc. (the "NASD")
requires that all issuers maintaining quotations of their securities on the
OTC Bulletin Board file periodic reports under the 1934 Act. In order to
maintain such a quotation, the Company will have to register its securities
under the 1934 Act on Form 8-A or Form 10-SB.
The public may read and copy any materials that the Company files
with the Commission at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Commission at 1-800-
SEC-0330. The Commission maintains an Internet site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of that site is
http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
accounting firm, and such other periodic reports as it may determine to be
appropriate or as may be required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The Company's plan of operation for the next 12 months is to begin
its bison operation under the Management Agreement with Blue Sky. The
Purchase Agreement provides for each of the purchased cows to have been bred
with a bull, but does not guarantee pregnancy. The Company expects to have a
crop of approximately 18 calves in the spring of 1999, assuming the standard
90% calf crop. However, many factors can influence the breeding process and
the Company can not guarantee that it will have that many calves. Revenue
from calf sales will also be reduced if the crop is reduced.
Approximately 5% of a herd of bison cows must be replaced every
year due to infertility, aging, death and other causes. Approximately one
heifer calf would stay in the herd as a replacement if the Company has a crop
of 18 calves in 1999 (with equal numbers of bull and heifer calves). The
remaining 8 heifer calves would be sold for breeding stock and all of the bull
calves would be sold for slaughter or breeding. Because all of the Company's
cows are young (about three to five years old), management hopes to be able to
sell all of its heifer calves while its cows are in their breeding prime.
However, many factors, including illness and death of its existing cows, could
force the Company to keep some of its annual heifer calf crop; this would have
a negative effect on revenues because the replacement heifers would not be
made available for sale.
Most bison operations breed bulls at the rate of about one bull to
10 cows. The Company expects that most of the cows it receives under the
Purchase Agreement will already be pregnant, so breeding bulls will not be
used until the 1999 fall breeding season. The Management Agreement provides
for Blue Sky to supply bulls for breeding, so the Company will not require
breeding bulls of its own until it moves its operations to its own location as
discussed below. Once this occurs, the Company will keep about one bull for
every 10 cows, to be bred for two years. The Company will have to keep
replacement bulls from its own herd (or purchase them, on a regular basis) in
order to ensure genetic diversity and avoid inbreeding.
The Company will pay Blue Sky $500 (Canadian) (approximately $US
335) per month under the Management Agreement, and will pay to Blue Sky one-
fourth (1/4) of the proceeds from the sales of its bulls and heifers during
1999. In exchange, Blue Sky will provide grazing of the herd, winter feeding,
veterinary care, handling, identification tagging and records maintenance, and
provision of breeding bulls (at the rate of one bull per 20 cows). With
additional feed expenses and reimbursement of out-of-pocket expenses of its
directors and officers, the Company expects annual costs of operation in 1999
to equal approximately $5,500. This figure does not include the initial
$84,000 purchase price for the Company's herd.
Management estimates that it will cost approximately $500 to raise
a calf to the point where it is weaned and ready for sale. The price range
for weaned heifer calves is about $2,000 to $3,000; for weaned bulls it is
$1,000 to $1,500. Therefore, the Company expects to make a profit of $1,500
to $2,500 per heifer calf and $500 to $1,000 per bull calf. These figures
depend on many factors, including for example:
a calf crop of 90%;
lack of factors that would complicate pregnancy and birth
(e.g., unusually harsh weather, brucellosis and other
diseases, inferior genetic stock); and
stability of feed and bison prices.
If any one of these factors changes, the Company's profitability
could decrease significantly.
The Company has allocated approximately $9,800 of the net proceeds
of this offering to the leasing and fencing of a suitable bison property for
the Company's own use. See "Use of Proceeds."
During the next 12 months, management plans to begin searching for
a suitable 1/4 section (160 acres) property to lease for its operations.
Management intends to limit its search to the Province of Alberta, Canada, and
will try to locate a full section (640 acres), with W. Malcolm C. Davidson,
William R. Davidson's father, to lease three quarters and the Company to lease
one quarter.
If the Company is successful in its property search, it will have
to transport the herd to the new facility, hire herd management personnel and
begin paying directly for all costs that are currently covered by the
Management Agreement. The Company would also be responsible for the purchase
or lease of its own handling facilities (pens and chutes for restraining
animals during breeding, veterinary treatment and transportation). Management
believes that by locating the Company's herd next to W. Malcolm C. Davidson's
herd, both parties will be able to share handling facilities and reduce
expenses. However, there is no formal agreement between the parties in this
regard and it is possible that the Company may have to purchase handling
facilities of its own. These facilities typically cost from $2,000 to $2,500.
The Company has not allocated any of the proceeds from this offering to the
acquisition of handling facilities. The Company will have to obtain them with
operating revenues or through additional debt or equity funding if handling
facilities become necessary in the next 12 months. The Company can provide no
assurance that it will have enough money to acquire these facilities.
Management expects that it will hire one person to operate its
ranch once it has located a suitable property. The standard rate for ranch
workers in Alberta is approximately $10 to $12 (Canadian) (approximately US$
6.70 to US$ 8.04) per hour. The Company believes that the labor pool in
Alberta is large enough that it will not have difficulty finding a suitable
worker.
The Company estimates that its costs to produce weaned calves will
be about $500 per calf, assuming current market prices for feed, veterinary
care and all other production costs. Assuming the prices outlined above,
profits would be approximately $1,500 to $2,500 per heifer calf and $500 to
$1,000 per bull calf. These figures assume many factors and if one or more
changes significantly, the Company's operating results could be negatively
affected.
Year 2000
- ---------
The Company's computer-related business activities will be limited
to record keeping for its herd and the use of a word processing program for
preparation of business correspondence and similar documents. Management
believes that its computer systems are "Year 2000 compliant" for these
applications.
The Company can give no assurance that third parties with whom it
does business (e.g., banks and utilities) will ensure Year 2000 compliance in
a timely manner or that, if they do not, their computer systems will not have
an adverse effect on the Company. However, the Company does not believe that
Year 2000 compliance issues of third parties will result in a material adverse
effect on its financial condition or results of operations.
DESCRIPTION OF PROPERTY
-----------------------
The Company does not currently own any property. Its executive
office is the office of William R. Davidson, its President, and is provided
rent free. During the next 12 months, the Company plans to identify, lease
and fence a pasture and feeding facility in Alberta, Canada. The Company has
not yet identified a suitable location and there is no guarantee that it will
be able to do so or that, if it does, it will be able to obtain a lease on
satisfactory terms.
The Management Agreement with Blue Sky is renewable for monthly
periods beyond the initial 12-month term. If the Company does not identify a
suitable facility of its own during this period, management expects that it
will renew its Management Agreement for successive one-month periods until it
is able to move its herd to a new location.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
See the caption "Organization Within Last Five Years" of this
Prospectus for a discussion of all transactions between the Company and its
directors, executive officers, sole stockholder and members of their immediate
families.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
- -------------------
There has never been any "public market" for shares of
common stock of the Company. The Company intends to submit for listing on the
OTC Bulletin Board of the NASD, once it registers its securities to become
subject to the reporting requirements of the 1934 Act. However, it can
provide no assurance that it will meet the reporting requirements or that any
market for the Company's common stock will develop or be maintained.
If a public market ever develops in the future, the sale of
"unregistered" and "restricted" shares of common stock pursuant to Rule 144 of
the Commission by members of management may have a substantial negative impact
on any such public market. William R. Davidson would be able to sell up to
11,000 of his 1,000,000 "unregistered" and "restricted" shares in any three
month period, beginning as early as August, 1999. See the Risk Factor "Sale
of 'Restricted' Securities."
The Company will have to file quarterly and annual reports with
the Commission in order to have its securities quoted on the OTC Bulletin
Board. These reports must contain financial statements, with year-end
financial statements being audited. Management expects that the legal and
accounting fees required to prepare and file its periodic reports will total
approximately $10,000 per year.
There are no outstanding options, warrants or calls to purchase
any of the authorized securities of the Company. However, the Company has
adopted a 1998 Stock Option Plan and has reserved 1,000,000 shares of common
stock under that Plan. The issuance of any of these shares under the Plan may
dilute the holdings of purchasers under this offering.
The 1,000,000 "unregistered" and "restricted" post-split shares of
common stock owned by William R. Davidson are the only securities that the
Company has issued since its inception. Future sales of any of these shares,
or any shares issued under the 1998 Stock Option Plan or otherwise may
decrease the value of the Company's common stock in any "public market" that
may develop for the common stock. See "Security Ownership of Certain
Beneficial Owners and Management."
Holders.
- --------
William R. Davidson is the only record holder of the Company's
common stock as of the date of this Prospectus. No shares of its preferred
stock are outstanding.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to
its common stock or its preferred stock, and does not intend to declare
dividends in the foreseeable future. There are no material restrictions
limiting, or that are likely to limit, the Company's ability to pay dividends
on its securities.
EXECUTIVE COMPENSATION
----------------------
The Company has adopted a 1998 Stock Option Plan (the "1998 Plan")
providing for the issuance of up to 1,000,000 "unregistered" and "restricted"
shares of common stock to key employees, directors, executive officers,
consultants and advisors. The 1998 Plan is administered by a Committee that
has full authority to award stock and options thereunder. The Committee has
not awarded any stock or options under the 1998 Plan and there are no current
plans to make any such award. If the Committee decides to award stock or
options under the 1998 Plan, the holdings of purchasers under this offering
would be diluted. In addition, the sale of "unregistered" and "restricted"
stock that is awarded under the 1998 Plan may have a negative effect on any
market price for the Company's common stock. See the Risk Factor "Sale of
'Restricted' Securities" and the Exhibit Index.
There are no employment agreements between the Company and any
member of management. The Company does not expect to enter into any such
agreement until it has successfully established its operations. The Company
can not guarantee that its operations will be successful. Other than
reimbursement of out-of-pocket expenses and the potential issuance of
securities under the 1998 Plan, the Company has no compensation arrangements
with its directors and executive officers. Neither of its executive officers
receives any salary or wages for services rendered to the Company.
FINANCIAL STATEMENTS
--------------------
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
OCTOBER 31, 1998
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
[Letterhead of Pritchett, Siler & Hardy, P.C.]
INDEPENDENT AUDITORS' REPORT
Board of Directors
R & R RANCHING, INC.
Springville, Utah
We have audited the Balance Sheet of R & R Ranching, Inc. [a development stage
company] as of October 31, 1998, and the related statement of operations,
stockholders' equity and cash flows from inception on August 3, 1998 through
October 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 R & R Ranching, Inc. as of
October 31, 1998, and the results of their operations and their cash flows for
the period from inception through October 31, 1998, in conformity with
generally accepted accounting principles.
The financial statements referred to above have been prepared assuming the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company is newly formed and has not yet established
profitable operations, raising substantial doubt about the Company's ability
to continue as a going concern. Management=s plans in regards to these
matters are also described in Note 4. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy, P.C.
November 10, 1998
Salt Lake City, Utah
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
October 31,
1998
______
<S> <C>
CURRENT ASSETS:
Cash in bank $ 20,782
Total Current Assets 20,782
ORGANIZATION COSTS, net 475
______
$ 21,257
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 955
Accounts payable B related party 500
Total Current Liabilities 1,455
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value
10,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,000,000 shares issued and
outstanding 1,000
Capital in excess of par value 24,000
Deficit accumulated during the
development stage (1,002)
23,998
Less: Stock subscription receivable (4,196)
Total Stockholders' Equity 19,802
$ 21,257
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF OPERATIONS
<CAPTION>
From Inception
on August 3,
1998 Through
October 31, 1998
<S> <C>
REVENUE $ -
EXPENSES:
General & Administrative 1,002
LOSS BEFORE INCOME TAXES (1,002)
CURRENT TAX EXPENSE -
DEFERRED TAX EXPENSE -
NET LOSS $ (1,002)
LOSS PER COMMON SHARE $ (.00)
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON AUGUST 3, 1998
THROUGH OCTOBER 31, 1998
[Restated]
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
______ _______ Excess of Development
Shares Amount Shares Amount Par Value Stage
------ ------ ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
August 3, 1998 - $ - - $ - $ - $ -
Issuance of 1,000,000
shares of common stock
at $.025 per share for
Cash proceeds of
$20,804 and a
Subscription receivable
of $4,196. - - 1,000,000 1,000 24,000 -
Net loss for the period
ended October 31, 1998 - - - - - (1,002)
BALANCE,
October 31, 1998 - $ - 1,000,000 $1,000 $ 24,000 $(1,002)
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
From Inception
on August 3,
1998 Through
October 31, 1998
<S> <C>
Cash Flows from Operating Activities:
Net loss $ (1,002)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 25
Changes in assets and liabilities:
Increase in accounts payable 955
________________
Net Cash (Used) by Operating Activities (22)
Cash Flows from Investing Activities:
Payment of organization costs -
Net Cash (Used) in Investing Activities -
________________
Cash Flows from Financing Activities:
Proceeds from common stock issuance 20,804
Net Cash Provided by Financing Activities 20,804
Net Increase in Cash and Cash Equivalents 20,782
Cash at Beginning of Period -
Cash at End of Period $ 20,782
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ -
Income taxes $ -
</TABLE>
Supplemental schedule of Noncash Investing and Financing Activities:
For the period ended October 31, 1998:
Stock Subscriptions Receivable increased by $4,196
for common stock which was issued for a receivable.
A shareholder of the Company advanced $500 in
payment of organization costs.
The accompanying notes are an integral part of this financial statement.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - R & R Ranching, Inc. was organized under the laws of the
State of Nevada on August 3, 1998. The Company has not yet commenced
planned principal operations and is considered a development stage company as
defined in SFAS No. 7. The Company is planning to engage in the business of
breeding and raising bison. The Company at the present time, has not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. Amortization expense was $25 for
the period ended October 31, 1998.
Loss Per Share - The Company accounts for loss per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share". This statement requires the Company to present basic earnings
per share and dilutive earnings per share when the effect is dilutive [See
Note 6].
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". This statement requires an asset and liability approach for
accounting for income taxes [See Note 5].
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information",
SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement
Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and SFAS No. 134, "Accounting for Mortgage-Backed Securities.."
were recently issued. These accounting standards have no current
applicability to the Company or their effect on the financial statements would
not have been significant.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported amounts of assets
and liabilities, the disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimated by management.
Restatement of Financial Statements - The financial statements have been
restated for all periods presented to reflect a forward common stock split on
the basis of two shares issued for each one share previously outstanding.
The reverse stock split was effected during March, 1999.
NOTE 2 - RELATED PARTY TRANSACTIONS
Management Compensation - The Company has not paid any compensation to
its officers and directors.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his
office as a mailing address, as needed, at no expense to the Company.
Accounts Payable - During the period ending October 31, 1998, an officer
of the Company paid organization costs in the amount of $500 on behalf of
the Company. The Company recorded a related party accounts payable in the
amount of $500.
NOTE 3 - CAPITAL STOCK
Preferred Stock - The Company has authorized 10,000,000 shares of
preferred stock, $.001 par value, with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors. No shares are issued and outstanding at October 31, 1998.
Common Stock - During the period ended October 31, 1998, the Company
issued 1,000,000 shares of its previously authorized, but unissued common
stock for cash of $20,804 and a stock subscription receivable of $4,196.
The Company is proposing to issue up to 100,000 additional shares of
common stock and related warrants in a public offering [See Note 7].
Stock Option Plan - On August 10, 1998, the Board of Directors of the
Company adopted and the stockholders at that time approved, the 1998 Stock
Option Plan. The plan provides for the granting of awards of up to
1,000,000 shares of common stock to sales representatives, officers,
directors, consultants and employees. The awards can consist of stock
options, restricted stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards as described in the plan.
Awards under the plan will be granted as determined by the board of
directors. As of October 31, 1998, no awards have been granted under the
plan.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate continuation
of the Company as a going concern. However, the Company was only recently
formed and has not yet been successful in establishing profitable operations.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. In this regard, management is proposing to raise
additional funds through sales of its common stock, which funds will be used
to assist in establishing on-going operations. There is no assurance that the
Company will be successful in raising this additional capital or achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
FASB 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At October 31, 1998, the Company
has available unused operating loss carryforwards of approximately $1,000,
which may be applied against future taxable income and which expire in 2013.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the uncertainty
surrounding the realization of the loss carryforwards the Company has
established a valuation allowance equal to the tax effect of the loss
carryforwards and, therefore, no deferred tax asset has been recognized for
the loss carryforwards. The net deferred tax assets are approximately $340 as
of January 31, 1999, with an offsetting valuation allowance of the same amount
resulting in a change in the valuation allowance of approximately $340 during
the period ended October 31, 1998.
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share and
the effect on income and the weighted average number of shares for the period
ended October 31, 1998:
For The
Period Ended
October 31,
1998
Loss from continuing operations applicable to
common stock $(1,002)
Loss available to common stockholders used in
calculating loss per share $(1,002)
Weighted average number of common shares
outstanding during the period used to calculate
loss per share 1,000,000
____________
NOTE 7 - SUBSEQUENT EVENTS
Common Stock Split - During March, 1999 the Company effected a forward
split of its issued and outstanding common stock on the basis of two
shares issued for each one share previously issued. There were 500,000
shares of common stock issued and outstanding immediately prior to the
split and 1,000,000 shares of common stock issued and outstanding
immediately after the split. There was no change in the number of
authorized common shares or the par value of common shares. The financial
statements for all periods presented have been restated to reflect the
stock split.
Proposed Public Offering of Common Stock - The Company is proposing to
make a public offering of 100,000 units consisting of a total of 100,000
shares of common stock, 100,000 A warrants and 100,000 B warrants. Each
A warrant allows the holder to purchase one share of common stock at a
price of $2.50. Each B warrant allows the holder to purchase one share of
common stock at a price of $5.00. The warrants are subject to adjustment
in certain events and are exercisable for a period of five years from the
date of the offering. The Company may call the warrants at their exercise
price on 30 days notice at any time after issuance and prior to the
expiration date of the warrants. The warrants may only be exercised or
redeemed if a current prospectus is in effect. The Company plans to file
a registration statement with the United States Securities and Exchange
Commission on Form SB-2 under the Securities Act of 1933. An offering
price of $1.25 per unit has arbitrarily been determined by the Company.
The offering will be managed by the Company without any underwriter. The
units will be offered and sold by the directors and officers of the
Company, who will receive no sales commissions or other compensation in
connection with the offering, except for reimbursement of expenses
actually incurred on behalf of the Company in connection with the
offering. The Company estimates it will incur stock offering costs of
approximately $15,000, but any such costs will be deferred and netted
against the proceeds of the proposed public stock offering.
Bison Care and Management Agreement - During December, 1998 the Company
entered into an agreement with Blue Sky Bison Ranch, Ltd., of Carvel,
Alberta, Canada ("Blue Sky") under which Blue Sky would house, feed,
manage and market the Company's bison for a period of one year commencing
January 1, 1999. The agreement provides for the Company to pay a monthly
management fee of $500 (Canadian) which is approximately $335 US. Blue
Sky's president, director and controlling shareholder is the father of the
Company's President and controlling shareholder. The Company recorded a
related party accounts payable in the amount of $335 for services rendered
during January 1999.
Notes Payable - During January, 1999, the Company borrowed $70,000 from
Libco Equities, Inc., a corporation organized under the laws of the
Province of Alberta, Canada ("Libco"). The loan is due on demand and
provides for interest at 10% per annum. The President and sole
shareholder of the Company is also the President, director and controlling
shareholder of Libco.
Purchase of Bison Inventory - During January, 1999 the Company acquired
20 mature bison cows at a cost of $84,000. The company plans to breed and
market bison.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
UNAUDITED FINANCIAL STATEMENTS
JANUARY 31, 1999
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
[Letterhead of Pritchett, Siler & Hardy, P.C.]
ACCOUNTANTS' DISCLAIMER
Board of Directors
R & R RANCHING, INC.
Springville, Utah
The accompanying financial statements of R & R Ranching, Inc. [a development
stage company] as of January 31, 1999 and for the periods then ended were not
audited by us and, accordingly, we do not express an opinion on them.
/s/ Pritchett, Siler & Hardy, P.C.
March 18, 1999
Salt Lake City, Utah
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
BALANCE SHEET
[ Unaudited - See Accountants' Disclaimer]
<CAPTION>
ASSETS
January 31,
1999
<S> <C>
CURRENT ASSETS:
Cash in bank $ 10,959
Inventory - Bison 84,000
Total Current Assets 94,959
ORGANIZATION COSTS, net 450
______
$ 95,409
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 955
Accounts payable - related party 836
Interest payable - related party 250
Notes payable - related party 70,000
Total Current Liabilities 72,041
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value
10,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,000,000 shares issued and
outstanding 1,000
Capital in excess of par value 24,000
Deficit accumulated during the
development stage (1,632)
Total Stockholders' Equity 23,368
$ 95,409
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
[Unaudited - See Accountants' Disclaimer]
<CAPTION>
From Inception
For the Three on August 3,
Months Ended 1998 Through
January 31, 1999 January 31, 1999
<S> <C> <C>
REVENUE $ - $ -
_____________ _____________
EXPENSES:
Bison Operating Expenses 335 335
General & Administrative 45 1,047
Interest Expense 250 250
_____________ _____________
LOSS BEFORE INCOME TAXES (630) (1,632)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
_____________ _____________
NET LOSS $ (630) $ (1,632)
LOSS PER COMMON SHARE $ (.00) $ (.00)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON AUGUST 3, 1998
THROUGH OCTOBER 31, 1998 AND
JANUARY 31, 1999
[Unaudited - See Accountants' Disclaimer]
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
______ _______ Excess of Development
Shares Amount Shares Amount Par Value Stage
------ ------ ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
August 3, 1998 - $ - - $ - $ - $ -
Issuance of 1,000,000
shares of common stock
at $.025 per share for
Cash proceeds of
$20,804 and a
Subscription receivable
of $4,196. - - 1,000,000 1,000 24,000 -
Net loss for the period
ended October 31, 1998 - - - - - (1,002)
BALANCE,
October 31, 1998 - $ - 1,000,000 $1,000 $ 24,000 $(1,002)
Net loss for the period
ended January 31, 1999 - - - - - (630)
BALANCE,
January 31, 1999 - $ - 1,000,000 $1,000 $ 24,000 $(1,632)
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
[Unaudited - See Accountants' Disclaimer]
<CAPTION>
From Inception
For the three on August 3,
Months Ended 1998 Through
January 31, 1999 January 31, 1999
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (630) $ (1,632)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 25 50
Changes in assets and liabilities:
Increase in bison inventory (84,000) (84,000)
Increase in accounts payable - 955
Increase in accounts
payable-Related Party 336 336
Increase in interest payable 250 250
Net Cash (Used) by Operating
Activities (84,019) (84,041)
________________ _____________
Cash Flows from Investing Activities:
Payment of organization costs - -
Net Cash (Used) in Investing
Activities - -
________________ _____________
Cash Flows from Financing Activities:
Proceeds from issuance of note
payable - related party 70,000 70,000
Proceeds from common stock issuance 4,196 25,000
Net Cash Provided by
Financing Activities 74,196 95,000
Net Increase in Cash and Cash Equivalents (9,823) 10,959
Cash at Beginning of Period 20,782 -
Cash at End of Period $ 10,959 $ 10,959
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ -
Income taxes $ -
</TABLE>
Supplemental schedule of Noncash Investing and Financing Activities:
For the period ended January 31, 1999:
The Company received $4,196 in payment of stock subscriptions receivable
which has been reflected as proceeds from sale of common stock.
A shareholder of the Company advanced $500 in payment of organizational
costs.
The accompanying notes are an integral part of these financial statements.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - R & R Ranching, Inc. was organized under the laws of the
State of Nevada on August 3, 1998. The Company has not yet commenced
planned principal operations and is considered a development stage company
as defined in SFAS No. 7. The Company is planning to engage in the business
of breeding and raising bison. The Company at the present time, has not paid
any dividends and any dividends that may be paid in the future will depend
upon the financial requirements of the Company and other relevant factors.
Inventory - Inventory consists of bison which are being held for breeding
purposes. The bison are recorded at the lower of cost or market value [See
Note 4].
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. Amortization expense was $25 for the
period ended January 31, 1999.
Loss Per Share - The Company accounts for loss per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share". This statement requires the Company to present basic earnings
per share and dilutive earnings per share when the effect is dilutive [See
Note 6].
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". This statement requires an asset and liability approach for
accounting for income taxes [See Note 7].
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", SFAS
No. 132, "Employer's Disclosure about Pensions and Other Postretirement
Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and SFAS No. 134, "Accounting for Mortgage-Backed Securities..."
were recently issued. These accounting standards have no current
applicability to the Company or their effect on the financial statements would
not have been significant.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported amounts of assets
and liabilities, the disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimated by management.
Restatement of Financial Statements - The financial statements have been
restated for all periods presented to reflect a forward common stock split on
the basis of two shares issued for each one share previously outstanding.
The reverse stock split was effected during March, 1999.
NOTE 2 - RELATED PARTY TRANSACTIONS
Bison Care and Management Agreement - During December, 1998 the Company
entered into an agreement with Blue Sky Bison Ranch, Ltd., of Carvel,
Alberta, Canada ("Blue Sky") under which Blue Sky would house, feed,
manage and market the Company's bison for a period of one year commencing
January 1, 1999. The agreement provides for the Company to pay a monthly
management fee of $500 (Canadian) which is approximately $335 US. Blue
Sky's president, director and controlling shareholder is the father of the
Company's President and controlling shareholder. The Company recorded a
related party accounts payable in the amount of $335 for services rendered
during January 1999.
Notes Payable - During January, 1999, the Company borrowed $70,000 from
Libco Equities, Inc., a corporation organized under the laws of the
Province of Alberta, Canada ("Libco"). The loan is due on demand and provides
for interest at 10% per annum. The President and sole shareholder of the
Company is also the President, director and controlling shareholder of Libco.
Management Compensation - The Company has not paid any compensation to
its officers and directors.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his
office as a mailing address, as needed, at no expense to the Company.
Accounts Payable B During the period ending October 31, 1998, an officer
of the Company paid organization costs in the amount of $500 on behalf of
the Company. The Company recorded a related party accounts payable in the
amount of $500.
NOTE 3 - CAPITAL STOCK
Preferred Stock - The Company has authorized 10,000,000 shares of
preferred stock, $.001 par value, with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors. No shares are issued and outstanding at October 31, 1998.
Common Stock - During the period ended October 31, 1998, the Company
issued 1,000,000 shares of its previously authorized, but unissued common
stock for cash of $20,804 and a stock subscription receivable of $4,196.
The Company is proposing to issue up to 100,000 additional shares of
common stock and related warrants in a public offering [See Note 8].
Stock Option Plan - On August 10, 1998, the Board of Directors of the
Company adopted and the stockholders at that time approved, the 1998 Stock
Option Plan. The plan provides for the granting of awards of up to
1,000,000 shares of common stock to sales representatives, officers,
directors, consultants and employees. The awards can consist of stock
options, restricted stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards as described in the plan.
Awards under the plan will be granted as determined by the board of
directors. As of October 31, 1998, no awards have been granted under the
plan.
NOTE 4 - BISON INVENTORY
The Company acquired 20 mature bison cows during January, 1999 for
$84,000 ($4,200 per bison). The Company intends to breed and raise bison
which will be marketed as either breeding stock or as a meat product. The
company's bison are being cared for and managed by Blue Sky under the
terms of a management agreement (See Note 2).
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate continuation
of the Company as a going concern. However, the Company was only recently
formed and has not yet been successful in establishing profitable operations.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. In this regard, management is proposing to raise
additional funds through sales of its common stock, which funds will be used
to assist in establishing on-going operations. There is no assurance that the
Company will be successful in raising this additional capital or achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares for the periods
ended January 31, 1999:
From Inception on
For the Three August 3,
Months Ended 1998 Through
January 31, January 31,
1999 1999
(Loss) from continuing
operations applicable to
common stock $ (630) $(1,630)
(Loss) available to
common stockholders used in
earnings (loss) per share $ (630) $(1,630)
Weighted average number of
common shares outstanding
used in (loss) per share
during the period 1,000,000 1,000,000
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
FASB 109 requires the Company to provide a net deferred tax
asset/liability equal to the expected future tax benefit/expense of
temporary reporting differences between book and tax accounting methods
and any available operating loss or tax credit carryforwards. At January
31, 1999, the Company has available unused operating loss carryforwards
of approximately $1,600, which may be applied against future taxable
income and which expire in 2013 through 2014.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $500 as of January 31, 1999, with an offsetting valuation
allowance of the same amount resulting in a change in the valuation
allowance of approximately $214 during the three months ended January 31,
1999.
NOTE 8 - SUBSEQUENT EVENTS
Common Stock Split - During March, 1999 the Company effected a forward
split of its issued and outstanding common stock on the basis of two
shares issued for each one share previously issued. There were 500,000
shares of common stock issued and outstanding immediately prior to the
split and 1,000,000 shares of common stock issued and outstanding
immediately after the split. There was no change in the number of
authorized common shares or the par value of common shares. The financial
statements for all periods presented have been restated to reflect the
stock split.
Proposed Public Offering of Common Stock - The Company is proposing to
make a public offering of 100,000 units consisting of a total of 100,000
shares of common stock, 100,000 A warrants and 100,000 B warrants. Each
A warrant allows the holder to purchase one share of common stock at a
price of $2.50. Each B warrant allows the holder to purchase one share of
common stock at a price of $5.00. The warrants are subject to adjustment
in certain events and are exercisable for a period of five years from the
date of the offering. The Company may call the warrants at their exercise
price on 30 days notice at any time after issuance and prior to the
expiration date of the warrants. The warrants may only be exercised or
redeemed if a current prospectus is in effect. The Company plans to file
a registration statement with the United States Securities and Exchange
Commission on Form SB-2 under the Securities Act of 1933. An offering
price of $1.25 per unit has arbitrarily been determined by the Company.
The offering will be managed by the Company without any underwriter. The
units will be offered and sold by the directors and officers of the
Company, who will receive no sales commissions or other compensation in
connection with the offering, except for reimbursement of expenses
actually incurred on behalf of the Company in connection with the
offering. The Company estimates it will incur stock offering costs of
approximately $15,000, but any such costs will be deferred and netted
against the proceeds of the proposed public stock offering.
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
The Company has not dismissed any principal independent
accountant, and no such accountant has resigned or declined to stand for re-
election, since the Company's inception in August, 1998.
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers
-----------------------------------------
Section 78.751(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee,
or corporate agent "who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his corporate role. Section 78.751(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of
the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with
the defense."
Section 78.751 (4) of the NRS limits indemnification under
Sections 78.751 (1) and 78.751(2) to situations in which either (1) the
stockholders, (2)the majority of a disinterested quorum of directors, or (3)
independent legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(6)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his
corporate role.
Neither the Company's Articles of Incorporation nor its Bylaws
specifically provide for indemnification of directors, officers or controlling
persons against liability under the 1933 Act. However, Article X of the
Articles of Incorporation provides for:
elimination of directors' liability for breach of fiduciary
duty to the Company;
Company indemnification of any corporate agent in connection
with matters in which the agent acted in good faith and, in
criminal matters, in which he or she had no reason to
believe the conduct was unlawful;
no indemnification when the agent is adjudged liable for
gross negligence or wilful misconduct;
mandatory indemnification by the Company for costs and
expenses when the agent has been successful on the merits of
the case;
the Company to advance the agent's costs upon receipt of the
agent's undertaking to repay all amounts paid if he or she
is not entitled to indemnification; and
the Company to purchase liability insurance for agents, at
its discretion.
Article VIII of the Company's Bylaws provides for mandatory
indemnification by the Company of expenses incurred by directors, executive
officers and employees in cases in which they are not found liable for
negligence or misconduct.
The foregoing is only a summary of the indemnification provisions
of the Company's Articles of Incorporation and Bylaws. See the Exhibit Index.
Item 25. Other Expenses of Issuance And Distribution
-------------------------------------------
The following table sets forth the expenses which the Company
expects to incur in connection with the issuance and distribution of the Units
registered hereby. All of these expenses, except for the Commission
registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 243.25
Legal fees and expenses....................................$10,000
Accounting fees............................................$ 2,500
Printing and engraving expenses............................$ 500
Transfer agent fees........................................$ 1,500
Miscellaneous..............................................$ 256.75
--------
Total................................................$15,000
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
The following table provides information about all "unregistered"
and "restricted" securities that the Company has sold since inception, and
which were not registered under the 1933 Act:
<TABLE> Number
Date of Aggregate
Name of Owner Acquired Shares* Consideration
- ------------- -------- ------ -------------
<S> <C> <C> <C>
William R. Davidson 8/10/98 1,000,000 $25,000
Common
* This figure takes into account the two-for-one forward split
of the Company's issued and outstanding common stock on March 3, 1999.
Management believes that Mr. Davidson is an "accredited investor"
as that term is defined under applicable federal and state securities laws,
rules and regulations, because he is a director and executive officer of the
Company. Management also believes that the offer and sale of these shares of
common stock were exempt from the registration requirements of Section 5 of
the Act pursuant to Section 4(2) thereof, and from similar states' securities
laws, rules and regulations covering the offer and sale of securities by
available state exemptions from such registration.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description*
- ------ ------------
<S> <C>
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Warrant Agreement
4.2 Form of "A" Warrant
4.3 Form of "B" Warrant
5.1 Opinion of Branden T. Burningham, Esq. regarding legality
10.1 1998 Stock Option Plan
10.2 Buffalo Sale and Purchase Agreement, dated October 5, 1998
10.3 Bison Management Agreement, dated December 1, 1998
10.4 Promissory Note, dated January 19, 1999
23.1 Consent of Pritchett, Siler & Hardy, P.C.
23.2 Consent of Branden T. Burningham, Esq.
27.1 Financial Data Schedule
Item 28. Undertakings
------------
The Company hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Springville, State of Utah, on 22 March, 1999.
R & R RANCHING, INC.
By /s/ William R. Davidson
---------------------------------
William R. Davidson, President and
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following person in the capacities
and on the dates stated.
/s/ William R. Davidson
----------------------------------
William R. Davidson, President and
Director
/s/ Allyson R. N. Davidson
----------------------------------
Allyson R. N. Davidson, Secretary/
Treasurer
<PAGE>
Date Filed: March 30, 1999 SEC File No. _____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
R & R RANCHING, INC.
</TABLE>
ARTICLES OF INCORPORATION
OF
R & R RANCHING, INC.
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is R & R Ranching, Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Nevada is 3230 East Flamingo Road, Suite #156, Las Vegas, Nevada 89121. The
name of the registered agent of the Corporation is Gateway Enterprises, Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the provisions of Chapter 78 of
the Nevada Revised Statutes.
ARTICLE IV
(a) Common Stock. The aggregate number of shares of Common Stock
which the Corporation shall have authority to issue is 50,000,000 shares at a
par value of $.001 per share. All stock, when issued shall be fully paid and
non-assessable, shall be of the same class and have the same rights and
preferences.
Each share of Common Stock shall be entitled to one vote at a
stockholder's meetings, either in person or by proxy. Cumulative voting in
elections of Directors and all other matters brought before stockholders
meeting, whether they be annual or special, shall not be permitted.
The holders of the capital stock of the Corporation shall not be
personally liable for the payment of the Corporation's debts and the private
property of the holders of the capital stock of the Corporation shall not be
subject to the payment of debts of the Corporation to any extent whatsoever.
Stockholders of the Corporation shall not have any preemptive rights
to subscribe for additional issues of stock of the Corporation except as may
be agreed from time to time by the Corporation and any such stockholder.
(b) Preferred Stock. The aggregate number of share of Preferred
Stock which the Corporation shall have authority to issue is 10,000,000
shares, par value $.001, which may be issued in series, with such
designations, preferences, stated values, rights, qualifications or
limitations as determined solely by the Board of Directors of the Corporation.
ARTICLE V
The amount of the authorized stock of the Corporation of any class or
classes may be increased or decreased by the affirmative vote of the holders
of a majority of the voting power of all shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single
class.
ARTICLE VI
SECTION 1. Number. Election and Terms of Directors. The members of the
governing board of the Corporation shall be styled Directors of the
Corporation. The number of the Directors of the Corporation shall be fixed
from time to time by or pursuant to the By-Laws of the Corporation, and shall
initially be one.
SECTION 2. Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. No decrease in the number
of Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.
SECTION 3. Removal of Directors. Any Director may be removed from office,
with or without cause, only by the affirmative vote of the holders of 66.6% of
the voting power of all shares of the Corporation entitled to vote generally
in the election of Directors, voting together as a single class.
ARTICLE VII
Any action required or permitted to be taken by the stockholders of the
Corporation may be effected by any consent in writing by such holders, signed
by holders of not less than that number of shares of Common Stock required to
approve such action.
ARTICLE VIII
Subject to any express provision of the laws of the State of Nevada or
these Articles of Incorporation, the Board of Directors shall have the power
to make, alter, amend and repeal the By-Laws of the Corporation (except so far
as By-Laws of the Corporation adopted by the stockholders shall otherwise
provide). Any By-Laws made by the Directors under the powers conferred hereby
may be altered, amended or repealed by the Directors or by the stockholders.
ARTICLE IX
Election of Directors need not be by ballot unless the By-laws of the
Corporation shall so provide.
ARTICLE X
SECTION 1. Elimination of Certain Liability of Directors. A Director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of 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) for the payment of distributions to stockholders in violation of Section
78.300 of the Nevada Revised Statutes, or (iv) for any transaction from which
the Director derived an improper personal benefit.
SECTION 2. Indemnification and Insurance.
(a) Action, etc.. Other Than by or in the Right of the Corporation.
The Corporation shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as it presently exists or may hereafter be
amended, any Agent (as hereinafter defined) against costs, charges and
Expenses (as hereinafter defined), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Agent in connection with
such action, suit or proceeding, and any appeal therefrom, if the Agent acted
in good faith and in a manner the Agent reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit or proceeding--whether by
judgment, order, settlement conviction, or upon a plea of nolo contendere or
its equivalent--shall not, of itself, create a presumption that the Agent did
not act in good faith and in a manner which the Agent reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, that the Agent had reasonable
cause to believe that the Agent's conduct was unlawful.
(b) Action, etc., by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed judicial action or
suit brought by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that such person is or was an Agent, against
costs, charges and Expenses actually and reasonably incurred by the Agent in
connection with the defense or settlement of such action or suit and any
appeal therefrom if the Agent acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for gross negligence or wilful misconduct in the performance of the
Agent's duty to the Corporation unless and only to the extent that the court
in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and Expenses which such court shall deem
proper.
(c) Determination of Right of Indemnification. Any indemnification
under Paragraphs (a) and (b) of this Section (unless ordered by a court) shall
be paid by the Corporation unless a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting
of Directors who were not parties to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders, that such person acted in bad faith and
in a manner that such person did not believe to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal
proceeding, that such person believed or had reasonable cause to believe that
his conduct was unlawful.
(d) Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Section, to the extent that an
Agent has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, the settlement of an
action without admission of liability, or the defense of any claim, issue or
matter therein, or on appeal from any such proceeding, action, claim or
matter, such Agent shall be indemnified against all costs, charges and
Expenses incurred in connection therewith.
(e) Advances of Expenses. Except as limited by Paragraph (f) of this
Section, costs, charges, and Expenses incurred by an Agent in any action,
suit, proceeding or investigation or any appeal therefrom shall be paid by the
Corporation in advance of the final disposition of such matter if the Agent
shall undertake to repay such amount in the event that it is ultimately
determined as provided herein that such person is not entitled to
indemnification. Notwithstanding the foregoing, no advance shall be made by
the Corporation if a determination is reasonably and promptly made by the
Board of Directors by a majority vote of a quorum of disinterested Directors,
or (if such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested Directors so directs) by independent legal counsel in a written
opinion, that, based upon the facts known to the Board of Directors or counsel
at the time such determination is made, the Agent acted in bad faith and in a
manner that such person did not believe to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal proceeding,
that such person believed or had reasonable cause to believe his conduct was
unlawful. In no event shall any advance be made in instances where the Board
of Directors or independent legal counsel reasonably determines that the Agent
deliberately breached such persons' duty to the Corporation or its
stockholders.
(f) Right of Agent to Indemnification upon Application: Procedure
upon Application. Any indemnification under Paragraphs (a), (b) and (d) or
advance under Paragraph (e) of this Section, shall be made promptly, and in
any event within 60 days, upon the written request of the Agent, unless with
respect to applications under Paragraphs (a), (b) or (e), a determination is
reasonably and promptly made by the Board of Directors by a majority vote of a
quorum of disinterested Directors that such Agent acted in a manner set forth
in such Paragraphs as to justify the Corporation's not indemnifying or making
an advance to the Agent. In the event no quorum of disinterested Directors is
obtainable, the Board of Directors shall promptly direct that independent
legal counsel shall decide whether the Agent acted in the manner set forth in
such Paragraphs as to justify the Corporation's not indemnifying or making an
advance to the Agent. The right to indemnification or advances as granted by
this Section shall be enforceable by the Agent in any court of competent
jurisdiction if the Board of Directors or independent legal counsel denies the
claim in whole or in part or if no disposition of such claim is made within 60
days. The Agent's costs, charges and Expenses incurred in connection with
successfully establishing such persons' right to indemnification, in whole or
in part, in any such proceeding shall also be indemnified by the Corporation.
(g) Other Rights and Remedies. The indemnification provided by this
Section shall not be deemed exclusive of, and shall not affect, any other
rights to which an Agent seeking indemnification may be entitled under any
law, By-law, or charter provision, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be an Agent and
shall inure to the benefit of the heirs, executors and administrators of such
a person. All rights to indemnification under this Section shall be deemed to
be contract between the Corporation and the Agent who serves in such capacity
at any time while these Articles and other relevant provisions of the general
corporation law and other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then existing.
(h) Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was an Agent against any liability asserted
against such person and incurred by him or her in any such capacity, or
arising out of such persons's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Section. The Corporation may create a trust fund, grant a
security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such sums as may become necessary to
effect indemnification as provided herein.
(i) Other Enterprises. Fines and Serving at Corporation's Request.
For purposes of this Section, references to "other enterprise" in Paragraph
(a) shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the Corporation" shall
include any service by Agent as Director, officer, employee, agent or
fiduciary of the Corporation which imposes duties on, or involves services by,
such Agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to
in this Section.
(j) Savings Clause. If this Section or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Agent as to costs, charges and
Expenses, judgments, fines and amounts paid in settlement with respect to any
action, suit, proceeding or investigation, and any appeal therefrom, whether
civil, criminal or administrative, and whether internal or external, including
a grand jury proceeding and an action or suit brought by or in the right of
the Corporation, to the full extent permitted by any applicable portion of
this Section that shall not have been invalidated, and to the fullest extent
permitted by applicable law.
(k) Common Directors - Transactions between Corporations. No
contract or other transaction between this corporation and any one or more of
its directors or any other corporation, firm, association, or entity in which
one or more of its directors or officers are financially interested, shall be
either void or voidable because of such relationship or interest, or because
such director or directors are present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies
such contract or transaction, or because his or their votes are counted for
such purpose if: (a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent, or (c) the contract or
transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or committee there
of which authorizes, approves or ratifies such contract or transaction.
(l) Definitions. For the purposes of this Article:
(1) "Agent" means any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or
administrative, and whether external or internal to the Corporation (other
than a judicial action or suit brought by or in the right of the Corporation)
by reason of the fact that he or she is or was or has agreed to be a Director,
officer, employee, agent or fiduciary of the Corporation, or that, being or
having been such a Director, officer, employee, agent or fiduciary, he or she
is or was serving at the request of the Corporation as a Director, officer,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise.
(2) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or being or
preparing to be a witness in a proceeding.
ARTICLE XI
The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in these Articles of
Incorporation, and other provisions authorized by the laws of the State of
Nevada at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, Directors or any other persons
whomsoever by and pursuant to these Articles of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE XII
The name and address of each incorporator of the Corporation is:
Name Address
---- -------
William R. Davidson 1310 East 1600 South, Mapleton, UT 84664
ARTICLE XIII
The name and address of each member of the Board of Directors of the
Corporation is:
Name Address
---- -------
William R. Davidson 1310 East 1600 South, Mapleton, UT 84664
ARTICLE XIV
The Corporation shall exist in perpetuity, from and after the date of
filing of its original Articles of Incorporation with the Secretary of State
of the State of Nevada unless dissolved according to law.
IN WITNESS WHEREOF, this certificate has been executed by William R.
Davidson, the Incorporator of R & R Ranching, Inc. on this 31 day of July,
1998.
/s/ William R. Davidson
William R. Davidson, Incorporator
STATE OF Utah )
)ss
COUNTY OF Utah )
On the day of July,1998, personally appeared before me William R.
Davidson whom, being by me first duly sworn, declared that he was the person
who signed the foregoing document as an Incorporator of R & R Ranching, Inc.
and that the statements therein contained are true.
IN WITNESS THEREOF, I have hereunto set my hand and seal this 31 day of
July,1998.
/s/ F. Brent Porter
NOTARY PUBLIC
Residing at SLC, UT
My commission expires: 4-5-99
BY-LAWS
OF
R & R Ranching, Inc.
A Nevada CORPORATION
ARTICLE I
offices
Section I. The principal office of the Corporation shall be at 899 South
Artistic Circle, Springville, Utah 84663. The Corporation may have such other
offices, either within or without the State of Nevada as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.
The registered office of the Corporation required by the Nevada Business
Corporation Act to be maintained in the State of Nevada may be, but need not
be, identical with the principal offices in the State of Nevada, and the
address of the registered office may be changed, from time to time, by the
Board of Directors.
ARTICLE II
stockholders
Section 1. Annual Meeting. The annual meeting of stockholders shall be
held at the principal office of the Corporation, at 899 South Artistic Circle,
Springville, Utah 84663, or at such other places on the third Wednesday of
August or at such other times as the Board of Directors may, from time to
time, determine. If the day so designated falls upon a legal holiday then the
meeting shall be held upon the first business day thereafter. The Secretary
shall serve personally or by mail a written notice thereof, not less than ten
(10) nor more than fifty (50) days previous to such meeting, addressed to each
stockholder at his address as it appears on the stock book; but at any meeting
at which all stockholders shall be present, or of which all stockholders not
present have waived notice in writing, the giving of notice as above required
may be dispensed with.
Section 2. Special Meetings. Special meetings of stockholders other
than those regulated by statute, may be called at any time by a majority of
the Directors. Notice of such meeting stating the place, day and hour and the
purpose for which it is called shall be served personally or by mail, not less
than ten (10) days before the date set for such meeting. If mailed, it shall
be directed to a stockholder at his address as it appears on the stock book;
but at any meeting at which all stockholders shall be present, or of which
stockholders not present have waived notice in writing, the giving of notice
as above described may be dispensed with. The Board of Directors shall also,
in like manner, call a special meeting of stockholders whenever so requested
in writing by stockholders representing not less than ten percent (10%) of the
capital stock of the Corporation entitled to vote at the meeting. The
President may in his discretion call a special meeting of stockholders upon
ten (10) days notice. No business other than that specified in the call for
the meeting shall be transacted at any special meeting of the stockholders,
except upon the unanimous consent of all the stockholders entitled to notice
thereof.
Section 3. Closing of Transfer Books or fixing of Record Date. For the
purpose of determining stockholders entitled to receive notice of or to vote
at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend; or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall
be closed for a stated period not to exceed, in any case, fifty (50) days. If
the stock transfer books shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders,
such books shall be closed for a least ten (10) days immediately preceding
such meeting. In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than fifty
(50) days, and in case of a meeting of stockholders, not less than ten (10)
days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. If the stock transfer books
are not closed, and no record date is fixed for the determination of
stockholders entitled to receive notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination as to
stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 4. Voting. At all meetings of the stockholders of record having
the right to vote, subject to the provisions of Section 3, each stockholder of
the Corporation is entitled to one (1) vote for each share of stock having
voting power standing in the name of such stockholder on the books of the
Corporation. Votes may be cast in person or by written authorized proxy.
Section 5. Proxy. Each proxy must be executed in writing by the
stockholder of the Corporation or his duly authorized attorney. No proxy
shall be valid after the expiration of eleven (11) months from the date of its
execution unless it shall have specified therein its duration.
Every proxy shall be revocable at the discretion of the person executing
it or of his personal representatives or assigns.
Section 6. Voting of Shares by certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as
the by-laws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
noted by him either in person or by proxy without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate Order of the Court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledge, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Section 7. Election of Directors. At each election for Directors every
stockholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him for as many persons as
there are Directors to be elected and for whose election he has a right to
vote. There shall be no cumulative voting.
Section 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the stockholders.
If a quorum shall not be present or represented, the stockholders
entitled to vote thereat, present in person or by proxy, shall have the power
to adjourn the meeting, from time to time, until a quorum shall be present or
represented. At such rescheduled meeting at which a quorum shall be present
or represented any business or any specified item of business may be
transacted which might have been transacted at the meeting as originally
notified.
The number of votes or consents of the holders of stock having voting
power which shall be necessary for the transaction of any business or any
specified item of business at any meeting of stockholders, or the giving of
any consent, shall be a majority of the outstanding shares of the Corporation
entitled to vote.
Section 9. Informal Action by Stockholders. Any action required or
permitted to be taken by the stockholders of the Corporation may be effected
by any consent in writing by such holders, signed by holders of not less than
that number of shares of Common Stock required to approve such action.
ARTICLE III
directors
Section 1. Number. The affairs and business of this Corporation shall
be managed by a Board of Directors. The present Board of Directors shall
consist of one (1) member. Thereafter the number of Directors may be
increased to not more than nine (9) by resolution of the Board of Directors.
Directors need not be residents of the State of Nevada and need not be
stockholders of the Corporation.
Section 2. Election. The Directors shall be elected at each annual
meeting of the stockholders, but if any such annual meeting is not held, or
the Directors are not elected thereat, the Directors may be elected at any
special meeting of the stockholders held for that purpose.
Section 3. Term of Office. The term of office of each of the Directors
shall be one (1) year, which shall continue until his successor has been
elected and qualified.
Section 4. Duties. The Board of Directors shall have the control and
general management of the affairs and business of the Corporation. Such
Directors shall in all cases act
as a Board, regularly convened, and may adopt such rules and regulations for
the conduct of meetings and the management of the Corporation, as may be
deemed proper, so long as it is not inconsistent with these By-Laws and the
laws of the State of Nevada.
Section 5. Directors' Meetings. Regular meetings of the Board of
Directors shall be held immediately following the annual meeting of the
stockholders, and at such other time and places as the Board of Directors may
determine. Special meetings of the Board of Directors may be called by the
President or the Secretary upon the written request of one (1) Director.
Section 6. Notice of Meetings. Notice of meetings other than the
regular annual meeting shall be given by service upon each Director in person,
or by mailing to him at his last known address, at least three (3) days before
the date therein designated for such meeting, of a written notice thereof
specifying the time and place of such meeting, and the business to be brought
before the meeting, and no business other than that specified in such notice
shall be transacted at any special meeting. At any Directors' meeting at
which a quorum of the Board of Directors shall be present (although held
without notice), any and all business may be transacted which might have been
transacted if the meeting had been duly called if a quorum of the Directors
waive or are willing to waive the notice requirements of such meeting.
Any Directors may waive notice of any meeting under the provisions of
Article XII. The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting except where a Director attends a meeting for
the express purpose of objecting to the transaction of any business because
the meeting is not lawfully convened or called.
Section 7. Voting. At all meetings of the Board of Directors, each
Director is to have one (1) vote. The act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. No decrease in the number
of Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.
Section 9. Removal of Directors. Any Director may be removed from
office, with or without cause, only by the affirmative vote of the holders of
66.6% of the voting power of all shares of the Corporation entitled to vote
generally in the election of Directors, voting together as a single class.
Section 10. Quorum. The number of Directors who shall be present at any
meeting of the Board of Directors in order to constitute a quorum for the
transaction of any business or any specified item of business shall be a
majority.
The number of votes of Directors that shall be necessary for the
transaction of any business of any specified item of business at any meeting
of the Board of Directors shall be a majority.
If a quorum shall not be present at any meeting of the Board of
Directors, those present may adjourn the meeting, from time to time, until a
quorum shall be present.
Section 11. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors or each may be paid a stated salary as Director. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefore.
Section 12. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent is entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered or certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
ARTICLE IV
officers
Section 1. Number. The officers of the Corporation shall be:
President, Vice-President, Secretary, and Treasurer, and such assistant
Secretaries as the President shall determine.
Any officer may hold more than one (1) office.
Section 2. Election. All officers of the Corporation shall be elected
annually by the Board of Directors at its meeting held immediately following
the meeting of stockholders, and shall hold office for the term of one (1)
year or until their successors are duly elected. Officers need not be members
of the Board of Directors.
The Board may appoint such other officers, agents and employees as it
shall deem necessary who shall have such authority and shall perform such
duties as, from time to time, shall be prescribed by the Board.
Section 3. Duties of Officers. The duties and powers of the officers of
the Corporation shall be as follows:
president
The President shall preside at all meetings of the stockholders. He
shall present at each annual meeting of the stockholders and Directors a
report of the condition of the business of the Corporation. He shall cause to
be called regular and special meetings of these stockholders and Directors in
accordance with these By-Laws. He shall appoint and remove, employ and
discharge, and fix the compensation of all agents, employees, and clerks of
the Corporation other than the duly appointed officers, subject to the
approval of the Board of Directors. He shall sign and make all contracts and
agreements in the name of the Corporation, subject to the approval of the
Board of Directors. He shall see that the books, reports, statements and
certificates required by the statutes are properly kept, made and filed
according to law. He shall sign all certificates of stock, notes, drafts, or
bills of exchange, warrants or other orders for the payment of money duly
drawn by the Treasurer; and he shall enforce these By-Laws and perform all the
duties incident to the position and office, and which are required by law.
vice-president
During the absence or inability of the President to render and perform
his duties or exercise his powers, as set forth in these By-Laws or in the
statutes under which the Corporation is organized, the same shall be performed
and exercised by the Vice-President; and when so acting, he shall have all the
powers and be subject to all the responsibilities hereby given to or imposed
upon such President.
secretary
The Secretary shall keep the minutes of the meetings of the Board of
Directors and of the stockholders in appropriate books. He shall give and
serve all notices of the Corporation. He shall be custodian of the records
and of the corporate seal and affix the latter when required. He shall keep
the stock and transfer books in the manner prescribed by law, so as to show at
all times the amount of capital stock issued and outstanding; the manner and
the time compensation for the same was paid; the names of the owners thereof,
alphabetically arranged; the number of shares owned by each; the time at which
each person became such owner; and the amount paid thereon; and keep such
stock and transfer books open daily during the business hours of the office of
the Corporation, subject to the inspection of any stockholder of the
Corporation, and permit such stockholder to make extracts from said books to
the extent prescribed by law. He shall sign all certificates of stock. He
shall present to the Board of Directors at their meetings all communications
addressed to him officially by the President or any officer or stockholder of
the Corporation; and he shall attend to all correspondence and perform all the
duties incident to the office of Secretary.
treasurer
The Treasurer shall have the care and custody of and be responsible for
all the funds and securities of the Corporation, and deposit all such funds in
the name of the Corporation in such bank or banks, trust company or trust
companies or safe deposit vaults as the Board of Directors may designate. He
shall exhibit at all reasonable times his books and accounts to any Director
or stockholder of the Corporation upon application at the office of the
Corporation during business hours. He shall render a statement of the
conditions of the finances of the Corporation at each regular meeting of the
Board of Directors, and at such other times as shall be required of him, and a
full financial report at the annual meeting of the stockholders. He shall
keep, at the office of the Corporation, correct books of account of all its
business and transactions and such other books of account as the Board of
Directors may require. He shall do and perform all duties appertaining to the
office of Treasurer. The Treasurer shall, if required by the Board of
Directors, give to the Corporation such security for the faithful discharge of
his duties as the Board may direct.
Section 4. Bond. The Treasurer shall, if required by the Board of
Directors, give to the Corporation such security for the faithful discharge of
his duties as the Board may direct.
Section 5. Vacancies, How Filled. All vacancies in any office shall be
filled by the Board of Directors without undue delay, either at its regular
meeting or at a meeting specifically called for that purpose. In the case of
the absence of any officer of the Corporation or for any reason that the Board
of Directors may deem sufficient, the Board may, except as specifically
otherwise provided in these By-Laws, delegate the power or duties of such
officers to any other officer or Director for the time being; provided, a
majority of the entire Board concur therein.
Section 6. Compensation of Officers. The officers shall receive such
salary or compensation as may be determined by the Board of Directors.
Section 7. Removal of Officers. The Board of Directors may remove any
officer, by a majority vote, at any time with or without cause.
ARTICLE V
certificates of stock
Section 1. Description of Stock Certificates. The certificates of stock
shall be numbered and registered in the order in which they are issued. They
shall be bound in a book and shall be issued in consecutive order therefrom,
and in the margin thereof shall be entered the name of the person owning the
shares therein represented, with the number of shares and the date thereof.
Such certificates shall exhibit the holder's name and number of shares. They
shall be signed by the President or Vice President, and countersigned by the
Secretary or Treasurer and sealed with the Seal of the Corporation.
Section 2. Transfer of Stock. The stock of the Corporation shall be
assignable and transferable on the books of the Corporation only by the person
in whose name it appears on said books, his legal representatives or by his
duly authorized agent. In case of transfer by attorney, the power of
attorney, duly executed and acknowledged, shall be deposited with the
Secretary. In all cases of transfer the former certificate must be
surrendered up and canceled before a new certificate may be issued. No
transfer shall be made upon the books of the Corporation within ten (10) days
next preceding the annual meeting of the stockholders.
Section 3. Lost Certificates. If a stockholder shall claim to have lost
or destroyed a certificate or certificates of stock issued by the Corporation,
the Board of Directors may, at its discretion, direct a new certificate or
certificates to be issued, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed, and upon the
deposit of a bond or other indemnity in such form and with such sureties if
any that the Board may require.
ARTICLE VI
seal
Section 1. Seal. The seal of the Corporation shall be as follows:
NO SEAL IN USE AT THIS TIME
ARTICLE VII
dividends
Section 1. When Declared. The Board of Directors shall by vote declare
dividends from the surplus profits of the Corporation whenever, in their
opinion, the condition of the Corporation's affairs will render it expedient
for such dividends to be declared.
Section 2. Reserve. The Board of Directors may set aside, out of the
net profits of the Corporation available for dividends, such sum or sums
(before payment of any dividends) as the Board, in their absolute discretion,
think proper as a reserve fund, to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest
of the Corporation, and they may abolish or modify any such reserve in the
manner in which it was created.
ARTICLE VIII
indemnification
Section 1. Any person made a party to or involved in any civil, criminal
or administrative action, suit or proceeding by reason of the fact that he or
his testator or intestate is or was a Director, officer, or employee of the
Corporation, or of any corporation which he, the testator, or intestate served
as such at the request of the Corporation, shall be indemnified by the
Corporation against expenses reasonably incurred by him or imposed on him in
connection with or resulting from the defense of such action, suit, or
proceeding and in connection with or resulting from any appeal thereon, except
with respect to matters as to which it is adjudged in such action, suit or
proceeding that such officer, Director, or employee was liable to the
Corporation, or to such other corporation, for negligence or misconduct in the
performance of his duty. As used herein the term "expense" shall include all
obligations incurred by such person for the payment of money, including
without limitation attorney's fees, judgments, awards, fines, penalties, and
amounts paid in satisfaction of judgment or in settlement of any such action,
suit, or proceedings, except amounts paid to the Corporation or such other
corporation by him.
A judgment of conviction whether based on plea of guilty or nolo
contendere or its equivalent, or after trial, shall not of itself be deemed an
adjudication that such Director, officer or employee is liable to the
Corporation, or such other corporation, for negligence or misconduct in the
performance of his duties. Determination of the rights of such
indemnification and the amount thereof may be made at the option of the person
to be indemnified pursuant to procedure set forth, from time to time, in the
By-Laws, or by any of the following procedures: (a) order of the Court or
administrative body or agency having jurisdiction of the action, suit, or
proceeding; (b) resolution adopted by a majority of the quorum of the Board of
Directors of the Corporation without counting in such majority any Directors
who have incurred expenses in connection with such action, suit or proceeding;
(c) if there is no quorum of Directors who have not incurred expense in
connection with such action, suit, or proceeding, then by resolution adopted
by a majority of the committee of stockholders and Directors who have not
incurred such expenses appointed by the Board of Directors; (d) resolution
adopted by a majority of the quorum of the Directors entitled to vote at any
meeting; or (e) Order of any Court having jurisdiction over the Corporation.
Any such determination that a payment by way of indemnity should be made will
be binding upon the Corporation. Such right of indemnification shall not be
exclusive of any other right which such Directors, officers, and employees of
the Corporation and the other persons above mentioned may have or hereafter
acquire, and without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any By-Law,
Agreement, vote of stockholders, provision of law, or otherwise in addition to
their rights under this Article. The provision of this Article shall apply to
any member of any committee appointed by the Board of Directors as fully as
though each person and been a Director, officer or employee of the
Corporation.
ARTICLE IX
amendments
Section 1. How Amended. These By-Laws may be altered, amended, repealed
or added to by the vote of the Board of Directors of the Corporation at any
regular meeting of said Board, or at a special meeting of Directors called for
that purpose provided a quorum of the Directors as provided by law and by the
Articles of Incorporation, are present at such regular meeting or special
meeting. These By-Laws and any amendments thereto and new By-Laws added by
the Directors may be amended, altered or replaced by the stockholders at any
annual or special meeting of the stockholders.
ARTICLE X
fiscal year
Section 1. Fiscal Year. The fiscal year shall end on the 31st day of
DECEMBER.
ARTICLE XI
waiver of notice
Section 1. Whenever any notice is required to be given to any
shareholders or directors of the Corporation under the provisions of these By-
Laws, under the Articles of Incorporation or under the provisions of the
Nevada Business Corporation Act, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ADOPTED this 10th day of August, 1998.
R&R RANCHING, INC.
a Nevada corporation,
/s/ William R. Davidson, President
William R. Davidson, President
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary\Treasurer of R & R
Ranching, Inc., A Nevada Corporation: and
2. That the foregoing By-Laws, comprising eight (8) pages, constitute the
By-Laws of said Corporation as duly adopted at a meeting of the Board of
Directors thereof duly held on the 10th day of August 1998.
/s/ Allyson R. N. Davidson
Allyson R. N. Davidson, Secretary/Treasurer
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement") is entered into as of the 22
day of March, 1999, by and between R & R RANCHING, INC., a Nevada corporation
(the "Company"), and Interwest Transfer Company, Inc., a securities transfer
agency incorporated under the laws of the State of Utah, as warrant agent (the
"Warrant Agent").
Recitals
A. The Company is conducting a registered offering of 100,000 Units.
Each Unit is comprised of (i) one share of the Company's one mill ($0.001) par
value common stock; (ii) one "A" Warrant entitling the holder to purchase,
during the Exercise Period as defined in Section 5 herein, for $2.50 one share
of common stock (the "'A' Warrant Price"); and (iii) one "B" Warrant entitling
the holder to purchase, during the Exercise Period as defined in Section 5
herein, for $5.00 one share of common stock (the "'B' Warrant Price"). This
Agreement governs both the "A" Warrants and the "B" Warrants, including the
issuance, exercise, and redemption of such Warrants, and the rights and
obligations of the holders thereof. The shares of common stock issuable on
exercise of the Warrants are collectively referred to herein as the "'A'
Warrant Shares" or the "'B' Warrant Shares," as applicable. The Warrants may
not be separated or transferred without the Company's prior written consent.
B. The Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to act in connection with the
issuance, division, transfer, exchange, and exercise of the Warrants.
Agreement
---------
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered and record owners of the Warrants
(the "Holders"), the Company and the Warrant Agent hereby agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
2. Transferability and Form of Warrants.
2.1 Registration. The Warrants shall be designated by class and
numbered and shall be registered in registers as they are issued. The
Company and the Warrant Agent shall be entitled to treat the Holder of
any Warrant as the owner in fact thereof for all purposes and shall not
be bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, and shall not be liable
for any registration or transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or
transfer, or with knowledge of such facts that the Warrant Agent's
participation therein amounts to bad faith.
2.2 Transfer. The Warrants shall be non-transferable without
the prior written consent of the Company.
2.3 Form of Warrants. The Warrants, including the form of
election to purchase Warrant Shares, shall be represented by
certificates in substantially the forms set forth as Exhibit "A" (as to
the "A" Warrants) and Exhibit "B" (as to the "B" Warrants), which are
attached hereto and incorporated herein by reference. The price per
Warrant Share and the number of Warrant Shares issuable on exercise of
Warrants are subject to adjustment on the occurrence of certain events,
all as hereinafter provided. The Warrants shall be executed on behalf
of the Company by the manual or facsimile signature of the present or
any future president or vice-president of the Company, under its
corporate seal, affixed or in facsimile, attested by the manual or
facsimile signature of the present or any future secretary or assistant
secretary of the Company. The Warrants shall be dated as of the date of
countersignature thereof by the Warrant Agent, either on initial
issuance or on division, exchange, substitution or transfer.
3. Countersignature of Warrants. The Warrants shall be countersigned by
the Warrant Agent (or any successor to the Warrant Agent then acting as
warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. The Warrants may be countersigned by the Warrant
Agent (or by its successor as warrant agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have
ceased to be such officers at the time of such countersignature, issuance or
delivery. In total, the Warrant Agent shall, on written instructions of the
president or the secretary of the Company, countersign, issue and deliver
Warrants entitling the Holders thereof to purchase not more than 100,000 "A"
Warrant Shares and 100,000 "B" Warrant Shares.
4. Exchange of Units and Warrants. Any Warrant may be exchanged for
another Warrant of the same class entitling the holder thereof to purchase a
like aggregate number of Warrant Shares as the Warrant surrendered then
entitles the holder to purchase. Any Warrant Holder desiring to exchange
Warrants shall make such request in writing delivered to the Warrant Agent,
and shall surrender, properly endorsed, the Warrant to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant of the same class as requested. The Warrant
Agent's duty to transfer any Warrants shall be governed by the applicable
Uniform Commercial Code.
5. Term of Warrants; Exercise of Warrants.
5.1 Term of Warrants. Each Holder of Warrants shall have the
right, which may be exercised for a period of five years from the date
of issuance of the Warrant (the "Warrant Exercise Period"), to purchase
from the Company one fully paid and nonassessable Warrant Share for each
Warrant held at the warrant price as set forth in Sections 9 and 10
hereof (the "Warrant Price"), subject to the conditions set forth in
this Agreement. If the Warrant is not exercised during the Warrant
Exercise Period, it shall expire.
The Warrant Shares shall be issuable on exercise of the Warrants on
surrender to the Company at the principal office of the Warrant Agent in
Holladay, Utah, with the form of election to purchase on the reverse
thereof duly completed and signed, and on payment to the Warrant Agent
for the account of the Company of the Warrant Price for the number of
Warrant Shares in respect of which such Warrants are then exercised.
Payment of the applicable Warrant Price shall be made in cash or by
cashier's check or by collection of checks or drafts. Subject to
Subsections 5.1 and 5.2 of this Section, on such surrender of Warrants
and payment of the applicable Warrant Price as aforesaid, the Company
shall issue and cause to be delivered with all reasonable dispatch to or
on the written order of the Holder and in such name or names as the
Holder may designate, a certificate or certificates for the number of
full Warrant Shares so purchased on the exercise of such Warrants. No
fractional Warrant Shares shall be issuable on such surrender. Such
certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the applicable Warrant Price,
as aforesaid; provided, however, that if, at the date of surrender of
such Warrants and payment of such Warrant Price, the transfer books for
the Warrant Shares on the exercise of such Warrants shall be closed, the
certificates for the Warrant Shares in respect of which such Warrants
are then exercised shall be issuable as of the date on which such books
shall next be opened (whether before or after expiration of the exercise
period) and until such date the Company shall be under no duty to
deliver any certificate for such Warrant Shares; provided further,
however, that the transfer books of record, unless otherwise required by
law, shall not be closed at any one time for a period longer than 60
days. The right of purchase represented by the Warrants shall be
exercisable, at the election of the Holder thereof, either in full or
from time to time in part and, in the event that any Warrant is
exercised in respect of less than all of the Warrant Shares specified
therein at any time prior to the date of expiration of the applicable
Warrant class, a new Warrant or Warrants of the same class will be
issued for the remaining number of Warrant Shares, and the Warrant Agent
is hereby irrevocably authorized to countersign and to deliver the
required new Warrants pursuant to the provisions of this Section and of
Section 3 hereof. The Company, whenever required by the Warrant Agent,
will supply the Warrant Agent with Warrants of the applicable class,
duly executed on behalf of the Company for such purpose.
5.2 Exercise of Warrants. The Warrants may not be exercised by
the Holders thereof in the absence of an exemption from registration
under the Securities Act and applicable state securities laws or an
effective registration statement pertaining to the Warrant Shares. In
the event that the Company files a registration statement under the
Securities Act with the Securities and Exchange Commission during the
Warrant Exercise Period, such registration statement shall also cover
the resale of the Warrant Shares issuable on exercise of the Warrants.
The Company shall bear all registration expenses in connection with any
registration, qualification and compliance by the Company.
5.3. Call of Warrants. Upon 30 days' written notice, the Company
shall have the option, at any time during the Warrant Exercise Period,
to call, redeem and acquire all of the Warrants that are then
outstanding and unexercised, on the date specified in such notice (the
"Redemption Date"), which Redemption Date shall be 30 days after the
date of such notice, for an amount equal to one cent ($0.01) per
Warrant; provided, however, that the Warrant Holders shall have the
right during the 30-day period immediately following the date of such
notice to exercise the Warrants as provided hereinabove. In the event
that any Warrants are exercised during such 30-day period, this call
option shall be deemed not to have been exercised by the Company as to
the Warrants exercised by the holders thereof. Such notice of
redemption shall require each Warrant holder to surrender to the
Company, on the Redemption Date, at the corporate office of the Warrant
Agent (or its successor), his certificate or certificates representing
the Warrants to be redeemed. Notwithstanding the fact that any Warrants
called for redemption have not been surrendered for redemption and
cancellation of the Redemption Date, after the Redemption Date, such
Warrants shall be deemed to be expired and all rights of the holders of
such unsurrendered Warrants shall cease and terminate, other than the
right to receive the redemption price of one cent ($0.01) per Warrant
for such Warrants, without interest; provided, however, that such right
to receive the redemption price shall itself expire at the end of the
Warrant Exercise Period. The Company shall notify the Warrant Agent
verbally, with confirmation in writing, of the call of the Warrants and
of the Redemption Date, and the Company shall instruct the Warrant Agent
accordingly as to the procedures to be followed by the Warrant Agent in
connection with the redemption of the Warrants.
6. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect to the issuance or delivery of any Warrants or
certificates for Warrant Shares involving a transfer of record or beneficial
ownership.
7. Mutilated or Missing Warrants. In case any certificate representing
any Warrant is mutilated, lost, stolen or destroyed, the Company may at its
discretion issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and on cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of the same class and representing an equivalent right or interest,
but only on receipt of evidence satisfactory to the Company and the Warrant
Agent of such loss, theft or destruction of such Warrant and indemnity, if
requested, also satisfactory to them. Applicants for such substitute Warrants
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe.
8. Reservation and Registration of Warrant Shares. There have been
reserved, and the Company shall at all times keep reserved, out of the
authorized and unissued shares of Common Stock, a number of shares sufficient
to provide for the exercise of the rights of purchase represented by the
outstanding Warrants, assuming exercise of all Warrants. The Warrant Agent
and every subsequent transfer agent for any Warrant Shares issuable on the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued Warrant Shares as shall be requisite for such purpose. The Company
will keep a copy of this Agreement on file with any subsequent transfer agent
for the Warrant Shares issuable on the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably
authorized to requisition from time to time from any such transfer agent stock
certificates required to honor outstanding Warrants on exercise thereof in
accordance with the terms of this Agreement. The Company will supply such
transfer agent with duly executed stock certificates for such purpose and will
provide or otherwise make available any cash which may be payable as provided
in Section 11 hereof. All Warrants surrendered in the exercise of the rights
thereby evidenced shall be canceled by the Warrant Agent and shall be
maintained by the Warrant Agent, as the Company's property. Promptly after
the date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Warrants then outstanding, and
thereafter no Warrant Shares shall be subject to reservation in respect of
such Warrants.
At such time as the closing bid price for the Company's common stock on
the OTC Bulletin Board has exceeded the Warrant Price of the "A" Warrants
and/or the "B" Warrants by $0.75 per share for 10 consecutive trading days,
the Company shall use its best efforts to secure registration of the shares
underlying such Warrants as expeditiously as possible, and to maintain such
registration effective until the earlier of: (i) the expiration of the
applicable Warrant Exercise Period; (ii) the Redemption Date as defined above;
or (iii) the twentieth consecutive trading day on which the closing bid price
for the Company's common stock has been less than $3.25 per share (in the case
of "A" Warrants) or $5.75 per share (in the case of "B" Warrants). No Warrant
Share shall be issued unless and until such registration requirements have
been satisfied.
9. Warrant Price. The Warrant Price shall be $2.50 per "A" Warrant
Share and $5.00 per "B" Warrant Share. The Warrant Price shall be subject to
adjustment pursuant to Section 10 hereof.
10. Adjustment of Warrant Prices and Number of Warrant Shares.
10.1 Adjustments. The number of Warrant Shares issuable on the
exercise of each Warrant and the applicable Warrant Price shall be
subject to adjustment as follows:
(a)(1) In case the Company shall (i) pay a dividend in Common
Stock or make a distribution in Common Stock; (ii) subdivide its
outstanding Common Stock; (iii) combine its outstanding Common Stock
into a smaller number of shares; or (iv) issue by reclassification of
its Common Stock other securities of the Company, the number of
Warrant Shares issuable on exercise of each Warrant immediately prior
thereto shall be adjusted so that the Holder of each Warrant shall be
entitled to receive on exercise the kind and number of Warrant Shares
of the Company which he would have owned or been entitled to receive
after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto.
(2) Any adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date for such event.
(b) No adjustment in the number of Warrant Shares issuable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant
Shares issuable on the exercise of each Warrant; provided, however,
that any adjustments which by reason of this paragraph (b) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment.
(c) Whenever the number of Warrant Shares issuable on the
exercise of each Warrant is adjusted, as herein provided, the
applicable Warrant Price payable on exercise of each Warrant shall be
adjusted by multiplying such Warrant Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number
of Warrant Shares issuable on the exercise of each Warrant
immediately prior to such adjustment and the denominator of which
shall be the number of Warrant Shares so issuable immediately
thereafter.
(d) Whenever the number of Warrant Shares issuable on the
exercise of each Warrant or the applicable Warrant Price of such
Warrant Shares issuable are adjusted, as herein provided, the Company
shall cause the Warrant Agent to promptly mail by first class mail,
postage prepaid, to each Holder of Warrants notice of such adjustment
or adjustments and shall deliver to the Warrant Agent a certificate
of a firm of independent accountants selected by the Board of
Directors of the Company (which may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares
issuable on the exercise of each Warrant and the Warrant Price of
such Warrant Shares issuable after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made. Such
certificate, in the absence of manifest error, shall be conclusive
evidence of the correctness of adjustment. The Warrant Agent shall
be under no duty or responsibility with respect to any such
certificate, except to exhibit the same, from time to time, to any
Holder of Warrants desiring an inspection thereof during reasonable
business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder of Warrants to determine whether
any facts exist which may require any adjustment of the Warrant
Prices of the number of Warrant Shares issuable or other securities
purchasable or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in
making such adjustment.
(e) For purposes of this Subsection 10.1, the term "Common
Stock" shall mean (i) the class of stock designated as the common
stock of the Company at the date of this Agreement, or (ii) any other
class of stock resulting from successive changes or reclassifications
of such shares consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders of Warrants shall become entitled to
purchase any securities of the Company other than Warrant Shares,
thereafter the number of such other securities so purchasable on
exercise of each Warrant and the Warrant Price of such securities
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in paragraphs (a) through (d),
inclusive, above, and the provisions of Section 5 and Subsections
10.2 through 10.5, inclusive, with respect to the Warrant Shares
shall apply on like terms to any such other securities.
10.2 No Adjustments for Dividends. Except as provided in
Subsection 10.1, no adjustment in respect of any dividends shall be made
during the term of the Warrants or on the exercise of the Warrants.
10.3 No Adjustment in Certain Cases. No adjustments shall be
made:
(a) In connection with the issuance of any Warrant Shares on the
exercise of the Warrants;
(b) In connection with the issuance or conversion of shares of
preferred stock, if any;
(c) In connection with the issuance of additional Warrant Shares
or other securities on account of any anti-dilution provisions
contained in or relating to the Warrants;
(d) In connection with the purchase or other acquisition by the
Company of any shares of Common Stock, preferred stock, evidences of
its indebtedness or assets, or rights, options, warrants, or
convertible securities containing the right to subscribe for or
purchase Common Stock; or
(e) In connection with the sale or exchange by the Company of
any preferred stock, evidences of its indebtedness or assets, or
rights, options, warrants, or convertible securities containing the
right to subscribe for or purchase Common Stock.
10.4 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the Company with or
merger of the Company into another corporation or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor
or purchasing corporation, as the case may be, shall execute with the
Warrant Agent an agreement that each Holder of a Warrant shall have the
right thereafter on payment of the Warrant Price in effect immediately
prior to such action to purchase on exercise of each Warrant the kind
and amount of Warrant Shares and other securities and property which it
would have owned or would have been entitled to receive after the
happening of such consolidation, merger, sale, or conveyance had such
Warrant been exercised immediately prior to such action. The Company
shall mail by first class mail, postage prepaid, to the Holder of each
Warrant notice of the execution of any such agreement. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 10.
The provisions of this Subsection 10.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances. The Warrant
Agent shall be under no duty or responsibility to determine the
correctness of any provisions contained in any such agreement relating
either to the kind or amount of Warrant Shares of stock or other
securities or property receivable on exercise of Warrants or with
respect to the method employed and provided therein for any adjustments.
10.5 Statement on Warrants. Irrespective of any adjustments in
the applicable Warrant Price or the number or kind of Warrant Shares
purchasable on the exercise of the Warrants, Warrants theretofore or
hereafter issued may continue to express the same price and number and
kind of Warrant Shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
11. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable on the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares represented by the Warrants so presented. If any fraction of a
share would, except for the provisions of this Section 11, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay
an amount in cash equal to the current value of such fraction computed on the
basis of (i) the highest closing bid price of the Common Stock, as reported by
NASDAQ on the last business day prior to the date of exercise; (ii) the last
reported sale price of the Common Stock on the national stock exchange on
which the Common Stock is listed on the last business day prior to the date of
exercise on which such a sale shall have been effected, if the Common Stock is
listed on such an exchange, or (iii) if not quoted on NASDAQ or listed on an
exchange as reported on the Electronic Bulletin Board maintained by the NASD
or, if not on the Electronic Bulletin Board, any other reliable medium of
quotation.
12. No Rights as Shareholders; Notices to Warrant Holders. Nothing
contained in this Agreement or in the Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent to or to receive notice as shareholders in respect of
the meeting of shareholders for the election of directors of the Company or
any other matter, or any rights whatsoever as shareholders of the Company.
13. Disposition of Proceeds on Exercise of Warrants; Inspection of
Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys collected by the Warrant Agent for the purchase of the Company's
Warrant Shares through the exercise of such Warrants. The Warrant Agent shall
keep copies of this Agreement and any notices given or received hereunder
available for inspection by Holders of Warrants during normal business hours
at its principal office in Holladay, Utah. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement
as the Warrant Agent may request.
14. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 16 hereof. In case at the time such successor
to the Warrant Agent shall succeed to the agency created by this Agreement,
any of the Warrants shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned, and in case at that
time any of the Warrants shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and
in all such cases, the Warrant shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned, and in case at that time any of
the Warrants shall not have been countersigned, the Warrant Agent may
countersign such Warrants either in its prior name or in its changed name, and
in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
15. Concerning the Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the
Warrants except as herein otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys, agents or employees and the
Warrant Agent shall not be answerable or accountable for any act of any
such attorneys, agents or employees or for any loss to the Company
resulting from such act, except for the negligence or bad faith of such
attorneys, agents or employees; provided, reasonable care shall have
been exercised in the selecting and continued employment thereof.
15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to
any Holder of any Warrant in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion
or the advice of such counsel.
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate
signed by the president or a vice-president or the treasurer or the
secretary of the Company and delivered to the Warrant Agent, and such
certificate shall be full authorization to the Warrant Agent for any
action taken or suffered in good faith by it under the provisions of
this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of its duties under the terms of this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental charges, and
other charges of any kind and nature incurred by the Warrant Agent in
the execution of its duties under the terms of this Agreement and to
indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything
done or omitted by the Warrant Agent in the execution of its duties
under the terms of this Agreement, except as a result of the Warrant
Agent's negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other action likely
to involve expense unless the Company or one or more Holders of Warrants
shall furnish the Warrant Agent with reasonable security and indemnity
for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without any such
security or indemnity. All rights of action under this Agreement or
under any of the Warrants may be enforced by the Warrant Agent without
the possession of any of the Warrants or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable
benefit of the Holders of the Warrants, as their respective rights or
interests may appear.
15.8 The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement, except for its own
negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any
action taken in reliance on any notice, resolution, waiver, consent,
order, certificate or other paper, document or instrument reasonably
believed by it to be genuine and to have been signed, sent, or presented
by the proper party or parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant (except its
countersignature thereof), nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other stock) to
be issued pursuant to this Agreement or any Warrant or as to whether any
Warrant Shares (or other stock) will when issued be validly issued,
fully paid, and nonassessable or as to the Warrant Price, or the number
or kind or amount of Warrant Shares or other securities or other
property issuable on exercise of any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the chairman of the board or the president or a
vice-president or the secretary or the treasurer of the Company, and to
apply to such officers for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of any such
officer.
16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30
days' notice in writing. The Warrant Agent may be removed by like notice to
the Warrant Agent from the Company. If the Warrant Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make
such appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder of a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of
any Warrant may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such a court, shall be a bank, trust
company or securities transfer agency, in good standing, incorporated under
the laws of the States of Delaware, Nevada or Utah or any other jurisdiction
within the United States of America. After appointment, the successor warrant
agent shall be vested with the same powers, rights, duties, and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer
to the successor warrant agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act, or deed
necessary for the purpose. Failure to file any notice provided for in this
Section 16, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor warrant agent, as the case may be. In the event of such
resignation or removal, the successor warrant agent shall mail, first class,
to each Holder, written notice of such removal or resignation and the name and
address of such successor warrant agent.
17. Identity of Transfer Agent. Forthwith on the appointment of any
subsequent Transfer Agent for the Company's Warrant Shares, or any other
shares of the Company's capital stock issuable on the exercise of the rights
of purchase represented by the Warrants, the Company will file with the
Warrant Agent a statement setting forth the name and address of such Transfer
Agent.
18. Notices. Any notice pursuant to this Agreement by the Company or
by the Holder of any Warrant to the Warrant Agent, or by the Warrant Agent or
by the Holder of any Warrant to the Company, shall be in writing and shall be
deemed to have been duly given if delivered or mailed certified mail, return
receipt requested (a) if to the Company, to R & R Ranching, Inc., 899 South
Artistic Circle, Mapleton, Utah 84663, and (b) if to the Warrant Agent, to
Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Suite 100,
Holladay, Utah 84117. Each party hereto may from time to time change the
address to which notices to it are to be delivered or mailed hereunder by
notice in writing to the other party.
Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders of Warrants shall be in writing and shall be
deemed to have been duly given if mailed, postage prepaid, to such Holders at
their respective addresses as reflected on the books of the Warrant Agent.
19. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement, without the approval of
any Holders of Warrants, in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provision of the Warrants and which shall not adversely
affect the interests of the Holders of the Warrants. In this regard, but not
by way of limitation, establishing an earlier date of exercise without a
change in the expiration date of the Warrants set forth in Section 5 or
extending the period for exercise without a change in the date on which the
Warrants are first exercisable set forth in Section 5 shall not be deemed to
adversely affect the interests of the Holders. As such, the board of
directors of the Company and the Warrant Agent may at their discretion extend
the exercise periods for the Warrants.
20. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
21. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall
expressly assume, by supplemental agreement satisfactory in form to the
Warrant Agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition
of this Agreement to be performed and observed by the Company.
22. Applicable Law. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the state of Utah and
for all purposes shall be construed in accordance with the laws of said state.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy or claim under this Agreement, but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the Holders of the
Warrants.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one
and the same instrument.
25. Captions. The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
R & R RANCHING, INC.
By /s/ William R. Davidson
-----------------------
William R. Davidson, President
INTERWEST TRANSFER COMPANY, INC., as Warrant Agent
By /s/ Kurt Hughes
---------------
Kurt Hughes, President
EXHIBIT "A"
NO WARRANT MAY BE EXERCISED PRIOR TO A REGISTRATION STATEMENT COVERING
THE SHARES OF COMMON STOCK UNDERLYING THE WARRANTS BEING DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION, OR AT THE OPTION OF
THE COMPANY, PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933. UNLESS OTHERWISE PROVIDED
HEREIN, THE FILING OF ANY SUCH REGISTRATION STATEMENT SHALL BE AT THE
SOLE DISCRETION OF THE COMPANY. THE WARRANTS MAY ONLY BE EXERCISED IN
THOSE STATES IN WHICH IT IS LEGALLY PERMISSIBLE TO DO SO. THE WARRANTS
MAY NOT BE SEPARATED OR TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
WARRANT NUMBER A-______R & R RANCHING, INC. NUMBER OF WARRANTS
Incorporated Under the Laws of the State of Nevada
"A" Warrant to Purchase Common Stock
CERTIFICATE FOR WARRANTS TO PURCHASE COMMON STOCK
This Warrant Certificate Certifies That
or registered assigns (the "Warrant Holder"), is the registered owner of
the above indicated number of Warrants expiring at 11:59 p.m. Mountain
Time, ______, 2004 (the "Expiration Date"). One (1) Warrant entitles
the Warrant Holder to purchase one share of Common Stock, $0.001 par
value (the "Share") from R & R Ranching, Inc., a Nevada corporation (the
"Company"), at a purchase price of $2.50 per share of Common Stock (the
"Exercise Price"), commencing on the effective date of the Registration
Statement or exemption and terminating on the expiration Date (the
"Exercise Period"), upon surrender of this Warrant Certificate with the
exercise form hereon duly completed and executed with payment of the
Exercise Price at the office of Interwest Transfer Company, Inc. (the
"Warrant Agent"), subject to the conditions set forth herein and in a
Warrant Agreement between the Company and the Warrant Agent, which
Warrant Agreement is incorporated herein by this reference. The
Exercise Price, the number of Shares purchasable upon exercise of each
Warrant, the number of Warrants outstanding and the Expiration Date are
subject to adjustments upon the occurrence of certain events enumerated
in the Warrant Agreement to which this Warrant Certificate is attached
as Exhibit "A."
Upon due presentment for transfer of this Warrant Certificate at the
office of the Warrant Agent, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number
of Warrants, subject to any adjustments made in accordance with the
provisions of the Warrant Agreement, shall be issued to the transferee
in exchange for this Warrant Certificate, subject to the limitations
provided in the Warrant Agreement, upon payment of any applicable
transfer fee to the Warrant Agent and any tax or governmental charge
imposed in connection with such transfer.
Subject to the Company's option to call the Warrants, as outlined below,
the Warrant Holder of the Warrants evidenced by this Warrant Certificate
may exercise all or any whole number of such Warrants during the period
and in the manner stated hereon. The Exercise Price shall be payable in
lawful money of the United States of America and in cash or by certified
or bank cashier's check or bank draft payable to the order of the
Company. If upon exercise of any Warrants evidenced by this Warrant
Certificate the number of Warrants exercised shall be less than the
total number of Warrants so evidenced, there shall be issued to the
Warrant Holder a new Warrant Certificate evidencing the number of
Warrants not so exercised. No fractional shares may be purchased.
No Warrant may be exercised after 5:00 p.m. Mountain Time on the
Expiration Date and any Warrant not exercised by such time shall expire
and become void unless extended by the Company.
At such time as the closing bid price for the Company's common stock on the
OTC Bulletin Board has exceeded the Exercise Price $0.75 per share for 10
consecutive trading days, the Company shall use its best efforts to secure
registration of the shares underlying the Warrants as expeditiously as
possible, and to maintain such registration effective until the earlier of:
(i) the expiration of the Exercise Period; (ii) the date of call of the
Warrants, as discussed below; or (iii) the twentieth consecutive trading
day on which the closing bid price for the Company's common stock has been
less than $3.25 per share. No Warrant Share shall be issued unless and
until such registration requirements have been satisfied.
By resolution of its Board of Directors, the Company may call this Warrant
at any time during the Exercise Period, by paying to the Warrant Holder one
cent ($0.01) per Warrant being called (the "Call Price"). The Company
shall give notice of its election to call this Warrant by mailing a copy of
such notice, postage prepaid, to the Warrant Holder not less than 30 days
prior to the date designated as the date of the call. Such notice shall be
addressed to the address of the Warrant Holder appearing on the books of
the Company.
On and after the date of call specified in the notice, the Warrant Holder
shall be entitled to receive the Call Price for the number of Warrants
being redeemed, upon presentation and surrender of this Warrant at the
place designated in the notice.
From and after the date of call specified in the notice (unless the Company
defaults in paying for the Warrants being redeemed), all rights of the
Warrant Holder as a Warrant Holder of the Company shall cease with respect
to the Warrants being called, except for the right to receive the Call
Price, without interest, and this Warrant shall no longer be deemed to be
outstanding; provided, however, that such right to receive the Call Price
shall itself expire at the end of the Exercise Period.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and by its Secretary, each by a facsimile of his or her
signature and has caused a facsimile of its corporate seal to be
imprinted hereon.
Dated:
R & R RANCHING, INC.
By____________________________ By _______________________________
President Secretary
COUNTERSIGNED AND REGISTERED:
_____________________________
_____________________________
WARRANT AGENT AND REGISTRAR
<PAGE>
"A" WARRANT EXERCISE FORM
The undersigned Warrant Holder hereby elects to exercise Warrants to
purchase a total of ____________ shares of the Common Stock of R & R Ranching,
Inc., a Nevada corporation (the "Company"), in accordance with the Warrant
Certificate and Paragraph 5 of the Warrant Agreement of the Company.
Simultaneous with the surrender of this Warrant Exercise Form, the
undersigned hereby tenders to the Warrant Agent the sum of $___________,
representing the full Warrant Price for the above-referenced Warrant Shares.
___________________________________
EXHIBIT "B"
NO WARRANT MAY BE EXERCISED PRIOR TO A REGISTRATION STATEMENT COVERING
THE SHARES OF COMMON STOCK UNDERLYING THE WARRANTS BEING DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION, OR AT THE OPTION OF
THE COMPANY, PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933. UNLESS OTHERWISE PROVIDED
HEREIN, THE FILING OF ANY SUCH REGISTRATION STATEMENT SHALL BE AT THE
SOLE DISCRETION OF THE COMPANY. THE WARRANTS MAY ONLY BE EXERCISED IN
THOSE STATES IN WHICH IT IS LEGALLY PERMISSIBLE TO DO SO. THE WARRANTS
MAY NOT BE SEPARATED OR TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
WARRANT NUMBER B-______R & R RANCHING, INC. NUMBER OF WARRANTS
Incorporated Under the Laws of the State of Nevada
"B" Warrant to Purchase Common Stock
CERTIFICATE FOR WARRANTS TO PURCHASE COMMON STOCK
This Warrant Certificate Certifies That
or registered assigns (the "Warrant Holder"), is the registered owner of
the above indicated number of Warrants expiring at 11:59 p.m. Mountain
Time, ______, 2004 (the "Expiration Date"). One (1) Warrant entitles
the Warrant Holder to purchase one share of Common Stock, $0.001 par
value (the "Share") from R & R Ranching, Inc., a Nevada corporation (the
"Company"), at a purchase price of $5.00 per share of Common Stock (the
"Exercise Price"), commencing on the effective date of the Registration
Statement or exemption and terminating on the expiration Date (the
"Exercise Period"), upon surrender of this Warrant Certificate with the
exercise form hereon duly completed and executed with payment of the
Exercise Price at the office of _____________ (the "Warrant Agent"),
subject to the conditions set forth herein and in a Warrant Agreement
between the Company and the Warrant Agent, which Warrant Agreement is
incorporated herein by this reference. The Exercise Price, the number
of Shares purchasable upon exercise of each Warrant, the number of
Warrants outstanding and the Expiration Date are subject to adjustments
upon the occurrence of certain events enumerated in the Warrant
Agreement to which this Warrant Certificate is attached as Exhibit "B."
Upon due presentment for transfer of this Warrant Certificate at the
office of the Warrant Agent, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number
of Warrants, subject to any adjustments made in accordance with the
provisions of the Warrant Agreement, shall be issued to the transferee
in exchange for this Warrant Certificate, subject to the limitations
provided in the Warrant Agreement, upon payment of any applicable
transfer fee to the Warrant Agent and any tax or governmental charge
imposed in connection with such transfer.
Subject to the Company's option to call the Warrants, as outlined below,
the Warrant Holder of the Warrants evidenced by this Warrant Certificate
may exercise all or any whole number of such Warrants during the period
and in the manner stated hereon. The Exercise Price shall be payable in
lawful money of the United States of America and in cash or by certified
or bank cashier's check or bank draft payable to the order of the
Company. If upon exercise of any Warrants evidenced by this Warrant
Certificate the number of Warrants exercised shall be less than the
total number of Warrants so evidenced, there shall be issued to the
Warrant Holder a new Warrant Certificate evidencing the number of
Warrants not so exercised. No fractional shares may be purchased.
No Warrant may be exercised after 5:00 p.m. Mountain Time on the
Expiration Date and any Warrant not exercised by such time shall expire
and become void unless extended by the Company.
At such time as the closing bid price for the Company's common stock on the
OTC Bulletin Board has exceeded the Exercise Price $0.75 per share for 10
consecutive trading days, the Company shall use its best efforts to secure
registration of the shares underlying the Warrants as expeditiously as
possible, and to maintain such registration effective until the earlier of:
(i) the expiration of the Exercise Period; (ii) the date of call of the
Warrants, as discussed below; or (iii) the twentieth consecutive trading
day on which the closing bid price for the Company's common stock has been
less than $5.75 per share. No Warrant Share shall be issued unless and
until such registration requirements have been satisfied.
By resolution of its Board of Directors, the Company may call this Warrant
at any time during the Exercise Period, by paying to the Warrant Holder one
cent ($0.01) per Warrant being called (the "Call Price"). The Company
shall give notice of its election to call this Warrant by mailing a copy of
such notice, postage prepaid, to the Warrant Holder not less than 30 days
prior to the date designated as the date of the call. Such notice shall be
addressed to the address of the Warrant Holder appearing on the books of
the Company.
On and after the date of call specified in the notice, the Warrant Holder
shall be entitled to receive the Call Price for the number of Warrants
being redeemed, upon presentation and surrender of this Warrant at the
place designated in the notice.
From and after the date of call specified in the notice (unless the Company
defaults in paying for the Warrants being redeemed), all rights of the
Warrant Holder as a Warrant Holder of the Company shall cease with respect
to the Warrants being called, except for the right to receive the Call
Price, without interest, and this Warrant shall no longer be deemed to be
outstanding; provided, however, that such right to receive the Call Price
shall itself expire at the end of the Exercise Period.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and by its Secretary, each by a facsimile of his or her
signature and has caused a facsimile of its corporate seal to be
imprinted hereon.
Dated:
R & R RANCHING, INC.
By____________________________ By _______________________________
President Secretary
COUNTERSIGNED AND REGISTERED:
_____________________________
_____________________________
WARRANT AGENT AND REGISTRAR
<PAGE>
"B" WARRANT EXERCISE FORM
The undersigned Warrant Holder hereby elects to exercise Warrants to
purchase a total of ____________ shares of the Common Stock of R & R Ranching,
Inc., a Nevada corporation (the "Company"), in accordance with the Warrant
Certificate and Paragraph 5 of the Warrant Agreement of the Company.
Simultaneous with the surrender of this Warrant Exercise Form, the
undersigned hereby tenders to the Warrant Agent the sum of $___________,
representing the full Warrant Price for the above-referenced Warrant Shares.
___________________________________
[Letterhead of]
BRANDEN T. BURNINGHAM
ATTORNEY AT LAW
455 EAST 500 SOUTH, SUITE 205
SALT LAKE CITY, UTAH 84111
TELEPHONE: (801) 363-7411
ADMITTED IN UTAH AND CALIFORNIA FACSIMILE: (801) 355-7126
March 22, 1999
William R. Davidson, Director
R & R Ranching, Inc.
899 South Artistic Circle
Springville, Utah 84663
Re: R & R Ranching, Inc., a Nevada corporation (the "Company")
Dear Mr. Davidson:
The Company has retained me in connection with the preparation and filing
of its Registration Statement on Form SB-2 with the Securities and Exchange
Commission (the "Registration Statement"), with respect to 100,000 Units (each
Unit consisting of one share of the Company's one mill ($0.001) par value
common stock (the "Shares"); one "A" Warrant to purchase an additional share
of common stock at a price of $2.50 per share; and one "B" Warrant to purchase
an additional share of common stock at a price of $5.00 per share). The
Shares and the shares of common stock underlying the "A" Warrants and the "B"
Warrants shall be referred to collectively herein as the "Common Stock."
You have requested an opinion as to whether the Common Stock to be issued
on the terms set forth in the Registration Statement will be validly issued,
fully paid and non-assessable.
I have examined the following documents in connection with this matter:
1. Articles of Incorporation of the Company;
2. Bylaws of the Company;
3. The Registration Statement; and
4. Unanimous Consents of the Sole Director and of the Sole Stockholder
of the Company.
In addition, I have examined such other corporate records and documents
and have made such other examinations as I have deemed relevant.
Based upon the foregoing, I am of the opinion that the Common Stock to be
issued pursuant to the Registration Statement is validly authorized and that,
when issued in accordance with the terms set forth therein, the Common Stock
will be validly issued, fully paid and non-assessable.
Sincerely yours,
/s/ Branden T. Burningham
R & R RANCHING, INC.
1998 STOCK OPTION PLAN
Section l. Purpose; Definitions.
1.1 Purpose. The purpose of the R & Ranching, Inc. ("Company") 1998 Stock
Option Plan ("Plan") is to enable the Company to offer to its key employees,
officers, directors, consultants, advisors and sales representatives whose
past, present and/or potential contributions to the Company and its
Subsidiaries have been, are or will be important to the success of the
Company, an opportunity to acquire a proprietary interest in the Company. The
various types of long-term incentive awards which may be provided under the
Plan will enable the Company to respond to changes in compensation practices,
tax laws, accounting regulations and the size and diversity of its businesses.
1.2 Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Agreement" means the agreement between the Company and the
Holder setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) " Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto and the regulations promulgated
thereunder.
(d) "Committee" means the Stock Option Committee of the Board or any
other committee of the Board, which the Board may designate to administer the
Plan or any portion thereof. If no Committee is so designated, then all
references in this Plan to "Committee" shall mean the Board.
(e) "Common Stock" means the Common Stock of the Company, par value
$.001 per share.
(f) "Company" means R & R Ranching, Inc., a corporation organized
under the laws of the State of Nevada.
(g) "Deferred Stock" means Stock to be received, under an award made
pursuant to Section 9, below, at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(i) "Effective Date" means the date set forth in Section 13.1, below.
(j) Employee means any employee, director, general partner, trustee
(where the registrant is a business trust), officer or consultant or advisor.
(k) "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
given date: (i) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market or Nasdaq small Cap Market,
the last sale price of the Common Stock in the principal trading market for
the Common Stock on the last trading day preceding the date of grant of an
award hereunder, as reported by the exchange or Nasdaq, as the case may be;
(ii) if the Common Stock is not listed on a national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded
in the over-the-counter market, the closing bid price for the Common Stock on
the last trading day preceding the date of grant of an award hereunder for
which such quotations are reported by the OTC Bulletin Board or the National
Quotation Bureau, Incorporated or similar publisher of such quotations; and
(iii) if the fair market value of the Common Stock cannot be determined
pursuant to clause (i) or (ii) above, such price as the Committee shall
determine, in good faith.
(l) "Holder" means a person who has received an award under the Plan
(m) "Incentive Stock Option" means any Stock Option intended to be
and designated as an "incentive stock option" within the meaning of Section
422 of the Code.
(n) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment with
the Company or any Subsidiary on or after age 65.
(p) "Other Stock-Based Award" means an award under Section 10, below,
that is valued in whole or in part by reference to, or is otherwise based
upon, Stock.
(q) "Parent" means any present or future parent corporation of the
Company, as such term is defined in Section 424(e) of the Code.
(r) "Plan" means the R & R Ranching, Inc.1998" Stock Option Plan, as
hereinafter amended from time to time.
(s) "Restricted Stock" means Stock, received under an award made
pursuant to Section 8, below, that is subject to restrictions under said
Section 8.
(t) "SAR Value" means the excess of the Fair Market Value (on the
exercise date) of the number of shares for which the Stock Appreciation Right
is exercised over the exercise price that the participant would have otherwise
had to pay to exercise the related Stock Option and purchase the relevant
shares.
(u) "Stock" means the Common Stock of the Company, par value $.001
per share.
(v) "Stock Appreciation Right" means the right to receive from the
Company, on surrender of all or part of the related Stock Option, without a
cash payment to the Company, a number of shares of Common Stock equal to the
SAR Value divided by the exercise price of the Stock Option.
(w) "Stock Option" or "Option" means any option to purchase shares of
Stock which is granted pursuant to the Plan.
(x) "Stock Reload Option" means any option granted under Section 6.3,
below, as a result of the payment of the exercise price of a Stock Option
and/or the withholding tax related thereto in the form of Stock owned by the
Holder or the withholding of Stock by the Company.
(y) "Subsidiary" means any present or future subsidiary corporation
of the Company, as such term is defined in Section 424(f) of the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the Board or a
Committee. Committee members shall serve for such term as the Board may in
each case determine, and shall be subject to removal at any time by the Board.
2.2 Powers of Committee. The Committee shall have full authority, subject
to Section 4, below, to award, pursuant to the terms of the Plan: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred
Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards. For
purposes of illustration and not of limitation, the Committee shall have the
authority (subject to the express provisions of this Plan):
(a) to select the officers, key employees, directors, consultants,
advisors and sales representatives of the Company or any Subsidiary to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Reload Stock Options and/or Other Stock- Based Awards may from time to time be
awarded hereunder.
(b) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, number of shares, share price, any restrictions or limitations, and any
vesting, exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions, as the Committee shall determine);
(c) to determine any specified performance goals or such other
factors or criteria which need to be attained for the vesting of an award
granted hereunder;
(d) to determine the terms and conditions under which awards granted
hereunder are to operate on a tandem basis and/or in conjunction with or apart
from other equity awarded under this Plan and cash awards made by the Company
or any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a payment under the Plan
under such rules and procedures as the Committee may establish, including the
crediting of interest on deferred amounts denominated in cash and of dividend
equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which Stock and
other amounts payable with respect to an award hereunder shall be deferred
which may be either automatic or at the election of the Holder; and
(g) to substitute (i) new Stock Options for previously granted Stock
Options, which previously granted Stock Options have higher option exercise
prices and/or contain other less favorable terms, and (ii) new awards of any
other type for previously granted awards of the same type, which previously
granted awards are upon less favorable terms.
2.2 Powers of Committee.
(a) Committee Authority. Subject to Sections 4 and 12, below, the
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of
the Plan and any award issued under the Plan (and to determine the form and
substance of all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 12, below, all decisions made
by the Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term or provision of the Plan relating to Incentive Stock
Options (including but limited to Stock Reload Options or Stock Appreciation
rights granted in conjunction with an Incentive Stock Option) or any Agreement
providing for Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Holder(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock reserved
and available for distribution under the Plan shall be 1,000,000 shares.
Shares of Stock under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. If any shares of Stock that have been
granted pursuant to a Stock Option cease to be subject to a Stock Option, or
if any shares of Stock that are subject to any Stock Appreciation Right,
Restricted Stock, Deferred Stock award, Reload Stock Option or Other Stock-
Based Award granted hereunder are forfeited or any such award otherwise
terminates without a payment being made to the Holder in the form of Stock,
such shares shall again be available for distribution in connection with
future grants and awards under the Plan. Only net shares issued upon a stock-
for-stock exercise (including stock used for withholding taxes) shall be
counted against the number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization. Etc. In the event of any
merger, reorganization, consolidation, recapitalization, dividend (other than
a cash dividend), stock split, reverse stock split, or other change in
corporate structure affecting the Stock, such substitution or adjustment shall
be made in the aggregate number of shares reserved for issuance under the
Plan, in the number and exercise price of shares subject to outstanding
Options, in the number of shares and Stock Appreciation Right price relating
to Stock Appreciation Rights, and in the number of shares subject to, and in
the related terms of, other outstanding awards (including but not limited to
awards of Restricted Stock, Deferred Stock, Reload Stock Options and Other
Stock-Based Awards) granted under the Plan as may be determined to be
appropriate by the Committee in order to prevent dilution or enlargement of
rights, provided that the number of shares subject to any award shall always
be a whole number.
Section 4. Eligibility.
Awards may be made or granted to key employees, officers, directors,
consultants, advisors and sales representatives who are deemed to have
rendered or to be able to render significant services to the Company or its
Subsidiaries and who are deemed to have contributed or to have the potential
to contribute to the success of the Company. No Incentive Stock Option shall
be granted to any person who is not an employee of the Company or a Subsidiary
at the time of grant.
Section 5. Required Six-Month Holding Period.
Any equity security issued under this Plan must be held and may not be
sold prior to six months from the date of the grant of the related award,
without the approval of the Company.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may be of two
types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, or with respect to Incentive Stock Options, not inconsistent
with the Code, as the Committee may from time to time approve. The Committee
shall have the authority to grant Incentive Stock Options, Nonqualified Stock
Options, or both types of Stock Options and which may be granted alone or in
addition to other awards granted under the Plan. To the extent that any Stock
Option intended to qualify as an Incentive Stock Option does not so qualify,
it shall constitute a separate Nonqualified Stock Option. An Incentive Stock
Option may be granted only within the ten-year period commencing from the
Effective Date and may only be exercised within ten years of the date of grant
(or five years in the case of an Incentive Stock Option granted to an optionee
("10% Stockholder") who, at the time of grant, owns Stock possessing more than
10% of the total combined voting power of all classes of stock of the Company.
6.2 Terms and Conditions. Stock Options granted under the Plan shall be
subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable
under an Incentive Stock Option shall be determined by the Committee at the
time of grant and may not be less than 100% of the Fair Market Value of the
Stock as defined above; provided, however, that the exercise price of an
Incentive Stock Option granted to a 10% Stockholder shall not be less than
110% of the Fair Market Value of the Stock. The exercise price per share of
Stock purchasable under any options granted that are not Incentive Stock
Option, shall be determined by the Committee at the time of grants.
(b) Option Term. Subject to the limitations in Section 6.1, above,
the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee and as set forth in Section 11, below. If the Committee
provides, in its discretion, that any Stock Option is exercisable only in
installments, i.e., that it vests over time, the Committee may waive such
installment exercise provisions at any time at or after the time of grant in
whole or in part, based upon such factors as the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment, exercise and
waiting period provisions are applicable in a particular case, Stock Options
may be exercised in whole or in part at any time during the term of the
Option, by giving written notice of exercise to the Company specifying the
number of shares of Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, which shall be in cash or, unless
otherwise provided in the Agreement, in shares of Stock (including Restricted
Stock and other contingent awards under this Plan) or, partly in cash and
partly in such Stock, or such other means which the Committee determines are
consistent with the Plan's purpose and applicable law. Cash payments shall be
made by wire transfer, certified or bank check or personal check, in each case
payable to the order of the Company; provided, however, that the Company shall
not be required to deliver certificates for shares of Stock with respect to
which an Option is exercised until the Company has confirmed the receipt of
good and available funds in payment of the purchase price thereof. Payments in
the form of Stock shall be valued at the Fair Market Value of a share of Stock
on the day prior to the date of exercise. Such payments shall be made by
delivery of stock certificates in negotiable form which are effective to
transfer good and valid title thereto to the Company, free of any liens or
encumbrances. Subject to the terms of the Agreement, the Committee may, in its
sole discretion, at the request of the Holder, deliver upon the exercise of a
Nonqualified Stock Option a combination of shares of Deferred Stock and Common
Stock; provided that, notwithstanding the provisions of Section 9 of the Plan,
such Deferred Stock shall be fully vested and not subject to forfeiture. A
Holder shall have none of the rights of a stockholder with respect to the
shares subject to the Option until such shares shall be transferred to the
Holder upon the exercise of the Option.
(e) Transferability. Unless otherwise determined by the Committee, no
Stock Option shall be transferable by the Holder other than by will or by the
laws of descent and distribution, and all Stock Options shall be exercisable,
during the Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holder's employment by the
Company or a Subsidiary terminates by reason of death, any Stock Option held
by such Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall be fully vested and may thereafter
be exercised by the legal representative of the estate or by the legatee of
the Holder under the will of the Holder, for a period of one year (or such
other greater or lesser period as the Committee may specify at grant) from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's employment by
the Company or any Subsidiary terminates by reason of Disability, any Stock
Option held by such Holder, unless otherwise determined by the Committee at
the time of grant and set forth in the Agreement, shall be fully vested and
may thereafter be exercised by the Holder for a period of one year (or such
other greater or lesser period as the Committee may specify at the time of
grant) from the date of such termination of employment or until the expiration
of the stated term of such Stock Option, whichever period is the shorter.
(h) Other Termination. Subject to the provisions of Section 14.3,
below, and unless otherwise determined by the Committee at the time of grant
and set forth in the Agreement, if a Holder is an employee of the Company or a
Subsidiary at the time of grant and if such Holder's employment by the Company
or any Subsidiary terminates for any reason other than death or Disability,
the Stock Option shall thereupon automatically terminate, except that if the
Holder's employment is terminated by the Company or a Subsidiary without cause
or due to Normal Retirement, then the portion of such Stock Option which has
vested on the date of termination of employment may be exercised for the
lesser of three months after termination of employment or the balance of such
Stock Option's term.
(i) Additional Incentive Stock Option Limitation. In the case of an
Incentive Stock Option, the aggregate Fair Market Value of Stock (determined
at the time of grant of the Option) with respect to which Incentive Stock
Options become exercisable by a Holder during any calendar year (under all
such plans of the Company and its Parent and Subsidiary) shall not exceed
$100,000.
(j) Buyout and Settlement Provisions. The Committee may at any time,
in its sole discretion, offer to buy out a Stock Option previously granted,
based upon such terms and conditions as the Committee shall establish and
communicate to the Holder at the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option shall be
confirmed by, and shall be subject to the terms of, the Agreement executed by
the Company and the Holder.
6.3 Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Nonqualified Stock Option) a Stock Reload
Option up to the amount of shares of Stock held by the Holder for at least six
months and used to pay all or part of the exercise price of an Option and, if
any, withheld by the Company as payment for withholding taxes. Such Stock
Reload Option shall have an exercise price equal to the Fair Market Value as
of the date of the Stock Reload Option grant. Unless the Committee determines
otherwise, a Stock Reload Option may be exercised commencing one year after it
is granted and shall expire on the date of expiration of the Option to which
the Reload Option is related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock Appreciation Rights
to participants who have been, or are being granted, Options under the Plan as
a means of allowing such participants to exercise their Options without the
need to pay the exercise price in cash. In the case of a Nonqualified Stock
Option, a Stock Appreciation Right may be granted either at or after the time
of the grant of such Nonqualified Stock Option. In the case of an Incentive
Stock Option, a Stock Appreciation Right may be granted only at the time of
the grant of such Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be subject to
the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be exercisable as
determined by the Committee and set forth in the Agreement, subject to the
limitations, if any, imposed by the Code, with respect to related Incentive
Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate and shall
no longer be exercisable upon the termination or exercise of the related Stock
Option.
(c) Method of Exercise. Stock Appreciation Rights shall be
exercisable upon such terms and conditions as shall be determined by the
Committee and set forth in the Agreement and by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
Holder shall be entitled to receive a number of Option Shares equal to the SAR
Value divided by the exercise price of the Option.
(d) Shares Affected Upon Plan. The granting of a Stock Appreciation
Rights shall not affect the number of shares of Stock available under for
awards under the Plan. The number of shares available for awards under the
Plan will, however, be reduced by the number of shares of Stock acquirable
upon exercise of the Stock Option to which such Stock Appreciation Right
relates.
Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the
price (if any) to be paid by the Holder, the time or times within which such
awards may be subject to forfeiture (the "Restriction Period"), the vesting
schedule and rights to acceleration thereof, and all other terms and
conditions of the awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be subject to
the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be represented
by a stock certificate or certificates registered in the name of the Holder to
whom such Restricted Stock shall have been awarded. During the Restriction
Period, certificates representing the Restricted Stock and any securities
constituting Retained Distributions (as defined below) shall bear a legend to
the effect that ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are
subject to the restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with the
Company, together with stock powers or other instruments of assignment, each
endorsed in blank, which will permit transfer to the Company of all or any
portion of the Restricted Stock and any securities constituting Retained
Distributions that shall be forfeited or that shall not become vested in
accordance with the Plan and the Agreement.
(b) Rights of Holder. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Holder will
have the right to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent distributions as the Board
may in its sole discretion designate, pay or distribute on such Restricted
Stock and to exercise all other rights, powers and privileges of a holder of
Common Stock with respect to such Restricted Stock, with the exceptions that
(i) the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled; (ii) the Company will retain custody of the
stock certificate or certificates representing the Restricted Stock during the
Restriction Period; (iii) other than regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion designate,
pay or distribute, the Company will retain custody of all distributions
("Retained Distributions") made or declared with respect to the Restricted
Stock (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the Restricted Stock)
until such time, if ever, as the Restricted Stock with respect to which such
Retained Distributions shall have been made, paid or declared shall have
become vested and with respect to which the Restriction Period shall have
expired; (iv) a breach of any of the restrictions, terms or conditions
contained in this Plan or the Agreement or otherwise established by the
Committee with respect to any Restricted Stock or Retained Distributions will
cause a forfeiture of such Restricted Stock and any Retained Distributions
with respect thereto.
(c) Vesting: Forfeiture. Upon the expiration of the Restriction
Period with respect to each award of Restricted Stock and the satisfaction of
any other applicable restrictions, terms and conditions (i) all or part of
such Restricted Stock shall become vested in accordance with the terms of the
Agreement, subject to Section 11, below, and (ii) any Retained Distributions
with respect to such Restricted Stock shall become vested to the extent that
the Restricted Stock related thereto shall have become vested, subject to
Section 11, below. Any such Restricted Stock and Retained Distributions that
do not vest shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Restricted Stock and Retained
Distributions that shall have been so forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded
to any person, the duration of the period (the "Deferral Period") during
which, and the conditions under which, receipt of the shares will be deferred,
and all the other terms and conditions of the awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be subject to
the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 9.2 (d) below, where
applicable), share certificates shall be issued and delivered to the Holder,
or his legal representative, representing the number equal to the shares
covered by the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred Stock
shall not have any rights of a stockholder by virtue of such award until the
expiration of the applicable Deferral Period and the issuance and delivery of
the certificates representing such Stock. The shares of Stock issuable upon
expiration of the Deferral Period shall not be deemed outstanding by the
Company until the expiration of such Deferral Period and the issuance and
delivery of such Stock to the Holder.
(c) Vesting: Forfeiture. Upon the expiration of the Deferral Period
with respect to each award of Deferred Stock and the satisfaction of any other
applicable restrictions, terms and conditions all or part of such Deferred
Stock shall become vested in accordance with the terms of the Agreement,
subject to Section 11, below. Any such Deferred Stock that does not vest shall
be forfeited to the Company and the Holder shall not thereafter have any
rights with respect to such Deferred Stock.
(d) Additional Deferral Period. A Holder may request to, and the
Committee may at any time, defer the receipt of an award (or an installment of
an award) for an additional specified period or until a specified event (the
"Additional Deferral Period"). Subject to any exceptions adopted by the
Committee, such request must generally be made at least one year prior to
expiration of the Deferral Period for such Deferred Stock award (or such
installment).
Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded, subject
to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, shares of Common Stock, as deemed by the Committee to be consistent with
the purposes of the Plan, including, without limitation, purchase rights,
shares of Common Stock awarded which are not subject to any restrictions or
conditions, convertible or exchangeable debentures, or other rights
convertible into shares of Common Stock and awards valued by reference to the
value of securities of or the performance of specified Subsidiaries. Other
Stock-Based Awards may be awarded either alone or in addition to or in tandem
with any other awards under this Plan or any other plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which grants
of such other stock-based awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such awards, and all other terms and
conditions of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be subject
to such terms and conditions as may be determined by the Committee and to
Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
If (i) any person or entity other than the Company and/or any
stockholders of the Company as of the Effective Date acquire securities of the
Company (in one or more transactions) having 25% or more of the total voting
power of all the Company's securities then outstanding and (ii) the Board of
Directors of the Company does not authorize or otherwise approve such
acquisition, then, the vesting periods of any and all Options and other awards
granted and outstanding under the Plan shall be accelerated and all such
Options and awards will immediately and entirely vest, and the respective
holders thereof will have the immediate right to purchase and/or receive any
and all Stock subject to such Options and awards on the terms set forth in
this Plan and the respective agreements respecting such Options and awards.
Section 12. Amendment and Termination.
Subject to Section 4 hereof, the Board may at any time, and from time to
time, amend alter, suspend or discontinue any of the provisions of the Plan,
but no amendment, alteration, suspension or discontinuance shall be made which
would impair the rights of a Holder under any Agreement theretofore entered
into hereunder, without the Holder's consent.
Section 13. Term of Plan.
13.1 Effective Date. The Plan shall be effective as of August 10, 1998.
("Effective Date").
13.2 Termination Date. Unless terminated by the Board, this Plan shall
continue to remain effective until such time no further awards may be granted
and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only be
made during the ten year period following the Effective Date.
Section 14. General Provisions.
14.1 Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed by
the Company and the Holder. The Committee may terminate any award made under
the Plan if the Agreement relating thereto is not executed and returned to the
Company within 10 days after the Agreement has been delivered to the Holder
for his or her execution.
14.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein
shall give any such Holder any rights that are greater than those of a general
creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In the event a Holder's
employment with the Company or a Subsidiary is terminated for any reason
whatsoever, and within one year after the date thereof such Holder accepts
employment with any competitor of, or otherwise engages in competition with,
the Company, the Committee, in its sole discretion, may require such Holder to
return to the Company the economic value of any award which was realized or
obtained by such Holder at any time during the period beginning on that date
which is six months prior to the date of such Holder's termination of
employment with the Company.
(b) Termination for Cause. The Committee may, in the event a Holder's
employment with the Company or a Subsidiary is terminated for cause, annul any
award granted under this Plan to such employee and, in such event, the
Committee, in its sole discretion, may require such Holder to return to the
Company the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with the
Company.
(c) No Right of Employment. Nothing contained in the Plan or in any
award hereunder shall be deemed to confer upon any Holder who is an employee
of the Company or any Subsidiary any right to continued employment with the
Company or any Subsidiary, nor shall it interfere in any way with the right of
the Company or any Subsidiary to terminate the employment of any Holder who is
an employee at any time.
14.4 Investment Representations. The Committee may require each person
acquiring shares of Stock pursuant to a Stock Option or other award under the
Plan to represent to and agree with the Company in writing that the Holder is
acquiring the shares for investment without a view to distribution thereof.
14.5 Additional Incentive Arrangements. Nothing contained in the Plan
shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of Stock Options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
14.6 Withholding Taxes. Not later than the date as of which an amount must
first be included in the gross income of the Holder for Federal income tax
purposes with respect to any option or other award under the Plan, the Holder
shall pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state and local taxes of any kind
required by law to be withheld or paid with respect to such amount. If
permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditioned upon such payment or arrangements and the
Company or the Holder's employer (if not the Company) shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Holder from the Company or any Subsidiary.
14.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of
the State of Nevada (without regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the Plan shall not be
deemed compensation for purposes of computing benefits under any retirement
plan of the Company or any Subsidiary and shall not affect any benefits under
any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under
this Plan).
14.9 Non-Transferability. Except as otherwise expressly provided in the
Plan, no right or benefit under the Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred, encumbranced or charged, and
any attempt to alienate, sell, assign, hypothecate, pledge, exchange,
transfer, encumber or charge the same shall be void.
14.10 Applicable Laws. The obligations of the Company with respect to all
Stock Options and awards under the Plan shall be subject to (i) all applicable
laws, rules and regulations and such approvals by any governmental agencies as
may be required, including, without limitation, the Securities Act of 1933, as
amended, and (ii) the rules and regulations of any securities exchange on
which the Stock may be listed.
14.11 Conflicts. If any of the terms or provisions of the Plan or an
Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions shall
be deemed inoperative to the extent they so conflict with the requirements of
said Section 422 of the Code. Additionally, if this Plan or any Agreement does
not contain any provision required to be included herein under Section 422 of
the Code, such provision shall be deemed to be incorporated herein and therein
with the same force and effect as if such provision had been set out at length
herein and therein. If any of the terms or provisions of any Agreement
conflict with any terms or provision of the Plan, then such terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of the Plan. Additionally, if any Agreement does not contain any
provision required to be included therein under the Plan, such provision shall
be deemed to be incorporated therein with the same force and effect as if such
provision had been set out at length therein.
14.12 Non-Registered Stock. The shares of Stock to be distributed under
this Plan have not been, as of the Effective Date, registered under the
Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to register
the Stock or to assist the Holder in obtaining an exemption from the various
registration requirements, or to list the Stock on a national securities
exchange.
BUFFALO SALE AND PURCHASE AGREEMENT
This Agreement is entered into this 9th day of November, 1998, by and
between R&R Ranching, Inc., whose address is 899 South Artistic Circle,
Springville, Utah 84663, ("Buyer") and Diving Buffalo Ranch, Inc., whose
address is P.O. Box 523, Harlowton, Montana 59036, ("Seller").
RECITALS
A. Seller wishes to sell and Buyer wishes to purchase certain buffalo the
Seller owns or has under contract to purchase. Seller and Buyer desire
to enter into this agreement in order to set forth in writing the terms
and conditions of the sale.
NOW THEREFORE, in consideration of the mutual promises contained hereto,
the parties agree as follows:
AGREEMENT
1. Buffalo Purchased/Purchase Price. Seller agrees to sell and Buyer
agrees to purchase a maximum of Twenty (20) buffalo. Buyer agrees
to pay to Seller the sum of Eighty-Four Thousand Dollars ($84,000)
for said 20 head of buffalo delivered under the terms of this
agreement, more specifically as follows:
Description Quantity Price per head Total
Mature cows 20 $4200.00 $84,000
Delivery 20 Cost of expenses
TOTAL 20 $84,000.00 US
A. Buyer shall wire to Seller's account within 2 days of the
execution of this contract Ten Thousand Dollars ($10,000.00 US) as
partial payment, with the balance of Seventy-Four Thousand Dollars
($74,000.00 US) to be wired upon loading.
2. Delivery Date. All buffalo purchased hereunder shall be delivered
to Buyer and shall be removed from Seller's possession on or
before January 15, 1999, no later than thirty (30) days following
notification to Buyer that the buffalo have passed all necessary
disease tests described in paragraph 4 herein. Seller shall be
reimbursed by Buyer $1.00 per head per day for boarding expense.
3. Buffalo to Conform to those Exhibited. Seller covenants that the
buffalo shall conform to those that were exhibited and/or
represented to Buyer prior to the execution of the agreement.
4. Disease Testing. Seller shall cause all buffalo purchased
hereunder to pass any necessary testing for disease. Buffalo to
be transported to Canada shall be four way tested for brucellosis
tuberculosis, anaplasmosis, and blue tongue. Buffalo to be
transported within the US shall be two way tested brucellosis and
tuberculosis. Seller shall bear all the cost of initial testing.
If subsequent testing is required, Seller shall each pay all of
the cost.
5. Inspection. Buyer shall have the right to examine the buffalo at
Seller's location, and has the right to reject any buffalo that
fail to conform as referred to in Paragraph 3 herein or that fail
to pass any inspection tests specified above. Buyer shall choose
the carrier or shipper of his choice and shall make all
arrangements and pay all expenses of shipping, in transit
insurance, and conforming to applicable regulations. Seller will
use his expertise in this area to assist Buyer if Buyer so
desires.
6. Transfer of Title and Risk of Loss. Title to the buffalo shall
remain in Seller's name until paid for by Buyer at which time the
right of ownership and risk of loss passes from Seller to Buyer.
Title to any animal that fails to pass inspection tests specified
above shall remain in Seller's name. Until the buffalo are so
loaded on buyers trucks, Seller will indemnify Buyer from and
against any and all actions or claims arising out of the terms of
this agreement or the handling of the buffalo pursuant to this
agreement and from and against any and all damages or injuries
arising from such matters, except that buyer bears the risk of
injury to himself and those employed by him while at Seller's
location. The risk of loss from any casualty to the buffalo
regardless of the cause of such casualty to the buffalo regardless
of the cause of such casualties shall be on the Buyer. If a
pregnant buffalo delivers in transit she shall be considered
pregnant for contract purposes whether the fetus is delivered
alive or dead. After delivery to Buyer, Buyer will indemnify
Seller from any and all claims, damages and injuries arising from
the delivered buffalo.
7. Seller's Warranties. Seller warrants that the buffalo shall be
free from any and all liens, security agreements, encumbrances,
claims, demands and charges of any kind whatsoever and further
expressly warrants that it will defend title to the buffalo and
indemnify Buyer from any and all loss or damage on account of such
liens, encumbrances, security agreements, claims, demands or
charges, or any other defects in title. Seller further warrants
that the buffalo shall be in good and merchantable condition on
the date of delivery. Seller will provide to buyer an executed
Bill of Sale for the buffalo at the time of loading as identified
above.
8. Modification. Any modification of this agreement or additional
obligation assumed by either party in connection with this
agreement shall be binding only if placed in writing and signed
by each party.
9. Governing Law. It is agreed that this agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of Montana.
10. Attorney's Fees. In the event that either party is forced to
obtain the services of an attorney to enforce any provision of
this agreement, the prevailing party shall be entitled to his
attorney's fees and any reasonable costs and expenses associated
therewith.
11. Binding Effect. This agreement shall bind and inure to the
benefit of the respective heirs, personal representatives,
successors and assigns of the parties.
12. Force Majeure. In the event Seller is unable to deliver buffalo
under this contract due to circumstances beyond his control
including, but not limited to strikes, walkouts, acts of God,
changes in governmental regulations and/or trade agreements,
failure of seller to obtain sufficient quantities of buffalo from
his sources to satisfy this contract, disease quarantines, Seller
shall return Buyers deposit in full and both parties are released
from any further obligations under this contract.
13. Duplicate Originals. This agreement shall be executed in
duplicate, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Signatures shall be valid if finished by facsimile copy.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
on the day and year first above written.
"BUYER" "SELLER"
R&R Ranching, Inc. Diving Buffalo Ranch, Inc.
/s/ William R. Davidson, President /s/ K. Steven Killorn, Pres.
- ---------------------------------- ----------------------------
William R. Davidson, President K. Steven Killorn, President
BLUE SKY BISON RANCH LTD
RR 1 Carvel, Alberta T0E 0H0 Telephone / Fax: (403) 963-5913
THIS AGREEMENT -- TO MANAGE BISON AT BLUE SKY BISON RANCH LTD.
This Agreement made and entered into this 1st day of December , 1998 by and
between R & R Ranching, Inc., hereinafter called Owner, and Blue Sky Bison
Ranch Ltd., hereinafter called Blue Sky, WITNESSETH:
A. Blue Sky operates a ranch enterprise that is engaged in the raising of
bison livestock.
B. The Owner is the owner of Bison carrying the identifying marks by ear tags
more particularly described and listed in Schedule A (the Bison) which will be
attached hereto on January 15, 1999.
C. The purpose and intent of This Agreement is that the Owner is desirous of
retaining the services of Blue Sky to provide grazing facilities and care for
the Bison on the terms and conditions set out in This Agreement.
Now therefore, in consideration of the mutual promises and covenants to be
performed by the respective parties, and the agreements and conditions
hereinafter set forth, BE IT AGREED:
1. All costs of transporting the Owner's Bison to Blue Sky lands shall be
borne by Blue Sky.
2. Upon delivery of the Bison, Blue Sky shall provide range, feed, care and
management for them in accordance with the customary and proper practices of
bison management. Specifically, Blue Sky shall provide the following:
a) Lands necessary for grazing (including proper pasture maintenance
and rotation practices)
b) All necessary winter feed, hay, straw, grains, minerals and water
c) All veterinary care including vaccinations for diseases and blood
parasites, and worming
d) Handling facilities and handling labor
e) Identification tagging of the Bison and records management
f) Herd bulls for the purpose of breeding the Bison at a rate of no
less than one ( 1 ) bull per twenty ( 20 ) bison cows.
3. Insurance for death loss, acts of parliament or other perils of the Bison
is the responsibility of the Owner.
4. Blue Sky agrees that it will carry liability insurance in the amount of
$2 million to protect the Owner from liability that may arise by reason of
acts of the public generally, third persons and trespassers; Blue Sky shall
bear the cost of this liability insurance.
5. Blue Sky will assist in marketing, selling and transporting the Owner's
Bison breeding stock at the Owner's request and at the Owners expense.
6. Blue Sky will market and sell the Owner's yearly calf crop and will bear
the costs associated therewith.
7. Blue Sky will provide reasonable access to the lands of Blue Sky for the
Owner or a person authorized by the Owner for the purpose of inspecting the
Bison.
8. The remuneration payable by the Owner to Blue Sky for the services
provided pursuant to This Agreement shall be as follows:
a) The Owner will pay on a monthly basis $500.00 (CAD) for the services
described in this agreement. The owner will pay 1/4 of the proceeds of money
earned from the sale of the bulls and the heifers for 1999.
10. Blue Sky shall be entitled to a lien upon all the Owner's Bison for any
sum which may be due and owing by the Owner to Blue Sky pursuant to This
Agreement. This lien may be enforced by the sale of any of the Owner's Bison.
Specifically, any animal whose pasturage fee is three ( 3 ) months in arrears
may be sold after serving due notice to the Owner. The proceeds of said sale
will go first to pay incurred pasturage and sale costs with the remaining
moneys to be remitted to the Owner.
11. It is mutually agreed that for purposes of Owner revenue determination,
the Owner shall receive a prorata share of the revenue from the sale of the
entire calf crop of the immediate herd in which the Owner's Bison cows reside
based on the number of the Owner's Bison cows in relation to the total number
of bison cows in the immediate herd.
i.e. the calving rate of the Owner's Bison cows shall be the collective
calving rate of the entire, immediate bison cow herd in which the Owner's
Bison cows reside, and the male to female ratio of the Owner's calf crop shall
be the male to female ratio of the entire, immediate herd's calf crop in which
the Owner's Bison cows reside.
12. It is specifically understood and agreed that Blue Sky shall have at all
times the exclusive preference option and right to purchase or refuse to
purchase, as the case may be any and all animals offered for sale by the Owner
at fair market value.
13. The term of this agreement will be for the period of 12 months
beginning on the 1st day of January , 1999, and ending on the 1st day of
January, 2000. The agreement may be extended on a monthly basis beyond the
first 12 months on a monthly basis as agreed upon between the owner and Blue
Sky.
14. In the event of premature termination of this contract, the Owner will
be liable for boarding fees over the remaining term of the contract at a rate
of $1,200 per bison per year. All fees payable by the Owner to Blue Sky
shall become due and payable at the time of contract termination.
15. This Agreement constitutes the entire agreement between the parties and
shall be amended only by agreement of the parties in writing.
16. This Agreement shall ensure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
IN WITNESS HEREOF, the parties have executed This Agreement as of the day and
year first noted above
BLUE SKY BISON RANCH LTD. R & R Ranching, Inc.
Per /s/ W.M.C. Davidson Per /s/ William R. Davidson, President
-------------------- ----------------------------------
WITNESS WITNESS
/s/ Rusty Reid /s/ Rusty Reid
- -------------- --------------
THIS PROMISSORY NOTE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE, SUCH SHARES, NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES
AN OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE OR SUCH SHARES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS NOTE OR SUCH
SHARES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
HOLDER OF THIS NOTE SHALL BE SOLELY RESPONSIBLE FOR PAYMENT OF ALL FEES AND
COSTS ASSOCIATED WITH THE PREPARATION OF SUCH OPINION.
R & R RANCHING, INC.
Promissory Note
$70,000 January 19,1999
Springville, Utah
R & R RANCHING, INC., a Nevada corporation (the "Company"), for
value received, hereby promises to pay to Libco Equities, Inc., an Alberta
corporation, with an address at RR #1, Carvel, Alberta, Canada or registered
assigns (the "Holder"), the principal amount of $70,000 U.S. dollars (US
$70,000) on the Maturity Date (as defined below), and to pay interest on the
unpaid principal balance hereof at the rate of 10% per annum (calculated on
the basis of a 360-day year consisting of twelve 30-day months) on the
Maturity Date all as hereafter further provided.
In no event shall any interest to be paid hereunder exceed the
maximum rate permitted by law. In any such event, this Note shall
automatically be deemed amended to permit interest charges at an amount equal
to, but no greater than, the maximum rate permitted by law.
1. Payments.
(a) Principal of, and any accrued and unpaid interest on, this
Note shall be due and payable in full on the Maturity Date. The "Maturity
Date" shall be the date which is 12 months after the date of this Note.
(b) Interest on this Note shall accrue from the date of this
Note to the Maturity Date, and thereafter if not paid, and shall be payable
on the Maturity Date.
(c) If the Maturity Date would fall on a day that is not
a Business Day (as defined below), the payment due on the Maturity Date will
be made on the next succeeding Business Day with the same force and effect as
if made on the Maturity Date. "Business Day" means any day which is not a
Saturday or Sunday and is not a day on which banking institutions are
generally authorized or obligated to close in the State of Utah.
(d) Thirty days after the effective date of the Company's
contemplated Registration Statement on Form SB-2, the Company may, at its
option, call all or any part of the principal and interest of this Note,
without payment of any premium or penalty. If the Company elects to call all
or any portion of such principal and interest, it shall promptly notify the
Holder in writing of such election at the Holder's record address. Upon
receipt of such notice the Holder shall have 30 days to: (i) convert
his/her/its outstanding principal and interest into shares of the Company's
common stock as provided in Section 2 herein; or (ii) receive payment of all
of the then-outstanding principal and interest on the Note (or such portion
thereof as the Company elects to call). All payments on this Note shall be
applied first to accrued interest hereon and the balance to the payment of
principal hereof.
(e) Payments of principal and interest on this Note shall be
made by check sent to the Holder's address set forth above or to such other
address as the Holder may designate for such purpose from time to time by
written notice to the Company, in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
(f) The obligations to make the payments provided for in this
Note are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever. The Company
hereby expressly waives demand and presentment for payment, notice of
nonpayment, notice of dishonor, protest, notice of protest, bringing of suit
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence, act
or omission with respect to the collection of any amount called for hereunder.
2. Conversion.
(a) At any time that principal or interest is outstanding
on this Note, the Holder shall have the right (the "Conversion Right"), on the
terms set forth in this Section 2, to convert the then outstanding principal
amount and interest on the Note into "unregistered" and "restricted" shares
of the Company's common stock at the rate of one share for the lesser of (i)
every $1.00 in principal and interest outstanding on this Note at the time of
such conversion, or (ii) the average bid price for the Company's common stock
on the OTC Bulletin Board of the National Association of Securities Dealers,
Inc., or other national quotation medium, over the 30 calendar days
immediately preceding the date of the Holder's exercise of the Conversion
Right as set forth below (the "Conversion Price").
(b) To exercise the Conversion Right, the Holder shall deliver
to the Company, at its office at 899 South Artistic Circle, Springville, Utah
84663, or at such other place as is designated in writing by the Company, a
notice (the "Conversion Notice") stating that the Holder is exercising the
Conversion Right, and the name or names in which the Holder wishes the
certificates for shares of common stock to be issued. The Conversion Notice,
once given, shall be irrevocable.
(c) Upon exercise of the Conversion Right, the Holder shall be
deemed to be the holder of record of the shares of common stock issuable upon
such exercise (the "Conversion Shares"), notwithstanding that the transfer
books of the Company shall then be closed or certificates representing such
Conversion Shares shall not then have been actually delivered to the Holder.
As soon as practicable after exercise of the Conversion Right, the Company
shall issue and deliver to the Holder a certificate or certificates for the
Conversion Shares issuable upon such exercise, registered in the name of the
Holder or its designee; provided that the Company, by notice given to the
Holder promptly after receipt of the Conversion Notice, may require the
Holder, as a condition to the delivery of such certificate or certificates,
to present this Note to the Company for cancellation.
(d) Notwithstanding the foregoing, if, within 60 days of receipt
of a Conversion Notice, the Company shall pay all amounts of principal and
interest (including interest on past due amounts) on this Note, the Holder's
exercise of the Conversion Right shall be deemed ineffective and the Company
shall not be required to issue any shares of common stock as a result thereof.
(e) The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of
any certificate in a name other than that of the Holder and the Company shall
not be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(f) The Holder shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in
equity, or any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Note.
(g) The Company shall at all times reserve and keep available
out of its authorized and unissued common stock, solely for the purpose of
providing for the exercise of the Conversion Rights, such number of shares of
common stock as shall, from time to time, be sufficient for the exercise of
the Conversion Rights in full. The Company covenants that all shares of common
stock issuable upon exercise of the Conversion Right shall be validly issued,
fully paid, nonassessable, and free of preemptive rights.
3. Adjustment of Conversion Price.
(a) In case the Company shall at any time after the date the
Note was first issued (i) declare a dividend on the outstanding common stock
payable in shares of its capital stock, (ii) subdivide the outstanding common
stock, (iii) combine the outstanding common stock into a smaller number of
shares, or (iv) issue any shares of its capital stock by reclassification of
the common stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Conversion Price, and the number of Conversion Shares
issuable upon exercise of this Note, in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination,
or reclassification, shall be proportionately adjusted so that the Holder
after such time shall be entitled to receive the aggregate number and kind of
shares which, if the Conversion Right had been exercised immediately prior to
such time he/she/it would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) Whenever there shall be an adjustment as provided in this
Section 3, the Company shall promptly cause written notice thereof to be sent
to the Holder, which notice shall be accompanied by an officer's certificate
setting forth the number of Conversion Shares issuable upon the exercise of
the Conversion Right and the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence
of the correctness of any such adjustment absent manifest error.
(c) The Company shall not be required to issue fractions of
shares of common stock or other capital stock of the Company upon the exercise
of the Conversion Right. If any fraction of a share would be issuable on any
exercise of the Conversion Right (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the same fraction
of one dollar as the fraction of such share bears to one whole share.
4. Covenants.
The Company covenants and agrees with the Holder as follows, so
long as any amount remains unpaid on the Note:
(a) The Company shall not pay any dividend or make any
distribution on, or purchase, redeem, or retire, any shares of its capital
stock or any warrants, options, or other rights to acquire any such shares,
except that the Company may pay dividends payable solely in shares of its
capital stock and except that the Company may repurchase at nominal prices
unvested shares of common stock from employees pursuant to repurchase options
existing on the date hereof.
(b) The Company shall not change its primary line of business.
(c) The Company shall not, directly or indirectly, enter into
any transaction, with or for the benefit of an affiliate (other than
reasonable compensation, consistent with Section 4(d), for services as an
officer, director or employee).
(d) The Company shall not in any manner increase the
compensation of its officers and directors from the levels in effect on the
date of issuance of this Note other than increases in the ordinary course of
business consistent with past practices.
(e) The Company shall deliver to the Holder promptly after the
Company shall obtain knowledge of the occurrence of any Event of Default (as
hereinafter defined) or any event which with notice or lapse of time or both
would become an Event of Default (an Event of Default or such other event
being a "Default"), a notice specifying that such notice is a "Notice of
Default" and describing such Default in reasonable detail, and, in such Notice
of Default or as soon thereafter as practicable, a description of the action
the Company has taken or proposes to take with respect thereto.
5 Events of Default.
The occurrence of any of the following events shall constitute
an event of default (an "Event of Default"):
(a) A default in the payment of the principal on the Note, when
and as the same shall become due and payable.
(b) A default in the payment of any interest on the Note, when
and as the same shall become due and payable, which default shall continue for
three days after the date fixed for the making of such interest payment.
(c) A default in the performance, or a breach, of any of the
covenants of the Company contained in Section 4 of this Note.
(d) A default in the performance, or a breach, of any other
covenant or agreement of the Company in this Note and continuance of such
default or breach for a period of 10 days after receipt of notice from the
Holder as to such breach or after the Company had or should have had knowledge
of such breach.
(e) Any representation, warranty or certification made by the
Company in or pursuant to this Note shall prove to have been false or
misleading as of the date made in any material respect.
(f) A final judgment or judgments for the payment of money in
excess of $500,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction
against the Company and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the Company shall
not, within such 60-day period, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(g) The entry of a decree or order by a court having
jurisdiction adjudging the Company a bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of or
in respect of the company, under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency
or other similar law, and the continuance of any such decree or order unstayed
and in effect for a period of 60 days; or the commencement by the Company of
a voluntary case under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency,
or other similar law, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under federal bankruptcy
law or any other applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due, or the taking of corporate action
by the Company in furtherance of any such action.
6. Remedies Upon Default.
(a) Upon the occurrence of an Event of Default referred to in
Section 5(g), the principal amount then outstanding of, and the accrued
interest on, this Note shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Company. Upon the occurrence of an
Event of Default referred to in Section 5(a) or 5(b), the Holder, by notice
in writing given to the Company, may declare the entire principal amount then
outstanding of, and the accrued interest on, this Note to be due and payable
immediately, and upon any such declaration the same shall become and be due
and payable immediately, without presentation, demand, protest or other
formalities of any kind, all of which are expressly waived by the Company.
Upon the occurrence of an Event of Default other than one referred to in
Sections 5(a), (b) and (g), the Holder may declare the principal amount then
outstanding of, and the accrued interest on, the Note to be due and payable
immediately, and upon any such declaration the same shall become due and
payable immediately, without presentation, demand, protest or other
formalities of any kind, all of which are expressly waived by the Company.
(b) The Holder may institute such actions or proceedings in law
or equity as it shall deem expedient for the protection of its rights and may
prosecute and enforce its claims against all assets of the company, and in
connection with any such action or proceeding shall be entitled to receive
from the Company payment of the principal amount of this Note plus accrued
interest to the date of payment plus reasonable expenses of collection
including, without limitation, attorney's fees and expenses.
7. Transfer.
(a) Any Notes issued upon the transfer of this Note shall be
numbered and shall be registered in a Note Register as they are issued. The
Company shall be entitled to treat the registered holder of any Note on the
Note Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Note
on the part of any other person, and shall not be liable for any registration
or transfer of Notes which are registered or to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Note shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his/her/its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his/her/its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Note or Notes to the person entitled
thereto. This Note may be exchanged, at the option of the Holder thereof, for
another Note, or other Notes of different denominations, of like tenor and
representing in the aggregate a like principal amount, upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause Notes to be transferred on its books
to any person if, in the opinion of counsel to the Company, such transfer does
not comply with the provisions of the Act and the rules and regulations
thereunder.
(b) The Holder acknowledges that he/she/it has been advised by
the Company that neither this Note nor the Conversion Shares have been
registered under the Act, and that the Note is being or has been issued and
the Conversion Shares may be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act or Regulation D promulgated thereunder,
or both, relating to transactions by an issuer not involving any public
offering. The Holder acknowledges that he/she/it has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer
of securities. In particular, the Holder agrees that no sale, assignment or
transfer of the Note or Conversion Shares shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment
or transfer, unless (i) the sale, assignment or transfer of the Note or
Conversion Shares is registered under the Act, it being understood that
neither the Note nor the Conversion Shares are currently registered for sale
and that the Company has no obligation or intention to so register the Notes
or Conversion Shares except as specifically provided herein, or (ii) the Note
or Conversion Shares are sold, assigned or transferred in accordance with all
the requirements and limitations of Rule 144 under the Act, it being
understood that Rule 144 is not available at the time of the original issuance
of this Note for the sale of the Note or the Conversion Shares and that there
can be no assurance that Rule 144 sales will be available at any subsequent
time, or (iii) such sale, assignment, or transfer is otherwise exempt from
registration under the Act. The Holder of this Note and each transferee hereof
further agree that if any distribution of this Note or any Conversion Shares
is proposed to be made by them otherwise than by delivery of a prospectus
meeting the requirements of Section 10 of the Act, such action shall be taken
only after submission to the Company of an opinion of counsel, which counsel
and opinion are reasonably satisfactory to the Company, to the effect that the
proposed distribution will not be in violation of the Act or of applicable
state law. The Holder shall be solely responsible for all legal fees and costs
incurred in connection with the preparation of such opinion. Furthermore, it
shall be a condition to the transfer of this Note that any transferee thereof
deliver to the Company his/her/its written agreement to accept and be bound
by all of the terms and conditions contained in this Note.
(c) The Conversion Shares issued upon exercise of the Conversion
Right shall be subject to a stop transfer order and the certificate or
certificates evidencing such Conversion Shares shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS; OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN
THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAWS."
8. Miscellaneous.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party
to whom it is to be given, (i) if to the Company, at its address at 899 South
Artistic Circle, Utah 84663; (ii) if to the Holder, at its address set forth
on the first page hereof, or (iii) in either case, to such other address as
the party shall have furnished in writing in accordance with the provisions
of this Section 8(a). Notice to the estate of any party shall be sufficient
if addressed to the party as provided in this Section 8(a). Any notice or
other communication given by certified mail shall be deemed given at the time
of certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means permitted by this Section 8(a) shall be deemed given at the time
of receipt thereof.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Note (and upon surrender of
this Note if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder a new
Note of like date, tenor and denomination.
(c) No course of dealing and no delay or omission on the part
of the Holder in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Holder's rights, powers or remedies. No
right, power or remedy conferred by this Note upon the Holder shall be
exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise, and all such
remedies may be exercised singly or concurrently.
(d) This Note may be amended only by a written instrument
executed by the Company and the Holder hereof. Any amendment shall be endorsed
upon this Note, and all future Holders shall be bound thereby.
(e) This Note has been negotiated and consummated in the State
of Utah and shall be governed by and construed in accordance with the laws of
the State of Utah, without giving effect to conflict of laws.
(f) The Company and the Holder irrevocably consent to the
jurisdiction of the courts of the State of Utah and of any federal court
located in such State in connection with any action or proceeding arising out
of or relating to this Note, any document or instrument delivered pursuant to,
in connection with or simultaneously with this Note, or a breach of this Note
or any such document or instrument. In any such action or proceeding, the
Company waives personal service of any summons, complaint or other process and
agrees that service thereof may be made in accordance with Section 8(a).
Within 30 days after such service, or such other time as may be mutually
agreed upon in writing by the attorneys for the parties to such action or
proceeding, the Company shall appear or answer such summons, complaint, or
other process. Should the Company so served fail to appear or answer within
such 30-day period or such extended period, as the case may be, the Company
shall be deemed in default and judgment may be entered against the Company for
the amount as demanded in any summons, complaint or other process so served.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
and dated the day and year first above written.
R & R RANCHING, INC.
By: /s/ William R. Davidson
------------------------
William R. Davidson,
President
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 for R & R Ranching, Inc., of our report
dated November 10, 1998, relating to the October 31, 1998 financial
statements of R & R Ranching, Inc., which appears in such Prospectus. We
also consent to the reference to us under the caption "Interest of Named
Experts and Counsel."
/s/ Pritchett, Siler & Hardy, P.C.
Pritchett, Siler & Hardy, P.C.
Salt Lake City, Utah
March 25, 1999
[Letterhead of]
BRANDEN T. BURNINGHAM
ATTORNEY AT LAW
455 EAST 500 SOUTH, SUITE 205
SALT LAKE CITY, UTAH 84111
TELEPHONE: (801) 363-7411
ADMITTED IN UTAH AND CALIFORNIA FACSIMILE: (801) 355-7126
March 22, 1999
William R. Davidson, Director
R & R Ranching, Inc.
899 South Artistic Circle
Springville, Utah 84663
Re: Opinion letter, dated March 22, 1999, regarding the issuance of shares
of common stock of R & R Ranching, Inc., a Nevada corporation (the
"Company")
Dear Mr. Davidson:
I hereby consent to being named in the Prospectus included in the
Company's Registration Statement on Form SB-2 as having rendered the above-
referenced opinion and as having represented the Company in connection with
such Registration Statement.
Sincerely yours,
/s/ Branden T. Burningham
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENT FOR THE PERIODS ENDED OCTOBER 31, 1998, AND JANUARY 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1999
<PERIOD-END> OCT-31-1998 JAN-31-1999
<CASH> 20782 10959
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 84000
<CURRENT-ASSETS> 20782 94959
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 21257 95409
<CURRENT-LIABILITIES> 1455 72041
<BONDS> 0 0
0 0
0 0
<COMMON> 1000 1000
<OTHER-SE> 18802 22368
<TOTAL-LIABILITY-AND-EQUITY> 21257 95409
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1002 380
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 250
<INCOME-PRETAX> (1002) (630)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> (1002) (630)
<EPS-PRIMARY> (0.00) (0.00)
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