SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
RANDOLPH CAPITAL GROUP, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 36-4317372
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 NORTH HARBOR DRIVE, STE. 4502
CHICAGO, ILLINOIS 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 819-1730
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Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock, $.001 par value
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(Title of Class)
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. BUSINESS
(a) General Development of Business
GENERAL. Randolph Capital Group, Inc. ("Randolph", the "Company" or
"Issuer"), a Delaware corporation, is a non-diversified closed-end management
investment company which has filed a notice of election to be regulated as a
business development company ("BDC") under the Investment Company Act of 1940
("1940 Act"). The Company was incorporated on September 17, 1999. The Company
has not conducted any operations to date. Its principal office is located at 175
North Harbor Drive, Suite 4502, Chicago, Illinois, 60601 and its telephone
number is (312) 819-1730. The Company has been organized to provide investors
with the opportunity to participate with a modest amount in venture capital
investments that are generally not available to the public and that typically
require substantially larger financial commitments. In addition, the Company
will provide professional management and administration that might otherwise be
unavailable to investors if they were to engage directly in venture capital
investing. The Company has recently elected to be regulated as a Business
Development Company ("BDC") under the Investment Company Act, and will operate
as a non-diversified company as that term is defined in the Investment Company
Act.
USE OF PROCEEDS. The proceeds of this offering will be applied in the
estimated amounts set forth below.
Amount Percent
Gross Offering Proceeds $200,000.00 100.00%
First-year Operating Costs1 $200,000.00 100.00%
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Amount Available for Investment,
Subsequent Years' Operating Costs
and Distribution Expenses $0.00 0.00%
1 The following table sets forth the estimated First Year Operating Costs (other
than broker commissions and/or finders fees) which are anticipated to be
incurred by the Company during its first 12 months of operations.
NASD Filing and Listing Fees /
Blue Sky Registration Costs $59,440.00
Legal/Accounting Fees for
registration of secondary offering $58,000.00
Office Rent/Telephones/Utilities $32,560.00
Working Capital $50,000.00
Total $200,000.00
The Company may also invest its funds in commercial paper (rated or unrated) and
other short-term securities. Cash, cash items, securities issued or guaranteed
by the United States Treasury or United States government agencies and high
quality debt securities (commercial paper rated in the two highest rating
categories by Moody's Investor Services, Inc. or Standard & Poor's Corporation
or, if not rated, issued by a company having an outstanding debt issue so rated
or corporate bonds rated at least AA) with maturities of less than one year at
the time of investment will qualify for determining whether the Company has 70%
of its total assets invested in types of assets specified in Section 55 of the
Investment Company Act. See "Investment Company Act Regulation."
(b) Financial Information About Industry Segments.
Not applicable; the Company has not commenced business and has no reserves.
(c) Narrative Description of Business.
GENERAL. The Company is in the business of investing in emerging companies
that are in the growth stage of development by providing investment capital and
actively providing managerial assistance and otherwise helping to build those
companies. Initially, Randolph will seek to invest in companies engaged in
information technology businesses, broadly defined to include those that
acquire, warehouse, process and disseminate information and related technology
that is developed to improve business and personal productivity. The Company has
identified the following industries that have, in management's opinion, strong
growth forecasts in the upcoming several years: manufacture and distribution of
medical equipment and devices; manufacture, warehousing and distribution of
computer supplies; the manufacturing, procurement and configuration of personal
computers including network integration, imaging equipment, software
telecommunications technologies; development and manufacture of business
application software and related products and services; internet electronic
commerce development and consulting services, website development and services,
the manufacture of internet related software and products and internet marketing
and consulting services. Randolph will invest in those companies of those
industries described above as well as in other industries that are seeking to
expand their market position and which are at a stage of development that would
benefit from Randolph's business development and management support, financing,
and market knowledge.
The Company has not yet commenced operations and is registering its shares
of common stock pursuant to Section 12(g) of the Securities Exchange Act of 1934
("Exchange Act"), in compliance with the requirement of Section 54(a)(2) of the
Investment Company Act of 1940 ("1940 Act").
DEFINITION AND NATURE OF BUSINESS DEVELOPMENT COMPANIES
The 1940 Act defines a business development company ("BDC") as a closed end
management investment company that provides small businesses that qualify as an
"eligible portfolio company" with investment capital and also significant
managerial assistance. A BDC is required under the 1940 Act to invest at least
70% of its total assets in qualifying assets ("Qualifying Assets") consisting of
(a) "eligible portfolio companies" as defined in the 1940 Act and (b) certain
other assets including cash and cash equivalents.
An eligible portfolio company generally is a United States company that is
not an investment company and that (i) does not have a class of securities
registered on an exchange or included in the Federal Reserve Board's
over-the-counter margin list; (ii) is actively controlled by a BDC and has an
affiliate of a BDC on its board of directors; or (iii) meets such other criteria
as may be established by the SEC. Control under the 1940 Act is presumed to
exist where a BDC owns more than 25% of the outstanding voting securities of the
eligible portfolio company.
An example of an eligible portfolio company is a new start up company or a
privately owned company that has not yet gone "public" by selling its shares in
the open market and has not applied for having its shares listed on a nationally
recognized exchange such as the NYSE (New York Stock Exchange), the American
Stock Exchange (AMEX), or the National Association of Securities Dealers'
Automated Quotation System (NASDAQ), National Market System. An eligible
portfolio company can also be one which is subject to filing, has filed, or has
recently emerged from reorganization protection under Chapter 11 of the
Bankruptcy Act.
As a BDC, the Company must invest at least 70% of its total assets in
qualifying assets ("Qualifying Assets") consisting of (a) "eligible portfolio
companies" as defined in the 1940 Act ("Eligible Portfolio Companies") and (b)
certain other assets including cash and cash equivalents. An eligible portfolio
company generally is a United States company that is not an investment company
and that (i) does not have a class of securities registered on an exchange or
included in the Federal Reserve Board's over-the-counter margin list; (ii) is
actively controlled by a BDC and has an affiliate of a BDC on its board of
directors; or (iii) meets such other criteria as may be established by the SEC.
A BDC may invest the remaining 30% of its total assets in non-Qualifying Assets,
including companies that are not Eligible Portfolio Companies. The foregoing
percentages will be determined, in the case of financings in which the Company
commits to provide financing prior to funding the commitment, by the amount of
the Company's total assets represented by the value of the maximum amount of
securities to be issued by the borrower or lessee to the Company pursuant to
such commitment.
INVESTMENT OBJECTIVES
CAPITAL APPRECIATION. The Company's investment objective is to obtain long
term capital appreciation from investments in emerging and established companies
that the Managers believe offer special opportunities for growth. The Company
plans on accomplishing this by: (1) investing in and providing strategic,
managerial, and operational support to emerging growth companies primarily
engaged in the information technology and in other industries and businesses
that the Company's management determines are likely to grow significantly in the
next five to seven years.
INVESTMENT OBJECTIVES MAY NOT BE CHANGED OR MODIFIED WITHOUT A SHARE HOLDER
VOTE. The following investment objectives of the Company cannot be changed
without a vote of the holders of a majority of the voting securities. However,
the manner in which the company intends to achieve its investment objectives is
within the discretion of the Company's Board of Directors and management and may
be changed at any time by Board action.
The goal of RANDOLPH is to identify and invest in prospective portfolio
companies whose equity has the potential for significant appreciation, and to
minimize portfolio losses by careful selection of such portfolio companies and
active participation with its portfolio companies.
Randolph will invest in those companies that are capable of being
market leaders and which are at a stage of development that would benefit from
Randolph's business development and management support, financing, and market
knowledge. The Company, however, will not be limited to investing in portfolio
companies that are exclusively in information technology industries.
The Company will realize value for its shareholders by selling the equity
securities of its Portfolio Companies for a profit, either to private investors
or by taking the Portfolio Companies public (generally through an offer to
Randloph's shareholders of rights to purchase stock of the portfolio company in
its initial public offering). Value will also be realized through continued
ownership in the Portfolio Companies, consulting fees received in connection
with assisting in the continued operations of the emerging companies and through
the sale of a partial or the complete ownership interest in its Portfolio
Companies. There can be no assurance, however, that the Company will be
successful in selling any equity securities of its Portfolio Companies for a
profit at any time in the future.
INVESTMENT POLICIES OF THE ISSUER
For purposes of these investment policies and unless otherwise specified,
references to the percentage of the Company's total assets "invested" in
securities of a company will be deemed to refer, in the case of financings in
which the Company commits to provide financing prior to funding the commitment,
to the amount of the Company's total assets represented by the value of the
maximum amount of securities to be issued by the eligible portfolio company to
Randolph pursuant to such commitment; the Company will not be required to divest
securities in its portfolio or decline to fund an existing commitment because of
a subsequent change in the value of securities the Company has previously
acquired or committed to purchase. UNLESS OTHERWISE STATED HEREIN, OR PROHIBITED
BY THE INVESTMENT COMPANY ACT OF 1940, ALL OF THE FOLLOWING INVESTMENT POLICIES
ARE SUBJECT TO CHANGE WITHOUT THE PRIOR VOTE OF THE HOLDERS OF A MAJORITY OF THE
VOTING SECURITIES OF RANDOLPH CAPITAL GROUP INC. SEE RISK FACTORS.
In selecting investments for the Company's portfolio, the Company will
endeavor to meet the following investment guidelines, as established by the
Company's board of directors. The Company may, however, make investments that do
not conform to one or more of these guidelines when deemed appropriate by the
Company. Such investments might be made if the Company believes that a failure
to conform in one area is offset by exceptional strength in another or is
compensated for by a higher yield, favorable warrant issuance or other
attractive terms or features.
INVESTMENT GUIDELINES
(A) STAGE OF DEVELOPMENT CRITERIA. The Company will seek to diversify
the Company's portfolio based on the stage of development of eligible portfolio
companies by limiting the Company's aggregate investment in securities of
companies that, in the opinion of the Board, are in the start-up stage to a
maximum of 35% of the Company's total assets, except that the Company may invest
up to 10% of the Company's total assets in securities of companies that, in the
opinion of the Company, are in the seed capital stage. The Company will seek to
invest the remainder of the Company's Assets in securities of companies that, in
the opinion of the Company, are in the emerging growth stage or mezzanine stage.
The Company will invest in seed capital stage companies for strategic purposes,
with the goal of making additional, larger investments if the company succeeds.
For purposes of these investment guidelines, the stages of development are
defined as follows:
A) Seed capital companies represent the earliest stage of development. These
companies have raised relatively modest equity capital to prove a concept and
qualify for start-up capital. Their activities generally are limited to product
development, scientific and market research, recruiting a management team and
developing a business plan. These companies likely do not have financial support
from either venture capitalists or larger companies making strategic
investments. B) Start-up stage companies are completing or have recently
completed product development and initial marketing, but have not sold their
products commercially. Generally such firms have made market studies, assembled
key management, developed a business plan and are ready to commence operations.
C) Emerging growth stage companies have initiated or are about to initiate
full-scale operations and sales, but may not be showing a profit. D) Mezzanine
stage companies are approaching or have attained break even or profitability and
are continuing to expand. An acquisition or initial public offering may be
imminent.
Classification of a company by stage of development necessarily involves a
subjective judgment by the Company, and it is possible that other investors or
market analysts would classify a company differently than the classification
used by the Company.
(B) QUANTITATIVE CRITERIA. The Company will seek to invest 65% of the Company's
total investment capital raised pursuant to a second offering and all subsequent
offerings during the next 36 months in equity of venture companies that meet the
following criteria:
1) The eligible portfolio company has a minimum capitalization of at least
$1,000,000.00; 2) The eligible portfolio company has at least six months
available cash to fund its operations and indications from other equity
investors of additional investment; 3) The eligible portfolio company's business
plan contemplates sales/revenues of at least $25,000,000.00 within 5 years;
(C) EVALUATION CRITERIA. All potential Portfolio Companies will be first
evaluated and assessed based on their relative stage of development and the
quality of an investment in such Portfolio Company based on the above criteria.
Once the Company's Chairman and CEO has determined that a Potential Portfolio
Company satisfies the above criteria and is suitable for investment, the
Potential Portfolio Company will then be evaluated by the Board of Directors of
the Company using the eight step process as described below. After completion,
receipt and review of all internal and outside reports and evaluations of the
Potential Portfolio Company, the Board of Directors of the Company will place
the matter of investing in the Potential Portfolio Company to a vote. If a
majority of the Directors approve the investment, the Company will then proceed
with a written offer, establish a disbursement of proceeds schedule, and prepare
appropriate documents which will reflect the Company's investment, any
controlling interest in, and any management service contracts between the
Potential Portfolio Company and Randolph.
1) Read Business Plan/Assess Team. Request a business plan description and
complete resumes of management from all entrepreneurs. Members of Randolph's
Management Team will meet with the best of these entrepreneurs, attempting to
identify key traits that have been associated with entrepreneurial success in
the past, such as high energy, a must-win attitude, intellectual brilliance,
high personal integrity, relevant experience, a strong work ethic, and the
ability to prioritize and focus. A Business Plan submitted for evaluation to the
Company should contain the following information:
a) Overview of the business concept as well as the company's strategic focus and
direction. b) Discussion of competition including a discussion of specialized
expertise, intellectual property, patents, and/or other unique advantages held
by either the company or its competitors. c) Sources and uses of cash with
respect to investment capital sought. d) Pro forma financial projections for at
least the current year and two subsequent years including expected capital
requirements from the time of the investment capital received through the two
subsequent years. e) Operating plan including current and projected staffing,
equipment, and space requirements. f) Discussion of minimum dollar proceeds of
the offering necessary in order to implement the business plan. g) Marketing
plan. h) Exhaustive discussion of conflicts of interest with investors together
with steps being taken by the Portfolio Company to mitigate such conflicts of
interest and to protect against future conflicts of interest. i) Resumes for all
key officers/managers.
2) Evaluate Potential Market. Randolph has developed relationships with many
market experts, including CEOs and other key employees of many successful
companies in the technology arena. Each of these contacts represents a valuable
source of information about his or her own market, and the Company will call
upon these contacts as well as create new ones in the markets of each eligible
portfolio company seeking funding, for candid references. As the Company
evaluates markets, the Company must become convinced that the eligible portfolio
company can attain niche leadership over time.
3) Examine Structure of Business Model. Randolph will examine the structure upon
which the business plan is built, and the Board has indicated a distinct bias
toward business models calling for high gross margins and relatively low capital
intensiveness. Such businesses have higher internally sustainable growth rates
than most and are the best candidates for superior return on equity invested. In
addition, Randolph will require, whenever possible, to implement the following
policies into the articles, bylaws, or operating agreements of its seed to start
up stage eligible portfolio companies:
a) That there can be only one class of shares, all with equal voting rights, and
all distributions of capital or earnings can only be made with no preference to
all members based upon their percentage interest; b) The formulae for
compensation of the key officers/managers and their affiliates, including, but
not limited to, all salary, bonuses, commissions and/or fees, shall be
apportioned based upon the success of the eligible portfolio company in reaching
predetermined milestones established within its business plan; c) The highest
responsibility of the management/officers of the entity is as a fiduciary
charged with serving the best interests of the members even when such interests
may be in conflict with the management, officers or other employees of the
entity; d) No "poison pill" defenses to takeovers will be allowed to be used by
management of the eligible portfolio company;
4) Check References. Randolph will require that each entrepreneur supply a list
of references in order that the Company may get a better sense of the
entrepreneur's past experience, strengths, weaknesses, and work habits. Randolph
makes it a point to get references outside of this list as well, in order to
avoid only "cherry-picked references." Randolph believes that these checks are
important to develop a more complete and accurate picture of the team.
5) Call Potential Customers. Randolph will make it a practice to call a number
of prospective customers to get a sense of how they might respond to the
envisioned product. These early attempts to develop and promote a sense of
customer orientation in all entrepreneurs in whom we invest further helps
establish the value of the venture investment.
6) Evaluate Product/Technology. As part of our analysis, we need to be convinced
that the product is unique, and that use of the product does not require a
substantial change in customer behavior. To evaluate technology, Randolph will
not rely on in-house expertise alone, but will contact and hire appropriate
specialists and consultants to evaluate the feasibility of developing the
entrepreneur's vision. Generally, assuming technology risk is part of the job of
the early stage venture capitalist. Performing such a "Technology Audit" will
often minimize such risk.
7) Evaluate Risks/Rewards. Evaluate the pro-forma financials, the likelihood of
an exit after a five to seven year holding period, and the upside and downside
prospects for the company. We insist that, given realistic assumptions, we must
be able to make at least 10 times, and preferably 100 times, our money on each
initial investment.
8) Invest. When deciding on making an investment, the Management Team will draw
up a term sheet for negotiation. Valuation, board seats, requirements for
additional investment, vesting schedules, salaries, and so forth will all be
discussed, and terms will be agreed upon.
In addition, all mezzanine and growth stage Portfolio Companies in which
Randolph will invest will require a careful evaluation of their financial
records, including an evaluation of the following:
1) Audited financial statements and notes to the financial statements including:
Management discussion of operations and liquidity; details regarding all forms
of actual compensation of management and affiliates by the entity; details
regarding the contractual rights of management and affiliates to compensation by
the entity; number of shares outstanding at the beginning of the period and the
end of the period and an explanation of the difference, if any, and a detailed
discussion of the entity's rights and obligations under any joint ventures
entered into (whether before or after the offering) along with a full discussion
of any conflicts of interest management may have in entering into such joint
ventures on behalf of the entity. 2) Equipment list and appraisal of equipment;
3) Facilities, current product descriptions; 4) Current management resumes,
employment contracts; 5) All material contracts (and amendments) currently in
effect, including, without limitation, leases, sales, purchase, financing,
distribution, franchise, intellectual property, employment, insurance, employee
benefit, and joint-venture contracts; currently outstanding contractual offers
by and to the target company; 6) Correspondence with contracting parties
regarding contract interpretation, claims, or threats of contract litigation; 7)
Documents relating to the target company's internal determinations as to whether
it can, or should, fulfill a particular contract; 8) Documents relating to
material acquisitions and divestitures for the immediately preceding five years,
particularly agreements involving covenants by or in favor of the target
company; 9) Certified copies of the Company's Certificate or Articles of
Incorporation and all amendments thereto to date, as well as any proposed
amendments; 10) Certified copies of the Company's Bylaws, as amended to date;
11) Minute books of the Company, including minutes of the meetings of the board
of directors, any committee (whether of the board or otherwise), and
shareholders for the last five years to date; 12) The Company's stock transfer
or stock ledger books; 13) The form(s) of the Company's stock certificates and
the language of all legends or specific terms appearing thereon; 14) All stock
option, bonus, incentive, or pension plans, and any other agreements to issue
shares of the Company or any of its subsidiaries in the future; 15) All
agreements relating to the beneficial ownership, voting rights, or pledge of the
Company's common or preferred stock; 16) All agreements under which registration
or preemptive-rights are granted to shareholders of the Company; 17) All
agreements, offering circulars, letters of intent, written proposals, or
memoranda of any oral proposals for the disposition, acquisition, or
distribution of any of the assets or shares of the Company; 18) List of all
shareholders of the Company, cross-checked against the stock books and
disclosing the status of ownership of each (e.g., joint, in trust, minor); 19)
An opinion from auditors regarding the fully paid and nonassessable character of
the Company's shares; 20) All shareholder correspondence with the Company for
the last year;
DIVERSIFICATION. As a BDC, Randolph must invest at least 70% of its total assets
in Qualifying Assets consisting of eligible portfolio companies and certain
other assets including cash and cash equivalents. In order to receive favorable
pass-through tax treatment on its distributions to its shareholders, the Company
intends to diversify its pool of investments in such a manner so as to qualify
as a diversified closed end management investment company. However, because of
the limited size of this offering, the Company will likely be classified as a
"non-diversified" closed end investment company under the 40 Act. Until the
Company qualifies as a RIC "Registered Investment Company", it will not be
subject to the diversification requirements applicable to RICs under the
Internal Revenue Code and receive favorable pass through tax treatment on
distributions made out to its shareholders. Upon successful completion of
subsequent offerings made by the Company, Randolph will seek to increase the
diversification of the Company's portfolio so as to make it possible to meet the
RIC diversification requirements, as described below. There can be no assurance,
however, that the Company will be able to meet those requirements.
To qualify as a RIC, the Company must meet the issuer diversification
standards under the Internal Revenue Code that require that, at the close of
each quarter of the Company's taxable year, (i) not more than 25% of the market
value of its total assets is invested in the securities of a single issuer, and
(ii) at least 50% of the market value of its total assets is represented by
cash, cash items, government securities, securities of other RICs and other
securities (with each investment in such other securities limited so that not
more than 5% of the market value of the Company's total assets is invested in
the securities of a single issuer and the Company does not own more than 10% of
the outstanding voting securities of a single issuer). For purposes of the
diversification requirements under the Internal Revenue Code, the percentage of
the Company's total assets "invested" in securities of a company will be deemed
to refer, in the case of financing in which the Company commits to provide
financing prior to funding the commitment, to the amount of the Company's total
assets represented by the value of the securities issued by the eligible
portfolio company to the Company at the time each portion of the commitment is
funded.
WARRANTS AND EQUITY SECURITIES. Randolph will acquire warrants to purchase
equity securities and/or convertible preferred stock of the eligible portfolio
companies in connection with providing venture financing. The terms of the
warrants, including the expiration date, exercise price and terms of the equity
security for which the warrant may be exercised, will be negotiated individually
with each eligible portfolio company, and will likely be affected by the price
and terms of securities issued by the eligible portfolio company to other
venture capitalists and other holders. It is anticipated that most warrants will
be for a term of five to ten years, and will have an exercise price based upon
the price at which the eligible portfolio company most recently issued equity
securities or, if a new equity offering is imminent, will next issue equity
securities. The equity securities for which the warrant will be exercised
generally will be common stock (of which there may be one or more classes) or
convertible preferred stock. Substantially all the warrants and underlying
equity securities will be restricted securities under the 1933 Act at the time
of the issuance; the Company generally negotiates registration rights with the
borrower or lessee that may provide (i) "piggyback" registration rights, which
permit the Company under certain circumstances to include some or all of the
securities owned by it in a registration statement filed by the eligible
portfolio company, or (ii) in very rare circumstances, "demand" registration
rights permitting the Company under certain circumstances to require the
eligible portfolio company to register the securities under the 1933 Act (in
some cases at the Company's expense). The Company will generally negotiate "net
issuance" provisions in the warrants, which allow the Company to receive upon
exercise of the warrant without payment of any cash a net amount of shares
determined by the increase in the value of the issuer's stock above the exercise
price states in the warrant.
Randolph will make available significant managerial assistance through
its officers to certain companies whose securities are held in the Company's
portfolio but will not be obligated to do so. Although each warrant or preferred
stock purchase will contain customary and negotiated representations,
warranties, covenants and events of default to protect the Company, typically,
the Company will retain a seat on the Board of the eligible portfolio company,
retain covenants against subordination of its dividend and liquidation
preferences associated with its preferred shares, and secure, whenever possible
and practicable, its interest against land, equipment and other tangible assets
of the eligible portfolio company.
LEVERAGE. The Company intends to borrow money from and issue debt
securities to banks, insurance companies and other lenders to obtain additional
funds. Under the 1940 Act, the Company may not incur borrowings unless,
immediately after the borrowing is incurred, such borrowings would have "Asset
Coverage" of at least 200%. "Asset Coverage" means the ratio which the value of
the Company's total assets, less all liabilities not represented by (i) the
borrowings and (ii) any other liabilities constituting senior securities under
the 1940 Act, bears to the aggregate amount of such borrowings and senior
securities. The practical effect of this limitation is to limit the Company's
borrowings and other senior securities to 50% of its total assets less its
liabilities other than the borrowings and other senior securities. The 1940 Act
also requires that, if the Company borrows money, provision be made to prohibit
the declaration of any dividends or other distribution on the shares (other than
a dividend payable in shares), or the repurchase by the Company of shares, if,
after payment of such dividend or repurchase of shares, the Asset Coverage of
such borrowings would be below 200%. If the Company is unable to pay dividends
or distributions in the amounts required under the Internal Revenue Code, it
might not be able to qualify as a RIC or, if qualified, to continue to so
qualify. The use of leverage increases investment risk. Lenders are expected
that the Company pledge portfolio assets as collateral for loans. If the Company
is unable to service the borrowings, the Company may risk the loss of such
pledged assets. Lenders are also expected to require that the Company agree to
loan covenants limiting the Company's ability to incur additional debt or
otherwise limiting the Company's flexibility, the loan agreements may provide
for acceleration of the maturity of the indebtedness if certain financial tests
are not met.
TEMPORARY INVESTMENTS. Pending investment in venture financing transactions
and pending distributions, the Company will invest excess cash in (i) securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
(ii) repurchase agreements fully collateralized by U.S. government securities;
(iii) short-term high-quality debt instruments of U.S. corporations; and (iv)
pooled investment Funds whose investments are restricted to those described
above. All such investments will mature in one year or less. The U.S. government
securities in which the Company may invest include U.S. government securities
backed by the full faith and credit of the U.S. government (such as Treasury
bills, notes and bonds) as well as securities backed only by the credit of the
issuing agency. Corporate securities in which the Company may invest include
commercial paper, bankers' acceptances and certificates of deposit of domestic
or foreign issuers.
The Company also may enter into repurchase agreements that are fully
collateralized by U.S. government securities with banks or recognized securities
dealers in which the Company purchases a U.S. government security from the
institution and simultaneously agrees to resell it to the seller at an
agreed-upon date and price. The repurchase price is related to an agreed-upon
market rate of interest rather than the coupon of the debt security and, in that
sense, these agreements are analogous to secured loans from the Company to the
seller. Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Company if the other party
to the transaction defaults.
RESERVE MANAGEMENT. The Company must retain significant reserves for a
number of years after the Close Date of this Offering and any subsequent
Offerings made by the Company in order to have sufficient funds for
equity-oriented follow-on investments in Portfolio Companies. The Company
intends on registering additional common stock for subsequent sale to meet the
funding requirements for such follow on investments. As such, the Company will
likely have cash reserves from subsequent common stock sales. In order to
enhance the rate of return on these reserves and increase the amounts ultimately
available for equity-oriented investments and Company operating expenses, the
Company will engage in a reserve management strategy that may include making
secured loans to its Portfolio Companies, potential Portfolio Companies, or
similar types of corporations. The Company also expects to invest some portion
of these reserves in either publicly traded securities or in mutual funds,
subject to applicable legal limits or SEC exemptive orders.
AVERAGE INVESTMENT. The amount of funds committed to a Portfolio Company
and the ownership percentage received will vary depending on the maturity of the
company, the quality and completeness of the management team, the perceived
business opportunity, the capital required compared to existing capital, and the
potential return. Although investment amounts will vary considerably, the
Company's Management expect that the average investment (including follow-on
investments) will be between $250,000 and $5,000,000, subject to the Company
successfully raising additional capital.
OTHER INVESTMENT POLICIES. The Company will not sell securities short,
purchase securities on margin (except to the extent the Company's permitted
borrowings are deemed to constitute margin purchases), write puts or calls,
purchase or sell commodities or commodity contracts. The Company will not
underwrite the securities of other companies, except to the extent the Company
may be deemed an underwriter upon the disposition of restricted securities
acquired in the ordinary course of the Company's business.
NON-QUALIFYING ASSET INVESTMENTS. The Company intends to invest its assets
not required to be invested in Qualified Assets in acquiring commercial and
residential real estate and in purchasing securities in publicly traded
companies that cannot be classified as Eligible Portfolio Companies under the
1940 Act.
TAX INFORMATION
The following is a general summary of certain of the United States federal
income tax laws relating to the Company and investors in its units. This
discussion is based on the Internal Revenue Code, regulations, published rulings
and procedures and court decisions as of the date hereof. The tax law, as well
as the implementation thereof, is subject to change, and any such change might
interfere with the Company's ability to qualify as a RIC or, if the Company so
qualifies, to maintain such qualification. This discussion does not purport to
deal with all of the United States federal income tax consequences applicable to
the Company or to all categories of investors, some of whom may be subject to
special rules. In addition, it does not address state, local, foreign or other
taxes to which the Company or its investors may be subject, or any proposed
changes in applicable tax laws. Investors should consult their tax advisers with
respect to an investment in Company Shares.
TAXATION OF THE COMPANY AS AN ORDINARY CORPORATION. It is anticipated that,
commencing with the second year of its investment operations, the Company will
seek to meet the requirements, including diversification requirements, to
qualify for the special pass-through status available to RICs under the Internal
Revenue Code, and thus to be relieved of federal income tax on that part of its
net investment income and realized capital gains that it distributes to
shareholders. Unless and until the Company meets these requirements, it will be
taxed as an ordinary corporation on its taxable income for that year (even if
that income is distributed to shareholders) and all distributions out of its
earnings and profits will be taxable to shareholders as dividends; thus, such
income will be subject to a double layer of tax (although corporate shareholders
may be entitled to a dividends-received deduction). There is no assurance that
the Company will meet the requirements to qualify as a RIC.
TAXATION OF THE COMPANY AS A RIC. CONSEQUENCES OF CONVERTING FROM AN
ORDINARY CORPORATION TO A RIC. In order to qualify as a RIC, the Company must,
at the end of the first year in which it so qualifies, have no accumulated
earnings and profits from years in which it was not taxed as a RIC. To meet this
requirement, the Company must, before the end of the first year in which it
qualifies as a RIC, distribute as dividends all of its accumulated earnings and
profits. In addition to the foregoing, pursuant to a published notice of the
Internal Revenue Service, the Company must either (i) elect to recognize gain on
the disposition of any asset during the ten year period (the "Recognition
Period") beginning on the first day of the first taxable year for which the
Company qualifies as a RIC that is held by the Company as of the beginning of
such Recognition Period, to the extent of the excess of (a) the fair market
value of such asset as of the beginning of such Recognition Period over (b) the
Company's adjusted basis in such asset as of the beginning of such Recognition
Period (such excess, hereinafter, "built-in gain"), taxable at the highest
regular corporate rates or (ii) immediately recognize and pay tax on any such
built-in gain with respect to any of its portfolio holdings and, as described
above, distribute the earnings and profits from such deemed sales. As a RIC, the
Company would not be able to use any net operating loss carryforwards relating
to periods prior to the first year in which the Company qualifies as a RIC.
RIC QUALIFICATION REQUIREMENTS. To qualify as a RIC, the Company must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment income
and net short-term capital gain) ("Distribution Requirement") and must meet
several additional requirements. Among the requirements are the following: (a)
the Company must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to loans of securities and gains from
the sale or other disposition of securities or other income derived with respect
to its business of investing in securities ("Income Requirement"); (b) the
Company must derive less than 30% of its gross income each taxable year from
gains from the sale or other disposition of securities held for less than three
months; (c) the Company must diversify its assets so that, at the close of each
quarter of the Company's taxable year, (i) not more than 25% of the market value
of its total assets is invested in the securities of a single issuer or in the
securities of two or more issuers that the Company controls and that are engaged
in the same or similar trades or businesses or related trades or businesses and
(ii) at least 50% of the market value of its total assets is represented by
cash, cash items, government securities, securities of other RICs and other
securities (with each investment in such other securities limited so that not
more than 5% of the market value of the Company's total assets is invested in
the securities of a single issuer and the Company does not own more than 10% of
the outstanding voting securities of a single issuer) ("Diversification
Requirement"); and (d) the Company must file an election to be treated as a RIC.
If, after initially qualifying as a RIC, the Company fails to qualify for
treatment as a RIC for a taxable year, it would be taxed as an ordinary
corporation on its taxable income for that year and all distributions out of its
earnings and profits would be taxable to shareholders as dividends (that is,
ordinary income). In such a case, there may be substantial tax and other costs
associated with re-qualifying as a RIC.
The Company would be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year at
least 98% of its ordinary income for such calendar year and 98% of its capital
gain net income for the one-year period ending on October 31 of such calendar
year, plus certain other amounts. For these purposes, any taxable income
retained by the Company, and on which it pays federal income tax, would be
treated as having been distributed.
The Company currently intends to distribute in each year for which it
qualifies as a RIC substantially all of its net investment income and capital
gain net income so as to not be subject to federal income or excise taxes.
TAXATION OF THE COMPANY'S SHAREHOLDERS IF THE COMPANY QUALIFIES AS A RIC.
Dividends paid to shareholders that are attributable to the Company's net
investment income will be taxable to shareholders as ordinary income. Capital
gain distributions are taxable as long-term capital gains regardless of how long
the shareholder has held the Shares. It is not anticipated that a significant
portion of the Company's dividends will qualify for the dividends-received
deduction for corporations.
Distributions are generally taxable to shareholders at the time the
distribution is received. However, any distribution declared by the Company in
October, November or December, made payable to shareholders of record in such a
month and paid the following January, is deemed to have been paid by the Company
and received by shareholders on December 31 of the year declared. This will
prevent the application of the Excise Tax, discussed above, to the Company as a
result of the delay in the payment of the dividends.
If, for any calendar year, the Company's total distributions exceed its net
investment income and net capital gains, the excess will generally be considered
a tax-free return of capital to a shareholder to the extent of the shareholder's
adjusted basis in its shares and then as capital gain. The amount treated as
tax-free return of capital will reduce the adjusted basis of a shareholder's
Shares, thereby increasing the potential gain or reducing the potential loss on
the sale of the Shares.
In general, upon the sale or other disposition of Shares, the selling
shareholder will recognize a gain or loss equal to the difference between the
amount realized on the sale and the seller's adjusted basis in the Shares. Any
loss realized will be disallowed to the extent the seller has acquired (or
entered into a contract to acquire) substantially identical Shares within a
period beginning 30 days before the disposition of Shares and ending 30 days
after the disposition. In such case, the basis of the Shares acquired will be
adjusted to reflect the disallowed loss. Gain or loss realized upon a sale of
Shares generally will be treated as a capital gain or loss. The gain or loss
will be a long-term capital gain or loss if the Shares were held for more than
one year. In addition, if the Shares sold were not held for more than six
months, any loss on the sale will be treated as long-term capital loss to the
extent of any capital gain dividend received by the shareholder with respect to
such Shares.
The Company is required to withhold 31% of reportable payments (which may
include dividends and capital gain distributions) to individuals and certain
other non-corporate shareholders who do not provide the Company with a correct
taxpayer identification number or who otherwise are subject to backup
withholding. The certification of a shareholder's taxpayer identification number
will be included in the Subscription Agreement to be provided with the Offering
Memorandum.
Federal withholding taxes at a rate of 30% (or a lesser treaty rate) may
apply to distributions to shareholders who are nonresident aliens or foreign
partnerships, trust or corporations. The rules governing United States federal
income taxation of foreign shareholders are complex, and prospective non-U.S.
shareholders should consult with their own tax advisors to determine the impact
of federal, state and local income tax laws with regard to an investment in
Shares, including any reporting requirements.
Individuals and certain other shareholders will be required to include in
their gross income an amount of certain Company expenses relating to the
production of gross income that are allocable to the shareholder. These
shareholders, therefore, will therefore be deemed to receive gross income from
the Company in excess of the distributions they actually receive. Such allocated
expenses may be deductible by an individual shareholder as a miscellaneous
itemized deduction, subject to the limitation on miscellaneous itemized
deductions not exceeding 2% of adjusted gross income. The Company will notify
shareholders following the end of each calendar year of the amounts of dividends
and capital gain distributions paid or deemed paid during the year.
Tax-Exempt Investors. Qualified plans, Individual Retirement Accounts and
investors exempt from taxation under the internal Revenue Code Section 501(c)(3)
(collectively, "Tax-Exempt Entities") are generally exempt from taxation except
to the extent that they have unrelated business taxable income ("UBTI")
(determined in accordance with Internal Revenue Code Sections 511-514). If the
Company qualifies as a RIC, it is likely that distributions to a Tax-Exempt
Entity shareholder that are treated as dividends will not be considered UBTI and
will therefore be exempt from federal income tax even if the Company borrows to
acquire its investment assets. Under Section 512(b) of the Internal Revenue
Code, UBTI does not include dividends received by a Tax-Exempt Entity. As a
general rule, the income tax provisions relating to corporation apply to RICs,
unless Subchapter M of the Internal Revenue Code provides otherwise, and thus
Section 512(b) should apply to exclude from UBTI dividends paid by a RIC to a
Tax-Exempt Entity. This conclusion is also supported by Revenue Ruling 66-106,
which applies Section 512(b) to exclude from UBTI dividends paid to the
tax-exempt shareholders of a real estate investment trust ("REIT"), a conduit
entity that invests in real estate and is substantially similar to a RIC for tax
purposes, on the same theory. However, if a Tax-Exempt Entity borrows money to
purchase its Shares, a portion of its income from the Company will constitute
UBTI pursuant to the "debt-financed property rules."
Social clubs, voluntary employee benefit associates, supplemental
unemployment benefit trusts, and qualified group legal service organizations
that are exempt from taxation under Internal Revenue Code Sections 501(c)(7),
(9), (17) and (20), respectively, are subject to different UBTI rules, which
generally will require them to characterize distributions from the Company as
UBTI. Dividends distributions by the Company to a charitable organization that
is a private foundation should constitute investment income for purposes of the
excise tax on net investment income of private foundations imposed by Section
4940 of the Internal Revenue Code.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT NECESSARILY LIMITED TO, THE SEVERAL FACTORS DESCRIBED BELOW. EACH
PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING BEFORE
MAKING AN INVESTMENT DECISION.
RECENTLY ORGANIZED "DEVELOPMENT STAGE" COMPANY; LIMITED RESOURCES; NO
PRESENT SOURCE OF REVENUES; NO OPERATING HISTORY; RELIANCE ON MANAGEMENT. The
Company is newly organized and has not yet entered into any definitive financing
transactions with any Portfolio Companies it will finance. Although the
Company's Chairman and advisory director have had prior experience relating to
the identification, evaluation and acquisition of target businesses, the Company
has no such experience and, accordingly, there is only a limited basis upon
which to evaluate the Company's prospects for achieving its intended business
objectives. To date, the Company's efforts have been limited primarily to
organizational activities and this offering. The Company has limited resources
and has had no revenues to date. In addition, the Company will not achieve any
revenues (other than interest income upon the proceeds of this offering) until,
at the earliest it is able to sell its position of securities in an underlying
portfolio company for a profit. The Company could require substantial time to
become fully invested. Pending investment, all cash that the Company has
received pursuant to this offering will be committed to short-term, high grade
investments that present relatively low investment risk but provide a
correspondingly lower return. The Company will be wholly dependent for the
selection, structuring, closing and monitoring of all of its investments on the
diligence and skill of its management, acting under the supervision of the
Company's board of directors. There can be no assurance that the Company will
attain its investment objective. The Company will be wholly dependent for the
selection, structuring, closing and monitoring of all of its investments on the
diligence and skill of its management, acting under the supervision of the
Company's Board of Directors. There can be no assurance that the Company will
attain its investment objective. Mr. Rizvi will have primary responsibility for
the selection of the companies in which the Company will invest, the negotiation
of the terms of such investments and the monitoring of such investments after
they are made. The Company anticipates hiring a Chief Operating Officer with
experience in the industry in which the Company will initially invest and seek
to effectuate a roll up or consolidation, but there is no assurance that it will
be successful in such a business venture or hiring qualified personnel to assist
it in its business venture in the near future. Although Mr. Rizvi intends to
devote such time as is necessary to the affairs of the Company, there is no
assurance that such sufficient time will be so devoted. Furthermore, there can
be no assurance that Mr. Rizvi will remain associated with Randolph or that, if
he were to cease to be associated with Randolph, the Company would be able to
find a qualified person or persons to fill such position.
DILUTION. The present shareholders of the Company have acquired an interest
in the Company at a total cost substantially less than the total cost the public
investors will pay for their shares. Therefore, the public investors will bear
most of the risk of loss. As of October 10, 1999, the Company had a total of
2,000,000 shares of common stock outstanding, which equals to a net tangible
book value of $2,000.00 or approximately $.001 per share.
As of September 21, 1999, the officers, directors and other present
shareholders own 2,0000,000 shares of common stock for which which is nominally
capitalized in the amount of $2,000.00 or an average of $.001 per share. If the
maximum number of shares being offered are sold, the present shareholders will
own 2,00,000 shares or 50.00% of the Company's common stock to be outstanding,
and the public purchasers will own 2,000,000 shares or 50.00% of the Company's
common stock to be outstanding, for which the public purchasers will have paid
to the Company a total of $200,000.00 (or $.10 per share.) The following table
illustrates the per share dilution:
Maximum Sold
Public offering price per share of common (1) $0.10
Net Asset Value per share before offering (2) $0.001
Increase per share attributable to new Investors $0.057
Net Asset Value per share after offering (3) $0.051
Dilution of Net Asset Value per share to new Investors $0.05
(1) Average offering price before deduction of offering expenses once the entire
offering has been sold. (2) Determined by dividing the number of shares of
common stock outstanding into the net asset value of the company. (3) Before
deduction of offering expenses and First Year Operating Costs as described
herein. See USE OF PROCEEDS.
The following table summarizes the comparative ownership and capital
contributions of present shareholders and public investors assuming the maximum
number of shares are sold:
Percent
Total of total Average
Percent consid- consid- price
Shares of total eration eration per
Owned Shares paid paid share
----- ------ ---- ---- -----
Present Shareholders 2,000,000 50.00 $2,000,000 0.99% $.001
Public Investors 2,000,000 50.00 $2,000,000 99.1% $.10
RECENT NOTICE OF INTENT TO ELECT BDC STATUS. The Company intends to file
with the Securities and Exchange Commission its intent to elect in good faith,
within ninety days from the date of such filing, to be regulated as a Business
Development Company under the 1940 Act and be subject to Sections 54 through 65
of said Act (BDC Provisions). Upon making this election, the Company is required
to file a notice of its election and thus will be subject to the provisions of
1940 Act as it applies to Business Development Companies as of the date of such
election. Thus, prior to filing its notice of election, the Company is not
subject to the BDC Provisions of the 1940 Act. Although the Management of the
Company has no intention of changing the status of the Company or in any way
changing its current intent of being regulated as a business development
company, there is no assurance that the Company will elect to be regulated as a
business development company within 90 days of the date of filing its intent to
be so regulated. This has several repercussions to the investor that may not be
apparent at first. For example, should the Company choose not to elect to be
regulated as a BDC under the 1940 Act (BDC Status), several of the restrictions
imposed by the 1940 Act as it applies to transactions between affiliated persons
and a business development company would not be applicable. Thus,
notwithstanding an election of BDC status, an affiliated person of Randolph is
not required to seek prior approval from the Securities and Exchange Commission
or pursuant to approval from the majority of voting shareholders of the Company
before entering into a transaction that would be otherwise be classified as
'interested' or in which they have a material direct or indirect interest.
INVESTMENT RISKS
Substantial appreciation of the equity securities of Portfolio Companies is
essential to achieving the Company's return objectives with respect to its
investments.
NATURE OF RISKS IN INVESTING IN GROWTH STAGE COMPANIES. Although
investments in growth stage companies offer the opportunity for significant
gains, each investment involves a high degree of business and financial risk
that can result in substantial losses. Among these are the risks associated with
investing in companies in an early-stage of development or with little or no
operating history, companies operating at a loss or with substantial variations
in operating results from period to period, and companies with the need for
substantial additional capital to support expansion or to achieve or maintain a
competitive position. Such companies may face intense competition, including
competition from companies with greater financial resources, more extensive
development, manufacturing, marketing, and service capabilities, and a larger
number of qualified managerial and technical personnel. Although the Company
intends on mitigating its risk exposure by limiting its investments in early
stage companies, there is no assurance that the portfolio companies in which it
chooses to place a majority of its investment capital are not facing the same
risks of companies that are inherent in start up companies. In addition, growth
stage companies are likely to have a very limited operating history and thus
evaluating their worthiness for investment will be more subjective on their
future potential for growth and cannot be predicated on operating successes. The
Company anticipates that it may make significant equity investments in companies
in rapidly growing industries and changing high-technology fields; such
companies may face special risks of product obsolescence and may encounter
intense competition from other companies. These risks are explained in more
detail below.
TECHNOLOGY. Particularly in early-stage companies, a major risk is the
potential inability of a Portfolio Company to commercialize its technology or
product concept with the resources it has available. Although many of the
Portfolio Companies may be later-stage companies that have developed products,
the ultimate success of such companies will depend to a large extent on their
ability to continue to create new products and improve existing ones. There can
be no assurance that the development efforts of any Portfolio Company will be
successful or, if successful, will be completed within the budget or time period
originally estimated. Additional funds may be necessary to complete such
development, and there is no assurance that such funds will be available from
any source.
MARKETING. The markets for new products and services may be highly
competitive, rapidly changing, or both. Commercial success is frequently
dependent on marketing and support resources, the effectiveness and sufficiency
of which are very difficult to predict accurately. While this is a significant
risk for all Portfolio Companies, it is one of the principal economic risks of
second- and third-stage Portfolio Companies, which are anticipated to receive a
large portion of the Company's equity investments. There can be no assurance
that the marketing efforts of any particular Portfolio Company will be
successful or that any such company's products or services can be sold at a
price and volume that will allow it to be profitable. High technology products
and services often have a limited market or life-span. No assurance can be given
that the products or services of a particular Portfolio Company will not become
obsolete or require significantly more capital to obtain or maintain an adequate
market share for the success of the business.
PERSONNEL. The success of any venture is dependent upon the availability of
qualified personnel. The day-to-day operations crucial to success will be in the
hands of the management of each Portfolio Company. Each company's management
must have a philosophy and personality appropriate for that company's particular
stage of development. Early-stage companies typically need entrepreneurial
talents, while more mature companies require a higher level of infrastructure
and managerial coordination. Competition for qualified personnel is intense at
any stage of development. High turnover of personnel has become endemic in many
rapidly growing industries and could severely disrupt a Portfolio Company's
implementation of its business plan. Similarly, the ability of a Portfolio
Company's personnel, particularly its founders, to accept and make the difficult
transitions that occur as the company matures is hard to predict or manage. No
assurance can be given that the Portfolio Companies will be able to attract and
retain the qualified personnel necessary for success, or that the Company's
Management can select Portfolio Companies that have, or can obtain, the
necessary management resources.
MANAGEMENT. The success of the Company will depend upon the success of the
Portfolio Companies and, in great part, upon the abilities of their management.
Although the Company's Management, in conjunction with other venture capital
investors, expect to provide Portfolio Companies with a great deal of assistance
(particularly with regard to capital formation, major personnel decisions, and
strategic planning), the day-to-day operations will be in the hands of the
management of the Portfolio Companies. As the Portfolio Companies have yet to be
identified, Investors must rely upon the Company's Management to select
Portfolio Companies that have, or can obtain, the necessary management
resources. There can be no assurance that such selection will be successful.
COMPETITION. Most emerging markets are highly competitive. The Company
anticipates that nearly all Portfolio Companies will compete against firms with
more experience and greater financial resources than such companies.
ADDITIONAL CAPITAL. The Company's Management expect that most Portfolio
Companies will require additional equity financing to satisfy their working
capital requirements. The amount of additional equity financing needed will
depend upon the maturity and objectives of the particular company. Each round of
venture financing (whether from the Company or other investors) is typically
intended to provide a Portfolio Company with enough capital to reach the next
major valuation milestone. If the funds provided are not sufficient, a company
may have to raise additional capital at a price unfavorable to the existing
investors, including the Company. The availability of capital is generally a
function of capital market conditions that are beyond the control of the Company
or any Portfolio Company. There can be no assurance that the Company's
Management or the Portfolio Companies will be able to predict accurately the
future capital requirements necessary for success or that additional funds will
be available from any source.
TIME REQUIRED TO MATURITY OF INVESTMENT. The Company's Management intend to
invest funds available for equity investments as rapidly as is consistent with
the investment objectives of the Company. However, it is anticipated that there
will be a significant period of time (up to one to three years) before the
Company has completed the initial selection of Portfolio Companies for its first
round of equity investments. Venture capital investments typically take from
four to eight years from the date of initial investment to reach a state of
maturity at which liquidation can be considered. In light of the foregoing, it
is unlikely that any significant distributions of the proceeds from the
liquidation of equity investments will be made until the later years of the
Company.
ILLIQUIDITY OF VENTURE CAPITAL INVESTMENTS. It is anticipated that most of
the holdings in Portfolio Companies will be securities that are subject to
restrictions on resale. Generally, unless the securities are subsequently
registered under the Securities Act of 1933 (the "Securities Act"), the Company
will not be able to sell these securities unless it meets all of the conditions
of Rule 144 or another rule under the Securities Act that permits limited sales
under specified conditions. When restricted securities are sold to the public,
the Company may be deemed an "underwriter," or possibly a controlling person,
with respect thereto for the purpose of the Securities Act and may be subject to
liability as such under the Securities Act.
Other practical limitations may inhibit the Company's ability to sell or
distribute the securities of Portfolio Companies. For example, the Company may
own a relatively large percentage of a Portfolio Company's outstanding
securities, or customers, other investors, financial institutions, or management
may be relying on the Company's continued investment. Sales of securities of
Portfolio Companies may also be limited by the overall condition of the
securities market. In the past few years, the market for equity securities has
been volatile, especially for securities of high-technology companies.
Accordingly, the market price for public portfolio securities may be adversely
affected by factors unrelated to the operating performance of the Portfolio
Companies. The above limitations on liquidity of the Company's equity
investments could prevent a successful sale thereof, result in delay of any
sale, or reduce the amount of proceeds that might otherwise be realized.
NEED FOR FOLLOW-ON INVESTMENTS. Following its initial investment in
Portfolio Companies, the Company anticipates that it will be called upon to
provide additional funds to Portfolio Companies or have the opportunity to
increase its investment in a successful situation. See "Business of the
Company." Although the Company intends to maintain reasonable reserves and may
borrow to make follow-on equity investments, there is no assurance that the
Company will make follow-on investments or that the Company will have sufficient
funds to make all such investments. If the Company is unwilling or unable to
make a follow-on equity investment, the negative impact on a Portfolio Company
in need of such investment may be substantial. The Company's failure to make a
follow-on investment may also result in a significant reduction in the Company's
ownership percentage in a Portfolio Company or a missed opportunity for the
Company to increase its participation in a successful situation.
RISKS OF THE COMPANY
PORTFOLIO COMPANIES UNIDENTIFIED. The Company has not made any equity
commitments to any Portfolio Company. Therefore prospective investors will not
have an opportunity to carefully evaluate any of the Portfolio Companies that
the Company may eventually invest in and such evaluation will be entirely
dependent upon the Company's Management for selecting and negotiating with these
Portfolio Companies. If the Company makes material financing commitments to
Portfolio Companies before the close of its current Offering, the Company's
October 8th Offering Circular will be supplemented and any and all future
amendments will be posted on the Company's website under New Developments which
will include any additional information about such companies.
POTENTIAL LOSS OF ENTIRE INVESTMENT; FUNDING AND PORTFOLIO BALANCE. The
Company will begin investment operations pursuant to a potential second
offering. There is currently no assurance that the Company will be successful in
raising the maximum of $200,000.00 will be raised by the Offering Close Date,
nor is there any assurance that the Company will be successful with any
subsequent offerings. The Company will disburse $200,000.00 raised pursuant to
this offering to pay for expenses associated with preparing this offering and in
registering this offering in each of the fifty States. SEE USE OF PROCEEDS.
Therefore, should the company be unsuccessful in raising any of this amount
prior to the Offering Close Date, there is substantial risk of loss of the
entire investment made by the initial investors of the Company. The number of
investments, portfolio balance, and potential profitability of the Company could
be affected by the amount of funds at its disposal and, if it were to continue
investment operations with only a minimum amount of capitalization, the
Company's investment return might be adversely affected by a single investment
decision. At a lower funding level the number and diversity of investments will
be smaller.
SUBSTANTIAL INITIAL LOSSES. It is anticipated that most of the
capitalization of the Company, except for operating cash reserves and funds set
aside for follow-on investments in then-existing Portfolio Companies, will be
expended or committed by the end of the year 2001, which is expected to be prior
to the receipt of any substantial realized gains by the Company. The Company's
Management anticipate that the Company and a number of the Portfolio Companies
will sustain substantial losses in the initial three or four years of operation.
It is possible that these losses may never be recovered. There can be no
assurance that the Company will ever be profitable.
RELIANCE ON MANAGEMENT. All decisions with respect to the management of the
Company will be made exclusively by the Directors. Investors, except for the
Company's Management, will have no right or power to take part in the management
of the Company and will not receive any of the detailed financial information
issued by Portfolio Companies that is available to the Directors and the
Company's Management.
ERISA CONSIDERATIONS. In considering an investment in the Company by a
tax-exempt entity such as an employee benefit plan or individual retirement
account subject to the requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA"), the fiduciary acting on behalf of such entity should be
satisfied that such an investment is consistent with Sections 404 and 406 of
ERISA and that the investment is prudent in light of the entity's cash flow and
other objectives. To this end the Department of Labor has issued regulations
that would characterize the assets of certain entities in which tax-exempt
entities invest as "plan assets." Because the Company is expected to qualify as
a "venture capital operating company" and the shares are "publicly offered
securities" within the meaning of the regulations, the Company assets should not
be considered plan assets. However, fiduciaries of tax-exempt entities are urged
to consult their own advisors prior to investing in the Company.
COMPETITION FOR INVESTMENTS. The Company expects to encounter competition
from other entities having similar investment objectives (including others that
are affiliated with the Company's Management). Historically, the primary
competition for venture capital investments has been from venture capital funds
and corporations, venture capital affiliates of large industrial and financial
companies, small business investment companies, and wealthy individuals.
Additional competition is anticipated from foreign investors and from large
industrial and financial companies investing directly rather than through
venture capital affiliates. Many of the Company's competitors are subject to
regulatory requirements substantially different from those to which the Company
is subject, and, as a consequence, they may have a competitive advantage to the
extent that the regulations under which the Company operates restrict its
abilities to take certain actions. The Company will frequently be a co-investor
with other professional venture capital groups, and these relationships with
other groups may expand the Company's access to investment opportunities.
COMPETITION. Other entities and individuals compete for investments similar
to those proposed to be made by the Company, some of whom may have greater
resources than the Company. Furthermore, the Company's need to comply with
provisions of the 1940 Act pertaining to BDCs and, if the Company qualifies as a
RIC, provisions of the Internal Revenue Code pertaining to RICs might restrict
the Company's flexibility as compared with its competitors. The need to compete
for investment opportunities may make it necessary for the Company to offer
Portfolio Companies more attractive transaction terms than otherwise might be
the case.
DISTRIBUTIONS. There can be no assurance that any distributions to the
Investors will be made by the Company or that aggregate distributions, if any,
will equal or exceed the Investors' investment in the Company. Sales of
Portfolio Company securities will be the principal source of distributable cash
to the Investors. The Directors have absolute discretion in the timing of
distributions to the Investors, but the income tax liability of the Investors
depends on the profits of the Company, regardless of whether distributions are
made. Securities acquired by the Company through equity investments will be held
by the Company and will be sold or distributed at the sole discretion of the
Directors.
PORTFOLIO COMPANY LIABILITIES. The Company will participate actively in the
management of many Portfolio Companies, often having representatives serve as a
member of a Portfolio Company's Board of Directors. Consequently, the Company
may be subject to liability from lawsuits against its representatives as
directors. Because director liability insurance is typically not available at a
reasonable price, the Company's assets, including assets not related to those
Portfolio Companies, may be exposed to the claims of creditors of such Portfolio
Companies. The Company's Management will try to limit Company exposure to such
claims and liabilities where practical; however, such efforts may not be
successful. Although Investors generally will be liable only for the respective
amounts of their Capital Contributions, liability for Portfolio Company claims
or liabilities would adversely affect the amount of cash available for
distribution to the Investors.
DISCRETIONARY USE OF PROCEEDS. The Company's Management has broad
discretion with respect to the specific application of the net proceeds of this
offering. The Company intends that, upon the completion of a second or any
subsequent offerings, substantially all of the net proceeds held in the Escrow
Account from any such offering will be applied for investments in eligible
portfolio companies which satisfy the Company's Investment Criteria.
ILLIQUIDITY OF INVESTMENTS. The Company anticipates that substantially all
of its portfolio investments (other than short-term investments) will consist of
securities that at the time of acquisition are subject to restrictions on sale
and for which no ready market will exist. Restricted securities cannot be sold
publicly without prior agreement with the issuer to register the securities
under the 1933 Act, or by selling such securities under Rule 144 or other
provisions of the 1933 Act which permit only limited sales under specified
conditions. Venture capital investments in the securities of portfolio companies
are privately negotiated transactions, and there is no established trading
market in which securities can be sold. In the case of warrants or equity
securities, the Company generally will realize the value of such securities only
if the issuer is able to make an initial public offering of its shares, or
enters into a business combination with another company which purchases the
Company's warrants or equity securities or exchanges them for publicly traded
securities of the acquirer. The feasibility of such transactions depends upon
the portfolio company's financial results as well as general economic and equity
market conditions. Furthermore, even if the restricted warrants or equity
securities owned become publicly-traded, the Company's ability to sell such
securities may be limited by the lack of or limited nature of a trading market
for such securities. When restricted securities are sold to the public, the
Company, under certain circumstances, may be deemed an "underwriter" or a
controlling person with respect thereto for the purposes of the 1933 Act, and be
subject to liabilities as such under that Act.
Because of the illiquidity of the Company's investments, a substantial
portion of the Company's assets will be carried at fair value as determined by
the board of directors. This value will not necessarily reflect the value of the
assets which may be realized upon a sale.
NON-DIVERSIFIED STATUS. The Company will be classified as a
"non-diversified" investment company under the 1940 Act. At such time as the
Company meets certain asset diversification requirements, the Company intends to
qualify as a RIC under the Internal Revenue Code and will thereafter seek to
meet the diversification standards thereunder. Nevertheless, the Company's
assets may be subject to a greater risk of loss than if its investments were
more widely diversified.
Indemnification and Exculpation. The Company's Certificate of Incorporation
provides for indemnification of directors, officers, employees and agents of the
Company to the full extent permitted by Delaware law and the 1940 Act. The
Certificate of Incorporation also contains a provision eliminating personal
liability of a Company director or officer to the Company or its shareholders
for monetary damages for certain breaches of their duty of care.
Selection of Disinterested Directors. Randolph intends that, prior to the
closing of its Regulation E offering, a majority of the Company's directors will
be disinterested directors. Although the continued tenure of all directors will
be subject to annual election by shareholders, the initial selection of
directors, including the disinterested directors, is made by the Chairman.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
The Company has not commenced business and has no revenues or assets.
ITEM 2. FINANCIAL INFORMATION
The Company has not commenced business and has no revenues or assets.
ITEM 3. PROPERTIES
The Company has not commenced business and has no assets. It is anticipated
that the Company's principal assets following commencement of operations will be
securities of its eligible portfolio companies.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The Registrant has 2,000,000 shares of Common Stock issued and outstanding
as of the date of this Registration Statement. It is anticipated that, at the
closing of its exempt public offering pursuant to Regulation E, the Registrant
will have approximately 4,000,000 shares of Common Stock issued and outstanding,
of which 2,000,000 shares of common stock will be owned by officers, interested
directors and affiliates to the Issuer.
The following persons, as of October 10, 1999, either control the issuer as
specified in section 2(a)(9) of the Investment Company Act of 1940 and/or are
owners of more than five percent of any class of securities of the issuer.
Name Title/Class Amount % Class Owned(1)
- ---- ----------- ------ ----------------
Omar A. Rizvi Common 2,000,000 50.00
The above named individuals based on their percent holdings of the
Company's Common Stock, are deemed to have controlling interests in the issuer
as specified in section 2(a)(9) of the 1940 Act.
- -----------------
(1) Percent issued and outstanding based on completion of initial exempt
public offering of 2,000,000 shares of common stock pursuant to
Regulation E.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Omar A. Rizvi, J.D., LL.M.* Chairman and Chief Executive Officer
175 North Harbor Drive, Apt. 4502
Chicago, Illinois 60601
Scott K. Lindenberger Corporate Secretary
2970 North Sheridan Road, #916
Chicago, Illinois 60657
David W. Sear, Ph. D. Advisory Director
14810 Clara Street
Los Gatos, California 95030
Gregory H. Laborde Advisory Director
110 Wall Street, Suite 15C
New York City, New York 10005
</TABLE>
- ----------------------------------------
* Interested person of the Company within the meaning of the 1940 Act.
The Board of Directors of the Company anticipates electing two
additional disinterested directors. The Company's disinterested directors will
not receive any remuneration for their services from this Offering but each will
receive an annual fee from the Company between $3,000.00 to $10,000.00 per annum
upon successfully raising additional capital pursuant to a secondary offering
and having assisted in locating one or more probable eligible portfolio
companies in which the Company may invest. At such time, such directors will
also be reimbursed by the Company for their expenses in attending meetings of
the Board of Directors or any Committee thereof and will receive a fee for
attendance in person at any meeting at a per diem rate of $500.00.
The business backgrounds of the Company's directors and officers are as follows:
OMAR A. RIZVI is the Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Rizvi has been actively involved in the financial
and investment community as a securities lawyer for the past seven years. Mr.
Rizvi is also currently the President and Chairman of Origin Investment Group,
Inc., a business development company in the initial capitalization phase. Mr.
Rizvi is committed to devoting an equal amount of time and energy to his role as
the Chief Officer in Randolph as in his role as Chief Officer of Origin
Investment Group, Inc. Mr. Rizvi also is the managing partner of Rizvi &
Associates, LLP, a boutique law firm specializing in corporate and securities
law in Chicago which was established in 1993. Mr. Rizvi has recently held the
position of Executive Vice President and General Counsel for Griffin Industries,
Inc., a Seattle based business development company that specializes in investing
in equipment rental and distribution companies, where he was responsible for
managing all aspects of Griffin's corporate, transactional and securities
related legal work from incorporation to successfully raising several million
dollars in equity capital and in organizing an effective and cost efficient in
house due diligence review program for assessing investment opportunities with
potential eligible portfolio companies. Mr. Rizvi has also held the position of
General Counsel for Hughes Resources, Inc. in 1994-1995, an Oil & Gas holding
and distribution company located in Houston, Texas, and has acted as issuers
counsel for several other publicly traded companies including USA Health
Technologies, Inc., Canton Industrial Corporation, and Applied Technologies,
Inc. Mr. Rizvi holds a Masters of Law (LL.M.) degree in Securities Regulation
from the Georgetown University Law Center. Mr. Rizvi attended the University of
Illinois at Urbana-Champaign and completed three years of course work in
Chemical Engineering and finished his B.A. in Philosophy and Economics from the
University's Chicago campus. Mr. Rizvi received his J.D. degree from the
University of San Francisco School of Law. Mr. Rizvi is a member of the State
Bar of California, the United States District Courts for the Eastern, Central,
Northern and Southern Districts of California, the American Bar Association and
the Bar Association of San Francisco. Mr. Rizvi currently resides in downtown
Chicago.
SCOTT K. LINDENBERGER is Corporate Secretary for the Company. .
Lindenberger also serves as Corporation Secretary for Origin Investment Group,
Inc. Prior to working with Randolph, Mr. Lindenberger was a Client Services
Associate for InterOffice/Advantis, a large nationwide executive suite company,
in one of three downtown Chicago centers. His responsibilities included the
development and implementation of several new marketing initiatives, client
relations, and development of center services. Mr. Lindenberger brought several
new business accounts to InterOffice/Advantis. Mr. Lindenberger handled existing
client needs relating to ongoing services, promotions, and public relations and
served as liaison with other executive centers in the coordination of corporate
promotional initiatives. Mr. Lindenberger previously worked as a Marketing
Assistant for a large international manufacturing company, where his
responsibilities included the development of marketing materials, coordination
of corporate marketing projects, and assistance to the Regional Marketing
Manager. He was key to the roll-out of a new series of marketing materials
targeting the company's approximately 600 North American sales associates and
corporate managers. Mr. Lindenberger is a graduate of Drake University and holds
a Bachelors of Arts Degree in English and Cultural Studies. Mr. Lindenberger
currently resides in Chicago, Illinois.
ADVISORY BOARD MEMBERS
DR. DAVID W. SEAR received his Ph.D. in solid state physics from the
University of London in 1971. Between 1994 and 1996, Dr. Sear worked for and in
1995 through 1996 held the position of President and Chief Operating Officer for
Integrated Circuit Systems of San Jose, California where he was responsible for
marketing and engineering. Dr. Sear focused his efforts on restructuring the
company to develop a CMOS single chip 100Mbs Ethernet transceiver. Between 1991
and 1994, Dr. Sear was the President and Chief Operating Officer of Catalyst
Semiconductor where he was responsible for executing an effective turn around
plan which brought the company from a two million dollar loss in the March 1992
quarter to a four hundred thousand dollar profit one year after. The turnaround
made it possible to consider a public offering in which the company successfully
raised thirty three million dollars in May, 1993. Dr. Sear was employed with
Fujitsu Microelectronics between 1987 through 1991 as Vice President of
Marketing for all of Fujitsu's integrated circuit products marketed in North and
South America. In addition, Dr. Sear joined the small founding team of ICI Array
Technology from 1984 to 1987 as the Vice President of Marketing and Sales.
During his tenure with ICI, the Company increased sales from $1 million in 1983
to $5.5 million in 1984 and $14.5 million in 1985. Dr. Sear also founded Perex,
Inc., a U.S. based subsidiary of a UK peripherals company. Dr. Sear has also
worked for Advanced Micro Devices between 1978 and 1980 as Manager of Worldwide
Computer Marketing.
The Company anticipates nominating an additional three outside advisory
directors within the next several weeks. It is anticipated that such nominations
will be in place prior to entering into any definitive financing agreements with
any eligible portfolio companies.
ITEM 6. EXECUTIVE COMPENSATION.
The Company has not had any operations nor has it paid any remuneration
to any of its officers or directors to date. All Officers and Directors will not
receive any salary compensation until the Company has raised additional funding
pursuant to a second offering and has entered into a binding letter of intent to
acquire an equity investment interest within an eligible portfolio company.
Name & Position Salary($)
Omar A. Rizvi --0-
Chairman and Chief Executive Officer
All officers & directors -0-
as a group
The Board of Directors of the Company anticipates electing two
additional disinterested directors. The Company's disinterested directors will
not receive any remuneration for their services from this Offering but each will
receive an annual fee from the Company between $3,000.00 to $10,000.00 per annum
upon successfully raising additional capital pursuant to a secondary offering
and having assisted in locating one or more probable eligible portfolio
companies in which the Company may invest. At such time, such directors will
also be reimbursed by the Company for their expenses in attending meetings of
the Board of Directors or any Committee thereof and will receive a fee for
attendance in person at any meeting at a per diem rate of $500.00.
The Company's advisory directors will not receive any remuneration for
their services from this Offering but each will receive an annual fee from the
Company between $3,000.00 to $10,000.00 per annum upon successfully raising
additional capital pursuant to a secondary offering and having assisted in
locating one or more probable eligible portfolio companies in which the Company
may invest. At such time, such directors will also be reimbursed by the Company
for their expenses in attending meetings of the Board of Directors or any
Committee thereof and will receive a fee for attendance in person at any meeting
at a per diem rate of $500.00.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions With Management and Others
Notwithstanding the foregoing, the Company has not entered into any
transaction, or series of similar transactions, since the beginning of the
registrant's last fiscal year, or any currently proposed transaction, or series
of similar transactions, to which the registrant or any of its subsidiaries was
or is to be a party, in which the amount involved exceeds $60,000 and in which
any of the following persons had, or will have, a direct or indirect material
interest.
(b) Certain Business Relationships
The Company's Principal
The Chairman and Chief Executive Officer of the Registrant, Mr. Omar A.
Rizvi, is also the Managing Partner of Rizvi and Associates, L.L.P., a
California Limited Liability Partnership which maintains offices in Chicago and
San Francisco. Although there is no present legal contract for services between
Rizvi and Associates, L.L.P. and the Registrant, it is anticipated that during
the upcoming fiscal year Rizvi and Associates will provide all or substantially
all of the corporate transactional and securities regulatory legal services
(together "Legal Services") required by the Registrant from its Chicago and San
Francisco offices. Because Mr. Rizvi is a member of management and the Board of
Directors this transaction cannot be construed as occurring at arms length
between the Company and Rizvi and Associates, L.L.P., due to the involvement and
interests shared by Mr. Rizvi both as an officer and director of the Company as
well as a managing partner of Rizvi and Associates, L.L.P. Mr. Rizvi is likely
to receive an indirect pecuniary benefit as a managing partner of Rizvi and
Associates, L.L.P. from this agreement for services to be performed on behalf of
Randolph Capital Group, Inc. In order to avoid any potential conflicts of
interests, Randolph will engage an outside law firm for most legal services in
the future.
(c) Indebtedness of Management
None.
(d) Transactions With Promoters.
None.
ITEM 8. LEGAL PROCEEDINGS
None.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
(a) Market Information
The offer and sale of the Shares will not be registered under the 1933 Act
on the ground that their issuance and sale is exempt from such registration
requirements pursuant to Regulation E of the 1933 Act.
Because the subsequent second round of financing raised will be from shares
that will be acquired by investors in transactions involving an exempt public
offering pursuant to Regulation E, such shares will be unrestricted or
"free-trading" securities and may be freely traded, transferred, assigned,
pledged or otherwise disposed of at the time of issuance.
(b) Holders
The Company has 2,000,000 shares of common stock outstanding at the time of
this filing, held by approximately 1 shareholder as of September 21, 1999.
(c) Dividends
The Company intends to distribute to shareholders substantially all of its
net investment income and net realized capital gains, if any, as determined for
income tax purposes. Applicable law, including provisions of the 1940 Act, may
limit the amount of dividends and other distributions payable by the Company.
Income dividends will generally be paid quarterly to shareholders of record on
the last day of each preceding calendar quarter end. Substantially all of the
Company's net capital gain (the excess of net long-term capital gain over net
short-term capital loss) and net short-term capital gain, if any, will be
distributed at least annually with the Company's final quarterly dividend
distribution for the year.
The Company will seek to reinvest the proceeds of matured, repaid or resold
investments, net of required distributions to shareholders, principal payments
on borrowings and expenses or other obligations of the Company, in new loans or
leases. The Company will also distribute to investors all proceeds received from
principal payments and sales of investments, net of reserves and expenses,
principal repayments on the Company's borrowings, amounts required to fund
financing commitments entered into before such fourth anniversary, and any
amounts paid on exercise of warrants. Distributions of such amounts are likely
to cause annual distributions to exceed the earnings and profits of the Company
available for distribution, in which case such excess will be considered a tax
free return of capital to a shareholder to the extent of the shareholder's
adjusted basis in his shares and then as capital gain.
ITEM 10. RECENT SALES OF UNREGULATED SECURITIES
The present shareholders of the Company have acquired an interest in the
Company at a total cost substantially less than the total cost the public
investors will pay for their shares. Therefore, the public investors will bear
most of the risk of loss. As of October 11, 1999, the Company had a total of
2,000,000 shares of common stock outstanding, which equals to a net tangible
book value of $2,000.00 or approximately $.001 per share.
As of October 11, 1999, the officers, directors and other present
shareholders own 2,000,000 shares of common stock for which they have
contributed a total of $2,000.00 in cash or an average of $.001 per share. If
the maximum number of shares being offered are sold, the present shareholders
will own 2,000,000 shares or 50.00% of the Company's common stock to be
outstanding, and the public purchasers will own 2,000,000 shares or 50.00% of
the Company's common stock to be outstanding, for which the public purchasers
will have paid to the Company a total of $200,000.00(or $.10 per share.) The
following table illustrates the per share dilution:
Maximum Sold
Public offering price per share of common (1) $0.10
Net Asset Value per share before offering (2) $0.001
Increase per share attributable to new Investors $0.057
Net Asset Value per share after offering (3) $0.051
Dilution of Net Asset Value per share to new Investors $0.05
(1) Average offering price before deduction of offering expenses once the entire
offering has been sold. (2) Determined by dividing the number of shares of
common stock outstanding into the net asset value of the company. (3) Before
deduction of offering expenses and First Year Operating Costs as described
herein. See USE OF PROCEEDS.
The following table summarizes the comparative ownership and capital
contributions of present shareholders and public investors assuming the maximum
number of shares are sold:
Percent
Total of total Average
Percent consid- consid- price
Shares of total eration eration per
Owned Shares paid paid share
----- ------ ---- ---- -----
Present Shareholders 2,000,000 50.00 $2,000,000 0.99% $.001
Public Investors 2,000,000 50.00 $2,000,000 99.1% $.10
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
GENERAL. The Company is authorized to issue two classes of capital stock,
50,000,000 shares of "Common Stock", $.001 par value and 5,000,000 shares of
"Preferred Stock", $.001 par value, respectively. The holders of the Company's
outstanding shares of common stock will elect all of the directors and are
entitled to one vote per share of Common Stock on all matters submitted to
shareholder vote. Holders of Common Stock do not have preemptive or preferential
rights to acquire any shares of the capital stock of the Corporation, and any or
all of such shares, wherever authorized, may be issued, or may be reissued and
transferred if such shares have been reacquired and have treasury status, to any
person, firm, corporation, trust, partnership, association or other entity for
consideration and on such terms as the Board of Directors determine of the
Corporation determine in their discretion without first offering the shares to
any shareholder of record.
All of the shares of the Corporation's authorized capital stock, when
issued for such consideration as the Board may determine shall be fully paid and
nonassessable. The Board of Directors have the discretion and may, by adoption
of a resolution of Bylaw, designate one or more Series of Preferred Stock and
have the power to determine the conversion and/or redemption rights, preferences
and privileges of each such Series of Preferred Stock provided that such
conversion and/or redemption rights, preferences and privileges of any Series of
Preferred Stock does not subordinate or otherwise limit the conversion and/or
redemption rights, preferences and/or privileges of any previously issued Series
of Preferred Stock.
Except as otherwise required under the 1940 Act, voting power for the
election of directors and for all other purposes shall be exclusively vested in
the holders of Common Stock. Each holder of a full or fractional share of Common
Stock shall be entitled, in the case of full shares, to one vote for each such
share and in the case of fractional shares, to a fraction of one vote
corresponding to the fractional amount of each such fractional share, in each
case based upon the number of shares registered in such holder's name on the
books of the Corporation.
In the event of a liquidation or dissolution of the Company, the holders of
the Common Stock shall be entitled to receive all of the net assets of the
Company. The assets so distributed to the stockholders shall be distributed
among such stockholders, in case or in kind at the option of the directors, in
proportion to the number of full and fractional shares of the class held by them
and recorded on the books of the Company.
TRANSFERABILITY OF SHARES. The offer and sale of the shares of Common Stock
and together as, will be exempt from registration under the 1933 Act on the
ground that their issuance and sale is exempt from such registration
requirements pursuant to Regulation E of said Act. The Company intends to
register its units and underlying securities therein pursuant to Regulation S-B
and will file an appropriate registration statement under the Securities
Exchange Act of 1934.
Annual meetings of shareholders will be held beginning in 1999 and special
meetings may be called by the Chairman of the board of directors or President, a
majority of the board of directors or shareholders holding at least 25% of the
outstanding Shares entitled to be voted at a meeting. The Company anticipates
soliciting proxies from shareholders for each annual meeting. The Company's
Certificate of Incorporation can be amended by the affirmative vote of at least
a majority of the Company's Shares outstanding and entitled to vote.
The Company currently intends to issue share certificates. The ownership of
uncertificated shares will be recorded on a stock ledger maintained by the
Company's transfer agent. Share ownership may only be transferred in compliance
with the provisions set forth herein under "Transferability of Shares". The
transfer agent for the Shares shall notify the proposed purchaser of the Shares
that the Shares are subject to certain rights and restrictions including,
without limitation, the Company's right, to the extent permitted by law, to
repurchase the Shares at a price equal to the lesser of: (i) 60% of the Shares'
then current net asset value or (ii) the price at which the original subscriber
purchased the Shares if the original owner of such Shares should default upon
its obligation to make future required capital contributions. At the time of
issue or registration of transfer of any uncertificated Shares, the Company or
its transfer agent will deliver to the person designated by the registered
holder of such Shares an account statement specifying the number and class of
Shares being issued or transferred and certain other information. Share
certificates, if any, will bear legends reflecting restrictions on their
transferability, the existence of issuer's repurchase rights, and certain other
matters.
The Company's Certificate of Incorporation provides that each holder of
Shares will be required, upon demand, to disclose to the Company such
information with respect to direct or indirect holdings of Shares as is deemed
necessary to comply with provisions of the Internal Revenue Code applicable to
the Company, to comply with requirements of any other appropriate taxing
authority, or to comply with the provisions of the 1940 Act or ERISA.
To purchase Shares, a prospective investor must deliver to the Company a
completed, executed copy of the Subscription Agreement, such agreement and the
signature page to be in the form provided with the Offering Memorandum. The
Company may in its discretion require any prospective investor to complete an
investor questionnaire in form acceptable to the Company before accepting such
prospective investor's subscription.
Subscriptions may be made only by executing and delivering a Subscription
Agreement in the form specified by the Company. The rights and obligations under
the Subscription Agreements may not be transferred or assigned by a subscriber
without the consent of the Company.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation law of the State of Delaware, under which the Company is
incorporated, permits the certificate of incorporation of a Delaware corporation
to include a provision limiting the liability of its directors and officers to
the corporation and its stockholders for money damages, subject to specified
restrictions. The law does not, however, allow the liability of directors and
officers to the corporation or its stockholders to be limited to the extent that
(1) it is proved that the person actually received an improper benefit or profit
or (2) a judgment or other final adjudication is entered in a proceeding based
on a finding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The Certificate of Incorporation of the Company
contains a provision limiting the liability of its directors and officers to the
Company and its shareholders to the fullest extent permitted from time to time
by the laws of Delaware (but not in violation of the 1940 Act). The Delaware
corporation law also permits a corporation to indemnify its directors, officers
and agents, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that the act or omissions of the party
seeking to be indemnified was material to the matter giving rise to the
proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty, or the party actually received an improper personal
benefit, or, in the case of any criminal proceeding, the party had reasonable
cause to believe that the act or omission was unlawful. The Company's
Certificate of Incorporation and Bylaws require the Company to indemnify its
directors, officers and agents (including the Manager and Adviser to the
Manager) to the fullest extent permitted from time to time by the laws of
Delaware, subject to the limitations on indemnification under the 1940 Act.
The Company's Bylaws provide that the Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer or agent of
the Company against any liability asserted against that person and incurred by
that person in or arising out of his or her position, whether or not the Company
would have the power to indemnify him or her against such liability provided no
such insurance so purchased will protect or purport to protect any officer or
director against liabilities for willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company has not commenced business and has prepared no financial
statements.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not commenced business and has prepared no financial
statements.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements - None
(b) Exhibits - See Exhibit Index following signature page in this
Registration Statement, which Exhibit Index is incorporated herein by
reference.
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
RANDOLPH CAPITAL GROUP, INC.
Date: October 12, 1999 By: /s/ Omar A. Rizvi
------------------- --------------------------------
Omar A. Rizvi, Chairman and CEO
RANDOLPH CAPITAL GROUP, INC.
(the "Company" or "Registrant")
EXHIBIT INDEX
FORM 10
EXHIBIT DESCRIPTION
3(i) Certificate of Incorporation of the Company filed with the Delaware
Secretary of State on September 17, 1999.
3(ii)Bylaws of the Company.
4.1 Form of Subscription Agreement between the Company and Individual
Investors.
CERTIFICATE OF INCORPORATION
OF
RANDOLPH CAPITAL GROUP, INC.
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is Randolph Capital Group, Inc.
II.
The address of the initial registered office of the corporation in the
State of Delaware is The Company Corporation, 1010 Centre Road, Wilmington, New
Castle County, Delaware, 19805, and the name of the initial registered agent of
the corporation in the State of Delaware at such address is The Company
Corporation.
III.
The purpose of this corporation is to engage in any lawful acts or
activities for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total number
of shares which the corporation is authorized to issue is fifty-five million
(55,000,000) shares. Fifty million (50,000,000) shares shall be Common Stock and
five million (5,000,000) shares shall be Preferred Stock. All shares of Common
Stock and Preferred Stock shall have a par value of $.001.
B. The Preferred Stock may be issued from time to time in one of more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then-outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred Stock,
the Board of Directors or any individual director may be removed from office at
any time with or without cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock").
3. Subject to the rights of the holders of any series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
not be altered or amended or new Bylaws adopted by the affirmative vote of a
majority of the voting power of all of the then outstanding shares of the Voting
Stock. The Board of Directors shall also have the power to adopt, amend or
repeal the Bylaws.
2. The directors of the corporation need not be elected by written ballot
unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws.
4. Special meetings of the stockholders of the corporation may
be called, for any purpose of purposes, by (i) the Chairman of the Board of
Directors, (ii) the President, (iii) the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board of Directors for
adoption), or (iv) by the holders of the shares entitled to cast not less than
ten (10%) of the votes at the meeting, and shall be held at such place, on such
date, and at such time as the Board of Directors shall fix.
5. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided by the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as 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 international misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated of limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at this time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statue, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of a majority of the voting power of all of the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal Articles V, VI, and VII.
VIII.
The name and mailing address of the Sole Incorporator are as follows:
NAME MAILING ADDRESS
Scott K. Lindenberger Rizvi & Associates, L.L.P.
980 North Michigan Avenue
Suite 1400
Chicago, Illinois 60611
IN WITNESS WHEREOF, this Certificate has been subscribed this 14th day
of September, 1999, by the undersigned who affirms that the statements made
herein are true and correct.
/S/ S. Lindenberger
---------------------------
Scott K. Lindenberger
Sole Incorporator
BYLAWS
OF
RANDOLPH CAPITAL GROUP, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES................................................. 1
Section 1. Registered Office................................ 1
Section 2. Other Offices.................................... 1
ARTICLE II CORPORATE SEAL.......................................... 1
Section 3. Corporate Seal................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS................................. 1
Section 4. Place of Meetings............................... 1
Section 5. Annual Meeting............................... 1
Section 6. Special Meetings................................. 3
Section 7. Notice of Meetings............................... 3
Section 8. Quorum............................................ 4
Section 9. Adjournment and Notice of Adjourned Meetings...... 4
Section 10. Voting Rights......................................4
Section 11. Joint Owners of Stock............................ 5
Section 12. List of Stockholders.............................. 5
Section 13. Action Without Meeting........................... 5
Section 14. Organization..................................... 5
ARTICLE IV DIRECTORS........................................ 6
Section 15. Number and Term of Office....................... 6
Section 16. Powers........................................... 6
Section 17. Classes of Directors.............................. 6
Section 18. Vacancies........................................ 6
Section 19. Resignation....................................... 7
Section 20. Removal........................................... 7
Section 21. Meetings...........................................7
A. Annual Meetings................................ 7
B. Regular Meetings.................................. 7
C. Special Meetings.................................. 7
D. Telephone Meetings................................ 7
E. Notice of Meetings................................ 8
F. Waiver of Notice.................................. 8
Section 22. Quorum and Voting................................. 8
Section 23. Action Without Meeting............................ 8
Section 24. Fees and Compensation............................. 8
Section 25. Committees........................................ 9
A. Executive Committee............................ 9
B. Other Committees.............................. 9
C. Term.............................................. 9
D. Meetings..........................................10
Section 26. Organization..................................... 10
ARTICLE V
OFFICERS............................................................10
Section 27. Officers Designate................................10
Section 28. Tenure and Duties of Officers.................... 11
A. General........................................ 11
B. Duties of Chairman of the Board of Directors..... 11
C. Duties of Chief Executive Officer............... 11
D. Duties of President...............................11
E. Duties of Vice Presidents....................... 11
F. Duties of Secretary............................. 11
G. Duties of Chief Financial Officer............... 12
Section 29. Delegation of Authority...........................12
Section 30. Resignation.......................................12
Section 31. Removal...........................................12
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY
THE CORPORATION ....................................................12
Section 32. Execution of Corporate Instruments................12
Section 33. Voting of Securities Owned by the Corporation.... 13
ARTICLE VII SHARES OF STOCK................................. 13
Section 34. Form and Execution of Certificates............... 13
Section 35. Lost Certificates ................................14
Section 36. Transfers.........................................14
Section 37. Fixing Record Dates...............................14
Section 38. Registered Stockholders...........................15
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION............. 15
Section 39. Execution of Other Securities................... 15
ARTICLE IX DIVIDENDS........................................ 15
Section 40. Declaration of Dividends........................ 15
Section 41. Dividend Reserve............................... 15
ARTICLE X FISCAL YEAR.......................................16
Section 42. Fiscal Year.......................................16
ARTICLE XI INDEMNIFICATION................................ 16
Section 43. Indemnification of Directors, Executive Officers,
Other Officers,Employees and Other Agents. .. ... 16
Directors and Executive Officers.............. 16
B. Other Officers, Employees and Other Agents....... 16
C. Expenses..........................................16
D. Enforcement.......................................17
\ E. Non-Exclusivity of Rights........................ 17
F. Survival of Rights............................... 18
G. Insurance.........................................18
H. Amendment ........................................18
I. Saving Clause.....................................18
J. Certain Definitio.................................18
ARTICLE XII NOTICES...........................................19
Section 44. Notices...........................................19
A. Notice to Stockholders ...........................19
B. Notice to Directors...............................19
C. Affidavit of Mailing..............................19
D. Time Notices Deemed Given.........................19
E. Methods of Notice.................................20
F. Failure to Receive Notice.........................20
G. Notice to Person with Whom Communication Is
Unlawful..................................... 20
H. Notice to Person with Undeliverable Address.......20
ARTICLE XIII AMENDMENTS................................................ 20
Section 45. Amendments........................................20
ARTICLE XIV LOANS TO OFFICERS..........................................21
Section 46. Loans to Officers................................ 21
<PAGE>
BYLAWS
OF
RANDOLPH CAPITAL GROUP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware, as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING
A. The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
B. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not later than the close
of business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business, and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph B. The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph B, and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
C. Only persons who are nominated in accordance with the
procedures set forth in this paragraph C shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph C. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph B of this Section 5. Such stockholder's notice shall
set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (a) the name, age, business
address and residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of the corporation
which are beneficially owned by such person, (d) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (e) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph B of this Section 5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
nominated by a stockholder shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
paragraph C. The chairman of the meeting shall, if the facts warrant, determine
and declare at the meeting that a nomination was not made in accordance with the
procedures prescribed by these Bylaws, and if he should so determine, he shall
so declare at the meeting, and the defective nomination shall be disregarded.
D. For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press, Business Wire or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
SECTION 6. SPECIAL MEETINGS
A. Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the President, (iii) the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board of Directors for
adoption), or (iv) by the holders of shares entitled to cast not less than ten
percent (10%) of the votes at the meeting, and shall be held at such place, on
such date, and at such time as the Board of Directors, shall fix.
B. If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph B shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) days nor more than sixty (60) days before
the date of the meeting to each stockholder entitled to vote at such meeting,
such notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; PROVIDED, HOWEVER, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act
of the majority so voting binds all; and (c) if more than one (1) votes, but the
vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware Court of
Chancery for relief as provided in the General Corporation Law of Delaware,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
SECTION 14. ORGANIZATION
A. At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the Chief
Executive Officer, or if the Chief Executive has not been appointed or is
absent, the President, or, if the President is absent, a chairman of the meeting
chosen by a majority in interest of the stockholders entitled to vote, present
in person or by proxy, shall act as chairman. The Secretary, or, in his or her
absence, an Assistant Secretary directed to do so by the President, shall act as
secretary of the meeting.
B. The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IVDIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into two classes designated as
Class I and Class II, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following February 28, 1999, the
term of office of the Class I directors shall expire and Class I directors shall
be elected for a full term of two years. At the second annual meeting of
stockholders following February 28, 1999, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of two years. At each succeeding annual meeting of stockholders, directors shall
be elected for a full term of two years to succeed the directors of the class
whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time with or without cause by the affirmative vote of
the holders of a majority of the voting power of all the then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of
directors.
SECTION 21. MEETINGS
A. ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and may be at the place where such meeting is held. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
B. REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
C. SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
D. TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
E. NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be given orally or in writing,
by telephone, facsimile, electronic mail, telegraph or telex, during normal
business hours, at least twenty-four (24) hours before the date and time of the
meeting, or sent in writing to each director by first class mail, charges
prepaid, at least three (3) days before the date of the meeting. Notice of any
meeting may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
F. WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING
A. Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; PROVIDED, HOWEVER, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
B. At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES
A. EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
B. OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these Bylaws.
C. TERM. Each member of a committee of the Board of Directors
shall serve at the pleasure of the Board of Directors and until his or her
successors shall have been duly elected, unless sooner removed. The Board of
Directors, subject to the provisions of subsections A or B of this Bylaw may at
any time increase or decrease the number of members of a committee or terminate
the existence of a committee. The membership of a committee member shall
terminate on the date of his death or voluntary resignation from the committee
or from the Board of Directors. The Board of Directors may at any time for any
reason remove any individual committee member and the Board of Directors may
fill any committee vacancy created by death, resignation, removal or increase in
the number of members of the committee. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee, and, in addition,
in the absence or disqualification of any member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
D. MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the Chief Executive Officer, or if the Chief Executive Officer is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his or her absence, an Assistant Secretary directed to do
so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, and the Chief Financial Officer, all of whom shall be
appointed at the annual meeting of the Board of Directors. The Board of
Directors (or the Chief Executive Officer, if so empowered in accordance with
this Section 27) may also appoint other officers and agents with such powers and
duties as it shall deem necessary. Notwithstanding the foregoing, the Board of
Directors may empower the Chief Executive Officer of the corporation to appoint
such officers, other than Chairman of the Board, President, Secretary or Chief
Financial Officer, as the business of the corporation may require. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors or a designated
committee of the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS
A. GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
B. DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no Chief Executive Officer or
President, then the Chairman of the Board of Directors shall also serve as the
Chief Executive Officer of the corporation and shall have the powers and duties
prescribed in paragraph C of this Section 28.
C. DUTIES OF CHIEF EXECUTIVE OFFICER. Subject to such
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there be such an officer, the Chief Executive Officer
shall be the general manager and chief executive officer of the corporation and
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and officers of the
corporation. He or she shall have the general powers and duties of management
usually vested in the office of chief executive officer of a corporation, and
shall have other powers and duties as may be prescribed by the Board of
Directors.
D. DUTIES OF PRESIDENT. In the absence or disability of the
Chief Executive Officer, the President shall perform the duties of the Chief
Executive Officer and, when so acting, shall have all the powers of, and be
subject to all of the restrictions upon, the Chief Executive Officer. The
President shall have such other powers and perform such other duties as from
time to time may be prescribed for the President by the Board of Directors or
the Chief Executive Officer.
E. DUTIES OF VICE PRESIDENTS. In the absence or disability of
the President, the Vice Presidents in order of their rank as fixed by the Board
of Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform the duties of the President, and when so acting shall
have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, the Chief Executive Officer or the President.
F. DUTIES OF SECRETARY. The Secretary shall keep, or cause to
be kept, a book of minutes in written form of the proceedings of the Board of
Directors, committees of the Board, and stockholders. Such minutes shall include
all waivers of notice, consents to the holding of meetings, or approvals of the
minutes of meetings executed pursuant to these Bylaws or the Delaware General
Corporation Law. The Secretary shall keep, or cause to be kept at the principal
executive office or at the office of the corporation's transfer agent or
registrar, a record of its stockholders, giving the name and addresses of all
stockholders and the number and class of shares held by each. The Secretary
shall give or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors required by these Bylaws or by law to be given, and
shall keep the seal of the corporation in safe custody, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors, the Chief Executive Officer or the President.
G. DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of account in written form or any other form
capable of being converted into written form. The Chief Financial Officer shall
deposit all monies and other valuables in the name and to the credit of the
corporation with such depositories as may be designated by the Board of
Directors. He or she shall disburse all funds of the corporation as may be
ordered by the Board of Directors, shall render to the President, Chief
Executive Officer and Directors, whenever they request it, an account of all of
his or her transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors, the Chief Executive
Officer or the President.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, the Chief Executive Officer, or the President, Chief
Financial Officer or any Vice President. All other instruments and documents
requiring the corporate signature, but not requiring the corporate seal, may be
executed as aforesaid or in such other manner as may be directed by the Board of
Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, the Chief
Executive Officer, or the President or any Vice President and by the Chief
Financial Officer, Treasurer or Assistant Treasurer or the Secretary or
Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS
A. Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
B. The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES
A. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIIIOTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the Chief Executive Officer, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary or an Assistant Secretary, or the
Chief Financial Officer or Treasurer or an Assistant Treasurer; PROVIDED,
HOWEVER, that where any such bond, debenture or other corporate security shall
be authenticated by the manual signature, or where permissible facsimile
signature, of a trustee under an indenture pursuant to which such bond,
debenture or other corporate security shall be issued, the signatures of the
persons signing and attesting the corporate seal on such bond, debenture or
other corporate security may be the imprinted facsimile of the signatures of
such persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Chief Financial Officer, Treasurer or an Assistant Treasurer of the
corporation or such other person as may be authorized by the Board of Directors,
or bear imprinted thereon the facsimile signature of such person. In case any
officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in its discretion.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS
A. DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; PROVIDED, HOWEVER, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, PROVIDED, FURTHER, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law, or (iv) such
indemnification is required to be made under subsection D.
B. OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
C. EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph E of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if 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 the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
D. ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or 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 action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or executive officer to enforce a right to indemnification
or to an advancement of expenses hereunder, the burden of proving that the
director or executive officer is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
corporation.
E. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
F. SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
G. INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
H. AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
I. SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
J. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense,
settlement, arbitration and appeal of, and the giving of testimony in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(iv) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he 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 Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES
A. NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
B. NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection A, or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
C. AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
D. TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
E. METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
F. FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
G. NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
H. NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph H of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of a majority of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal the Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
RANDOLPH CAPITAL GROUP, INC.
175 North Harbor Drive, Suite 4502
Chicago, Illinois 60601
(312) 819-1730
SUBSCRIPTION AGREEMENT
The undersigned (the "Subscriber"), hereby subscribes to purchase
shares of Common Stock, $.001 par value ("Shares"), issued by Randolph Capital
Group, Inc., a Delaware corporation (the "Company"), in the amount set forth on
the signature page below ("Commitment"), on the terms and conditions set forth
herein. (Capitalized terms used and not defined in this Agreement have the
meanings assigned to them in the Offering Circular dated October 8, 1999
referred to below.)
1. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions set
forth in this Agreement, and in reliance upon the representations and warranties
of the respective parties set forth in this Agreement, the Company hereby agrees
to sell to the Subscriber, and the Subscriber irrevocably subscribes for and
agrees to purchase from the Company, Shares in the amount of its Commitment.
2. MANNER OF PAYMENT. Payments made to purchase Shares shall be made on
or before the payment date (the "Payment Date"), which shall occur no later than
five business days from the date of this Agreement. Payments shall be made by
wire transfer or by personal check.
3. PAYMENT DEFAULT. If payment for the purchase of Shares is received
by the Company from the Subscriber later than 14 days after the Payment Date,
interest will be charged on the overdue amount, calculated at a daily rate equal
on an annualized basis to four percentage points over the highest rate of
interest reported from time to time as a "prime rate" by The Wall Street Journal
(provided that, if such rate is in excess of the maximum rate of interest
permitted by law, interest will be charged at such maximum rate). If a default
in a payment under this Subscription Agreement (including interest charges)
remains uncured for 30 days following a payment date, the Company may, at its
option, pursue any or all of the following remedies: (i) cancel the balance of
the Subscriber's subscription (including the installment as to which the
Subscriber had defaulted), (ii) assign the remaining balance of the Subscriber's
subscription (including the installment as to which the Subscriber has
defaulted) to another investor selected by the Company and/or (iii) repurchase
the Shares previously purchased by the Subscriber at a purchase price per Share
equal to the lesser of 60% of the Shares' then-current Net Asset Value or the
prices at which the Subscriber purchased the Shares. The election by the Company
to pursue one or more of these remedies will not preclude the Company from
pursuing any rights it may have to seek judicial enforcement of the Subscriber's
subscription obligation.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants that:
(i) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the power and authority
to carry on its business as now conducted and as proposed to be conducted in the
Company's Offering Circular ("Offering Circular") and to issue the Shares
subscribed for hereby. This Agreement and any other documents executed and
delivered by the Company in connection herewith have been duly authorized,
executed and delivered by the Company, and are the legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms.
(ii) The execution and delivery of this Agreement and any other
documents executed and delivered by the Company in connection herewith do not,
and the performance and consummation of the transactions set forth or
contemplated herein will not, contravene or result in a default under any
provision of existing law or regulations to which the Company is subject, the
provisions of the charter, by-laws or other governing documents of the Company
or any indenture, mortgage or other instrument or agreement to which the Company
is a party or by which it is bound and does not require on the part of the
Company any approval, authorization, license or filing from or with any federal,
state, municipal or foreign board or agency (except such approvals,
authorizations, licenses or filings as have been obtained or made).
(iii) The Company has filed a notice of intent with the Securities and
Exchange Commission, pursuant to Section 54(a) of the 1940 Act, to in good faith
elect to be subject to the provisions of Sections 55 through 65 of the 1940 Act.
(iv) The Company warrants that it has complied in good faith with all
of the requisite requirements of Rules 601 through 610(a) of Regulation E, which
provide that subject to such compliance, shares issued thereunder are exempt
from the registration provisions of Section 5 of the Securities Act of 1933 and
are free trading at the time of issuance.
5. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. The Subscriber represents
and warrants that:
(i) This Agreement and any other documents executed and delivered by
the Subscriber in connection herewith have been duly executed and delivered by
the Subscriber, and are the legal, valid and binding obligations of the
Subscriber enforceable in accordance with their respective terms.
(ii) If the Subscriber is an Individual Retirement Account ("IRA"), (a)
the Subscriber has the power and authority to purchase the Shares subscribed for
hereby, (b) the execution and delivery of this Agreement and any other documents
executed and delivered by the Subscriber in connection herewith do not, and the
performance and consummation of the transactions set forth or contemplated
herein will not, contravene or result in a default under any provision of
existing law or regulations to which the Subscriber is subject or the provisions
of any custodial agreement, trust instrument or other governing documents of the
Subscriber, and (c) the Subscriber has caused this Agreement to be executed by
one or more of its custodians or trustees thereunto duly authorized.
(iii) If the Subscriber is an employee benefit plan as defined in ERISA
(an "ERISA Plan"), (a) the execution and delivery of this Agreement and any
other documents executed and delivered by the Subscriber in connection herewith
do not, and the performance and consummation of the transactions set forth or
contemplated herein will not, contravene or result in a default under any
provision of existing law or regulations to which the Subscriber is subject or
the provisions of any trust instrument or other governing documents of the
Subscriber; (b) the Subscriber has caused this Agreement to be executed by one
or more of its fiduciaries thereunto duly authorized; and (c) such fiduciaries,
by executing and delivering this Agreement on behalf of such ERISA Plan,
represent and warrant that (w) they and their co-fiduciaries, if any, have been
informed of the Company's investment objectives, policies and strategies, (x)
the decision to invest plan assets in the Company was made with appropriate
consideration of relevant investment factors with regard to such ERISA Plan; (y)
such decision was made by such fiduciaries without reliance on any investment
advice or recommendation provided by the Company, and is consistent with the
duties and responsibilities imposed upon fiduciaries with regard to their
investment decisions under ERISA; and (z) if the Company's underlying assets are
deemed to be "plan assets" of ERISA Plan investors, such fiduciaries shall be
deemed to have appointed the Company as investment managers of the ERISA Plan
Subscribers with respect to the assets managed in the Company.
(iv) The Subscriber acknowledges that the Shares have not been
registered under the 1933 Act or any state securities laws but are exempt from
such registration pursuant to Regulation E of 1933 Act and the National
Securities Markets Improvements Act of 1996, and can be disposed of at the
discretion of the Subscriber, however, there may not be a public market for the
sale of the Shares at any future time.
(v) The Subscriber acknowledges that the Company will accept this
subscription, and issue the Shares as contemplated hereunder, in a transaction
intended to be exempt from registration under the 1933 Act under Regulation E
thereunder.
(vi) The Subscriber has received and carefully reviewed the Offering
Circular and understands that any information provided other than in the
Offering Circular has been furnished on the understanding that the Subscriber
will refer to the Offering Circular for an authoritative statement on all
matters covered therein with respect to the Company and other information
concerning the Offering. The Subscriber has had reasonable time and opportunity
to ask questions and receive answers concerning the terms and conditions of the
offering and the proposed operations of the Company, and has received responses
to such questions that it has chosen to ask. Subscriber acknowledges that any
information is not intended to predict actual performance of the Company and
that Subscriber has not relied on such information or that purpose. Subscriber
understands that past performance does not guarantee future results
(vii) The Subscriber recognizes that an investment in the Company
involves certain risks and it has taken full cognizance of and understands the
risk factors relating to a purchase of Shares, including those set forth under
the headings "Risk Factors" in the Offering Circular. The Subscriber is capable
of bearing a high degree of risk, including the possibility of a loss of its
investment and the lack of a public market such that it will not be possible to
readily liquidate the investment. The Subscriber has such knowledge and
experience in business and financial matters as to be capable of evaluating the
merits and risks of an investment in the Shares and protecting its own interest
in connection with the investment in the Shares.
(viii) The Subscriber acknowledges that it has not relied upon the
Company or any of its employees, directors, officers or agents for any
investment, tax, legal or ERISA advice in connection with its purchase of Shares
and that the Subscriber has consulted, to the extent necessary, its own advisers
with respect to the investment, tax, legal or ERISA considerations of a purchase
of Shares.
(ix) The Subscriber acknowledges that there have been no guarantees or
warranties made to it by the Company or any of its employees, directors,
officers or agents, expressly or by implication, other than as contained in the
Offering Circular, with respect to (i) the approximate length of time that it
will be required to remain an owner of its Shares; or (ii) the percentage of
profit and/or the amount or type of consideration, profit or loss to be realized
as a result of its investment.
(x) The Subscriber acknowledges that he/she meets the minimum
suitability requirements set forth by the Company with respect to this offering.
Specifically, Subscriber warrants that:
1) his or her net worth is in excess of SIXTY THOUSAND DOLLARS
($60,000.00) which is exclusive of home, furnishings and automobiles
and any liabilities secured by those assets and his or her expected
income (for the upcoming fiscal year) is at least TWENTY FIVE THOUSAND
DOLLARS ($25,000.00); or
2) his or her net worth is in excess of ONE HUNDRED THOUSAND DOLLARS
($100,000.00), which is exclusive of home, furnishings and automobiles and any
liabilities secured by those assets;
6. COVENANTS OF THE SUBSCRIBER. The Subscriber agrees with the Company
that:
(i) For so long as the Subscriber owns Shares, the Subscriber shall,
upon request, disclose to the Company such information with respect to direct or
indirect holdings of such Shares as the Company deems necessary to comply with
provisions of the Internal Revenue Code of 1986 applicable to the Company, to
comply with requirements of any other appropriate taxing authority, or to comply
with the provisions of the 1940 Act, as any of said laws may be amended from
time to time.
(ii) The Subscriber, if an IRA or an ERISA Plan, will furnish to the
Company promptly upon its request the information called for by applicable
"prohibited transaction" regulations of the Department of Labor and any other
information with respect to Subscriber's parties in interest as the Company may
reasonably require.
(iii) The Subscriber will indemnify and hold the Company harmless from
and against any and all loss, damage or liability due to or arising out of a
breach of any representation or warranty of the Subscriber in this Agreement or
any other document furnished by it to the Company.
(iv) The Subscriber acknowledges that the Company has the exclusive
right and unilateral discretion and authority to accept the subscription
agreement from Subscriber and may refuse to do so if: (a) it deems Subscriber
does not meet the minimum suitability requirements for this Offering; (b) the
Offering has been closed and there are no Shares to fulfill Subscriber's
subscription purchase; and (c) any other reasonable and justifiable basis to
withhold the subscription agreement from being fulfilled on the part of the
Company in issuing Shares to Subscriber. In the event of any of the foregoing
instances, subscriber will be promptly notified in writing by the Company of the
reasons for why it cannot accept the submitted subscription agreement from
Subscriber and will promptly refund any funds submitted by Subscriber via
company check to the Subscriber's address as provided in the subscription
agreement within 5 business days of such notification.
7. NOTICES. The address of the Subscriber for all purposes shall be the
address set forth on the signature page to this Agreement, or such other address
of which the Company has received notice in accordance with the provisions
hereof. The address of the Company for all purposes shall be 175 North Harbor
Drive, Suite 4502, Chicago, Illinois 60601 or such other address of which the
Subscriber has received notice in accordance with the provisions hereof. Any
notice or communication to be given under this Agreement shall be made in
writing and, unless otherwise herein provided, shall be deemed to have been
given when sent by first class to such party at such address.
8.. APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and governed by the
laws of the State of Illinois.
9. COUNTERPARTS; OTHER AGREEMENTS. This Agreement may be executed in
any number of counterparts, and each of such counterparts shall, for all
purposes, constitute one agreement binding on all the parties, notwithstanding
that all parties are not signatories to the same counterpart.
10. MISCELLANEOUS. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns. This
Agreement constitutes the entire agreement among the parties pertaining to the
subject matter contained in this Agreement and supersedes all prior
understandings of the parties. The invalidity or unenforceability of any one
provision of this Agreement shall in no way affect the validity of any other
provision, and all other provisions shall remain in full force and effect. No
waiver by any party of any breach of any term hereof shall be construed as a
waiver of any subsequent breach of that term or any other term of the same or of
a different nature.
11. TAX CERTIFICATION. The Subscriber certifies that (1) the taxpayer
identification provided above the Subscriber signature is correct and (2) the
Subscriber is not subject to backup withholding because (i) the Subscriber has
not been notified that the Subscriber is subject to backup withholding as a
result of failure to report interest and dividends or (ii) the Internal Revenue
Service has not notified the Subscriber that the Subscriber is subject to backup
withholding. [Strike out clause (2) if incorrect.]
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber
as of the date of the Subscriber's signature set forth on the signature page
hereto and, if accepted by the Company, becomes an Agreement binding on the
Company as of the date of the signature signifying acceptance set forth on the
attached signature page.
SUBSCRIBER agrees to purchase _____________ shares of common stock of
Randolph Capital Group, Inc. (at a purchase price of $.10 per share of common
stock) in the total amount of ______________ dollars, which is immediately
payable by check submitted with this subscription agreement payable to "Randolph
Capital Group, Inc.", 175 North Harbor Drive, Suite 4502, Chicago, Illinois
60601.
SUBSCRIBER: I HEREBY ACKNOWLEDGE THAT I HAVE RECEIVED, READ AND UNDERSTAND THE
ACCOMPANYING OFFERING CIRCULAR AND MY INVESTMENT MADE HERE DOES NOT EQUAL TO
GREATER THAN 10% OF MY LIQUID NET WORTH.
- --------------------------------------- ------------------
Signed: Date
Please Type or Print the following information:
Name: ________________ ___ ________________________________
First Init. Last
Home Address:
----------------------------------------------------
Street
-------------------------------- -----------
City / State Zip
Home Phone: ___________________ Work Phone: ________________
Other (Pager/Cellular)________________
Social Security Number or Taxpayer ID: ______-___-_____________
Email Address: _____________________________________________________ (REQUIRED)
Having received this Subscription Agreement and acknowledging receipt of funds
from the above Subscriber in the amount of __________ dollars for an issuance of
__________ Shares of common stock of Randolph Capital Group, Inc., the
undersigned, having the authority to accept such subscription agreement and
having determined that there is no valid reason not to so accept such
Subscription Agreement, acknowledges its receipt and will instruct the Company's
transfer agent to record the above Subscriber as a holder of the above purchased
Shares as of the date written below.
__________________________________ Dated: _____/ ___/_______
Omar A. Rizvi
Chairman and CEO
Randolph Capital Group, Inc.
