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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number: 000-28527
WELLSTONE ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware 52-2201502
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
720 East Front Street
Lonoke, Arkansas 72086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 676-9222
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.0001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment of this Form 10-K [ ]
On April 10, 2000, there were outstanding 5,000,000 shares of the
registrant's Common Stock, $.0001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
Item 1. Business.
THE COMPANY
GENERAL
Wellstone Acquisition Corporation (the "Company") was incorporated on
March 24, 1999 under the laws of the State of Delaware to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has been in the developmental stage since inception
and has no operations to date other than issuing shares to its original
shareholder.
The Company will attempt to locate and negotiate with a business entity
for the combination of that target company with the Company. The combination
will normally take the form of a merger, stock-for-stock exchange or
stock-for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended.
The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company with a class
of registered securities.
ASPECTS OF A REPORTING COMPANY
There are certain perceived benefits to being a reporting company.
These are commonly thought to include the following:
* increased visibility in the financial community;
* provision of information required under Rule 144 for trading of eligible
securities;
* compliance with a requirement for admission to quotation on the OTC
Bulletin Board maintained by Nasdaq or on the Nasdaq SmallCap Market;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising of capital;
* compensation of key employees through stock options for which there may be
a market valuation;
* enhanced corporate image.
There are also certain perceived disadvantages to being a reporting
company. These are commonly thought to include the following:
* requirement for audited financial statements;
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* required publication of corporate information;
* required filings of periodic and episodic reports with the Securities and
Exchange Commission;
* increased rules and regulations governing management, corporate activities
and shareholder relations.
COMPARISON WITH INITIAL PUBLIC OFFERING
Certain private companies may find a business combination more
attractive than an initial public offering of their securities. Reasons for this
may include the following:
* inability to obtain underwriter;
* possible larger costs, fees and expenses;
* possible delays in the public offering process;
* greater dilution of their outstanding securities.
Certain private companies may find a business combination less
attractive than an initial public offering of their securities. Reasons for this
may include the following:
* no investment capital raised through a business combination;
* no underwriter support of after-market trading.
POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for which a primary purpose of becoming public is the use of its
securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or is
unable to find an underwriter of securities on terms acceptable to it;
* a company which wishes to become public with less dilution of its common
stock than would occur upon an underwriting;
* a company which believes that it will be able to obtain investment capital
on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United States
securities market;
* a special situation company, such as a company seeking a public market to
satisfy redemption requirements under a qualified Employee Stock Option
Plan;
* a company seeking one or more of the other perceived benefits of becoming a
public company.
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A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of its
own management and board of directors.
The proposed business activities described herein classify the Company
as a "blank check" company. The Securities and Exchange Commission and certain
states have enacted statutes, rules and regulations limiting the sale of
securities of blank check companies. The Company will not issue or sell
additional shares or take any efforts to cause a market to develop in the
Company's securities until such time as the Company has successfully implemented
its business plan and it is no longer classified as a blank check company.
RECENT DEVELOPMENTS
In March, 2000, the Company entered into an Agreement and Plan of
Reorganization among Pet Quarters, Inc., the Company, and the Company's
shareholders, by which all of the outstanding shares of the Company's common
stock were exchanged for shares of common stock of Pet Quarters. The result of
this transaction was that the Company is now a wholly-owned subsidiary of Pet
Quarters, Inc. Pet Quarters is a leading internet and catalog seller of pet
products to consumers and pet professionals. Pet Quarters common stock is traded
on the over-the-counter bulletin board under the symbol "PDEN."
BUSINESS
PLAN OF OPERATION
The Company's purpose is to seek, investigate and, if such
investigation warrants, acquire an interest in a business entity which desires
to seek the perceived advantages of a corporation which has a class of
securities registered under the Exchange Act. The Company will not restrict its
search to any specific business, industry, or geographical location and the
Company may participate in a business venture of virtually any kind or nature.
Management anticipates that it will be able to participate in only one potential
business venture because the Company has nominal assets and limited financial
resources. This lack of diversification should be considered a substantial risk
to the shareholders of the Company because it will not permit the Company to
offset potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Management believes (but has
not conducted any research to confirm) that there are business entities seeking
the perceived benefits of a reporting corporation. Such perceived benefits may
include facilitating or improving the terms on which additional equity financing
may be sought, providing liquidity for incentive stock options or similar
benefits to key employees, increasing the opportunity to use securities for
acquisitions, providing liquidity for shareholders and other factors. Business
opportunities may be available in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets. However,
management believes the Company will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
reporting company without incurring the cost and time required to conduct an
initial public offering. Management has not conducted market
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research and is not aware of statistical data to support the perceived benefits
of a business combination for the owners of a target company.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, the officers and directors of the Company, who are not
professional business analysts. In analyzing prospective business opportunities,
management may consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements; history
of operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; the potential for further research,
development, or exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact the proposed activities of the Company; the
potential for growth or expansion; the potential for profit; the perceived
public recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. This discussion of the proposed
criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Company will not restrict its search for any specific kind of
business entities, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially any stage of
its business life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer.
TERMS OF A BUSINESS COMBINATION
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. On the
consummation of a transaction, it is likely that the present management and
shareholders of the Company will no longer be in control of the Company. In
addition, it is likely that the Company's officer and director will, as part of
the terms of the business combination, resign and be replaced by one or more new
officers and directors.
It is anticipated that any securities issued in any such business
combination would be issued in reliance upon exemption from registration under
applicable federal and state securities laws. In some circumstances, however, as
a negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated or
at specified times thereafter. If such registration occurs, it will be
undertaken by the surviving entity after the Company has entered into an
agreement for a business combination or has consummated a business combination
and the Company is no longer considered a blank check company. The issuance of
additional securities and their potential sale into any trading market which may
develop in the Company's securities may depress the market value of the
Company's securities in the future if such a market develops, of which there is
no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a tax-free reorganization under Sections 351 or 368
of the Internal Revenue Code of 1986, as amended.
With respect to negotiations with a target company, management expects
to focus on the percentage of the Company which target company shareholders
would acquire in exchange for their shareholdings in the target company.
Depending upon, among other things, the target company's assets and liabilities,
the Company's shareholders will in all likelihood hold a substantially lesser
percentage ownership interest in the Company following any merger or
acquisition. The percentage of ownership may be subject to significant reduction
in the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the
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Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's shareholders at such time.
The Company will participate in a business combination only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing and will
include miscellaneous other terms.
UNDERTAKINGS AND UNDERSTANDINGS OF TARGET COMPANY
As part of a business combination agreement, the Company intends to
obtain certain representations and warranties from a target company as to its
conduct following the business combination. Such representations and warranties
may include (i) the agreement of the target company to make all necessary
filings and to take all other steps necessary to remain a reporting company
under the Exchange Act (ii) imposing certain restrictions on the timing and
amount of the issuance of additional free-trading stock, including stock
registered on Form S-8 or issued pursuant to Regulation S and (iii) giving
assurances of ongoing compliance with the Securities Act, the Exchange Act, the
General Rules and Regulations of the Securities and Exchange Commission, and
other applicable laws, rules and regulations.
A prospective target company should be aware that the market price and
trading volume of the Company's securities, when and if listed for secondary
trading, may depend in great measure upon the willingness and efforts of
successor management to encourage interest in the Company within the United
States financial community. The Company does not have the market support of an
underwriter that would normally follow a public offering of its securities.
Initial market makers are likely to simply post bid and asked prices and are
unlikely to take positions in the Company's securities for their own account or
customers without active encouragement and a basis for doing so. In addition,
certain market makers may take short positions in the Company's securities,
which may result in a significant pressure on their market price. The Company
may consider the ability and commitment of a target company to actively
encourage interest in the Company's securities following a business combination
in deciding whether to enter into a transaction with such company.
A business combination with the Company separates the process of
becoming a public company from the raising of investment capital. As a result, a
business combination with Company normally will not be a beneficial transaction
for a target company whose primary reason for becoming a public company is the
immediate infusion of capital. The Company may require assurances from the
target company that it has or that it has a reasonable belief that it will have
sufficient sources of capital to continue operations following the business
combination. However, it is possible that a target company may give such
assurances in error, or that the basis for such belief may change as a result of
circumstances beyond the control of the target company.
Prior to completion of a business combination, the Company may require
that it be provided with written materials regarding the target company
containing such items as a description of products, services and company
history; management resumes; financial information; available projections, with
related assumptions upon which they are based; an explanation of proprietary
products and services; evidence of existing patents, trademarks, or service
marks, or rights thereto; present and proposed forms of compensation to
management; a description of transactions between such company and its
affiliates during relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements, or
if they are not available, unaudited financial statements, together with
reasonable assurances that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 75 days following
completion of a business combination; and other information deemed relevant.
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COMPETITION
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
EXECUTIVE OFFICES
The Company's executive offices are located at 720 East Front Street,
Lonoke, Arkansas 72086. The Company's telephone number is (501) 676-9222.
Item 2. Properties.
The Company has no properties and at this time has no agreements to
acquire any properties. The Company currently uses the offices of Pet Quarters
at no cost to the Company. Pet Quarters has agreed to continue this arrangement
until the Company completes a business combination.
Item 3. Legal Proceedings.
There is no litigation currently pending by or against the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company is authorized to issue 100,000,000 shares of Common Stock,
$.0001 par value of which 5,000,000 shares were outstanding as of April 10,
2000, and 20,000,000 shares of Preferred Stock, $.0001 par value, of which no
shares were outstanding as of April 10, 2000.
The common stock of the Company is not currently traded on any exchange
and no established trading market for the Company's common stock currently
exists or is expected to develop.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common stock
do not have cumulative voting rights. Holders of common stock are entitled to
share ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, the
holders of common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. All of the outstanding shares of
common stock are fully paid and non-assessable.
Holders of common stock have no preemptive rights to purchase the
Company's common stock. There are no conversion or redemption rights or sinking
fund provisions with respect to the common stock.
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PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
shares of preferred stock in series and, by filing a certificate pursuant to the
applicable law of Delaware, to establish from time to time the number of shares
to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof without any further vote or action by the
shareholders. Any shares of preferred stock so issued would have priority over
the common stock with respect to dividend or liquidation rights. Any future
issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
shareholders and may adversely affect the voting and other rights of the holders
of common stock. At present, the Company has no plans to issue any preferred
stock nor adopt any series, preferences or other classification of preferred
stock.
The issuance of shares of preferred stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of preferred stock might impede
a business combination by including class voting rights that would enable the
holder to block such a transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
preferred stock could adversely affect the voting power of the holders of the
common stock. Although the Board of Directors is required to make any
determination to issue such stock based on its judgment as to the best interests
of the stockholders of the Company, the Board of Directors could act in a manner
that would discourage an acquisition attempt or other transaction that some, or
a majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
market price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized stock,
unless otherwise required by law or stock exchange rules. The Company has no
present plans to issue any preferred stock.
HOLDERS
There is one holder of the Company's common stock, Pet Quarters, Inc.
DIVIDEND POLICY
The Company has not previously paid cash dividends on its Common Stock.
The Company intends to retain any earnings for use in its business and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future.
RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold securities which were
not registered as follows:
Date Name Number of Shares Consideration
- ---- ---- ---------------- -------------
March 25, 1999 TPG Capital Corporation 5,000,000 $500
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Item 6. Selected Financial Data.
The selected financial data presented below should be read in
conjunction with the Company's financial statements and the related notes
thereto.
Statement of Income Data
Revenue from Operations $ 0.00
Expenses $ 1,330.00
Net loss $(1,330.00)
Net loss per share $(0.000266)
Balance Sheet Data
Total Assets $ 500.00
Total Liabilities $ 0.00
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company has had no operations to date. The Company continues to
search for target companies for a business combination. Pet Quarters, Inc., the
Company's sole shareholder, has agreed to pay all expenses of the Company
without repayment until such time as a business combination has been effected,
including the costs associated with locating a potential target company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements.
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Wellstone Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Wellstone Acquisition
Corporation (a development stage company) as of December 31, 1999 and the
related statements of operations, changes in stockholder's equity and cash flows
for the period from March 24, 1999 (inception) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Wellstone Acquisition Corporation
(a development stage company) as of December 31, 1999, and the results of its
operations and its cash flows for the period from March 24, 1999 (inception) to
December 31, 1999 in conformity with generally accepted accounting principles.
/s/ WEINBERG & COMPANY, P.A.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 1, 2000
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash $ 500
-------
TOTAL ASSETS $ 500
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES $ --
-------
STOCKHOLDER'S EQUITY
Preferred Stock, $.0001 par value, 20 million shares authorized,
none issued and outstanding --
Common Stock, $.0001 par value, 100 million shares authorized,
5,000,000 issued and outstanding 500
Additional paid in capital 1,330
Deficit accumulated during development stage (1,330)
-------
Total Stockholder's Equity 500
-------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 500
=======
</TABLE>
See accompanying notes to financial statements.
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 24, 1999
(INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Income $ --
Expenses
Organization expense 580
Professional fees 750
-------
Total expenses 1,330
-------
NET LOSS $(1,330)
=======
</TABLE>
See accompanying notes to financial statements.
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN
STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM MARCH 24, 1999
(INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Common Paid-In Development
Stock Capital Stage Total
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Common stock issuance $ 500 $ -- $ -- $ 500
Fair value of expenses
contributed -- 1,330 -- 1,330
Net loss for the period
ended December 31, 1999 -- -- (1,330) (1,330)
------------ ------------ ------------ ------------
BALANCE AT
DECEMBER 31, 1999 $ 500 $ 1,330 $ (1,330) $ 500
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 24, 1999
(INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,330)
Adjustment to reconcile net loss to net cash used by operating activities:
Contributed expense 1,330
--------
Net cash used in operating activities: --
--------
CASH FLOWS FROM INVESTING ACTIVITIES --
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 500
--------
Net cash provided by financing activities 500
--------
INCREASE IN CASH AND CASH EQUIVALENTS 500
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD --
--------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 500
========
</TABLE>
See accompanying notes to financial statements.
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WELLSTONE ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND BUSINESS OPERATIONS
Wellstone Acquisition Corporation (a development stage
company) ("the Company") was incorporated in Delaware on March
24, 1999 to serve as a vehicle to effect a merger, exchange of
capital stock, asset acquisition or other business combination
with a domestic or foreign private business. At December 31,
1999, the Company had not yet commenced any formal business
operations, and all activity to date relates to the Company's
formation and proposed fund raising. The Company's fiscal year
end is December 31.
The Company's ability to commence operations is contingent
upon its ability to identify a prospective target business and
raise the capital it will require through the issuance of
equity securities, debt securities, bank borrowings or a
combination thereof. (See Note 5)
B. USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
C. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash
equivalents.
D. INCOME TAXES
The Company accounts for income taxes under the Financial
Accounting Standards Board of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("Statement 109").
Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying
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amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date. There were no current or deferred income
tax expense or benefits due to the Company not having any
material operations for the period ending December 31, 1999.
NOTE 2 - STOCKHOLDER'S EQUITY
A. PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of
preferred stock at $.0001 par value, with such designations,
voting and other rights and preferences as may be determined
from time to time by the Board of Directors.
B. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of
common stock at $.0001 par value. The Company issued 5,000,000
shares of its common stock to TPG Capital Corporation ("TPG")
pursuant to Rule 506 for an aggregate consideration of $500.
C. ADDITIONAL PAID-IN CAPITAL
Additional paid-in capital at December 31, 1999 represents
the fair value of the amount of organization and
professional costs incurred by TPG on behalf of the Company.
(See Note 3)
NOTE 3 - AGREEMENT
On March 24, 1999, the Company signed an agreement with TPG, a
related entity (See Note 4). The Agreement calls for TPG to
provide the following services, without reimbursement from the
Company, until the Company enters into a business combination
as described in Note 1A:
1. Preparation and filing of required documents with the
Securities and Exchange Commission.
2. Location and review of potential target companies.
3. Payment of all corporate, organizational, and other costs
incurred by the Company.
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NOTE 4 - RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of
the Company who also owns a controlling interest in the
outstanding stock of TPG. (See Note 3)
NOTE 5 - SUBSEQUENT EVENTS
Pursuant to an Agreement and Plan of Reorganization (the
"Acquisition Agreement"), effective March 6, 2000, Pet
Quarters, Inc. ("Pet Quarters") an Arkansas corporation,
acquired all the outstanding shares of common stock of the
Company in an exchange for an aggregate of 130,208 shares of
common stock of Pet Quarters (the "Acquisition"). As a result,
the Company became a wholly owned subsidiary of Pet Quarters.
The Acquisition was approved by the unanimous consent of the
Board of Directors of Pet Quarters on March 6, 2000. The
Acquisition is intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. For financial accounting purposes
the Acquisition will be accounted for using the purchase
method of accounting.
Prior to the Acquisition, Pet Quarters had 13,467,500 shares
of common stock issued and outstanding, and 13,597,708 shares
issued and outstanding following the Acquisition.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
17
<PAGE> 18
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following table gives certain information regarding directors and
executive officers of the Company as of April 10, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Steven Dempsey 43 President and Director
Gregg Rollins 42 Secretary/Treasurer and Director
</TABLE>
The information set forth below identifies the principal occupation and
activities of the directors and executive officers during the past five years:
MR. STEVEN DEMPSEY has served as the President of the Company since
March 2000. He currently serves as Chairman, President, and a Director of Pet
Quarters, Inc., the sole shareholder of the Company, and has held such positions
since May, 1998. He was vice president of Sales and Marketing at Paine-Webber,
Inc., between February 1989 and November 1997. Mr. Dempsey is one of two
directors of the Company. Mr. Dempsey was appointed a director in June 1998.
This term expires in May 2001.
MR. GREGG ROLLINS has served as Secretary/Treasurer of the Company
since March 2000. He has been employed as the Chief Financial Officer of Pet
Quarters, Inc. since April 1999. Mr. Rollins was a senior vice president with
Leiblong Associates from 1998 until April, 1999 and was an account vice
president, assistant manager and sales manager with Paine Webber between 1988
and 1998.
Item 11. Executive Compensation.
The Company's officers and directors do not receive any compensation
for their services rendered to the Company, have not received such compensation
in the past, and are not accruing any compensation pursuant to any agreement
with the Company. However, the officers and directors of the Company anticipate
receiving benefits as a beneficial shareholder of the Company, as an officer
and/or director and shareholder of Pet Quarters, Inc. No retirement, pension,
profit sharing, stock option or insurance programs or other similar programs
have been adopted by the Company for the benefit of its employees.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth each person known by the Company to be
the beneficial owner of five percent or more of the Company's Common Stock, all
directors individually and all directors and officers of the Company as a group.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
<TABLE>
<CAPTION>
Amount of
Name and Address Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------- --------- --------
<S> <C> <C>
Pet Quarters, Inc. 5,000,000 100%
720 East Front Street
Lonoke, Arkansas 72086
</TABLE>
All shares of common stock of the Company are owned by Pet Quarters, Inc., and
there are no agreements which would result in a change of control of the
Company.
18
<PAGE> 19
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as a part of this report.
1. Financial Statements.
The following financial statements of Wellstone Acquisition Corporation
are set forth in Item 8 of this Report.
DESCRIPTION
Report of Independent Public Accountants
Balance Sheet
Statement of Operations
Statement of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
None.
3. Exhibits required by Item 601 of Regulation S-K.
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Reorganization among Pet
Quarters, Inc., Wellstone Acquisition Corporation,
and the shareholders named therein.
3.1 Articles of Incorporation of the Company.1
3.2 By-Laws of the Company.1
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during fiscal
1999.
(1) Incorporated by reference from Wellstone Acquisition Corporation Form
10-SB Registration Statement, filed with the Securities and Exchange
Commission on December 16, 1999.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WELLSTONE ACQUISITION CORPORATION
April 14, 2000 By: /s/ Steven Dempsey
--------------------------------------
Steven Dempsey
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
April 14, 2000 By: /s/ Steven Dempsey
------------------------------------
Steven Dempsey
President and Director
April 14, 2000 By: /s/ Gregg Rollins
------------------------------------
Gregg Rollins
Secretary/Treasurer and Director
20
<PAGE> 21
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization among Pet Quarters, Inc.,
Wellstone Acquisition Corporation, and the shareholders named therein.
3.1 Articles of Incorporation of the Company.(1)
3.2 By-Laws of the Company.(1)
27.1 Financial Data Schedule.
</TABLE>
21
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION among PET QUARTERS, INC., an
Arkansas corporation ("Pet Quarters"), WELLSTONE ACQUISITION CORPORATION, a
Delaware corporation ("Wellstone") and the persons listed in Exhibit A hereof
(collectively the "Shareholders"), being the owners of record of all the issued
and outstanding stock of Wellstone.
Whereas, Pet Quarters wishes to acquire and the Shareholders wish to
transfer all of the issued and outstanding securities of Wellstone in a
transaction intended to qualify as a reorganization within the meaning of
Section368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Exchange").
Now, therefore, Pet Quarters, Wellstone, and the Shareholders adopt this
plan of reorganization and agree as follows:
1. EXCHANGE OF STOCK
1.1. NUMBER OF SHARES. The Shareholders agree to transfer to Pet Quarters
at the Closing (defined below) the number of shares of common stock of
Wellstone, $0.0001 par value per share, shown opposite their names in Exhibit A,
in exchange for an aggregate of 130,208 shares of voting common stock of Pet
Quarters, $.001 par value per share.
1.2. EXCHANGE OF CERTIFICATES. Each holder of an outstanding certificate
or certificates theretofore representing shares of Wellstone common stock shall
surrender such certificate(s) for cancellation to Pet Quarters, and shall
receive in exchange a certificate or certificates representing the number of
full shares of Pet Quarters common stock into which the shares of Wellstone
common stock represented by the certificate or certificates so surrendered shall
have been converted. The transfer of Wellstone shares by the Shareholders shall
be effected by the delivery to Pet Quarters at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank.
1.3. FURTHER ASSURANCES. At the Closing and from time to time thereafter,
the Shareholders shall execute such additional instruments and take such other
action as Pet Quarters may request in order more effectively to sell, transfer,
and assign the transferred stock of Wellstone to Pet Quarters and to confirm Pet
Quarters' title thereto.
2. CLOSING
2.1. DATE AND PLACE. The Closing contemplated herein shall be held at the
offices of the Exchange Agent provided for herein without requiring the meeting
of the parties hereof. All proceedings to be taken and all documents to be
executed at the Closing shall be deemed to have been taken, delivered and
executed simultaneously, and no proceeding shall be deemed taken nor documents
deemed executed or delivered until all have been taken, delivered and executed.
The date of Closing may be accelerated or extended by agreement of the parties.
2.2. EXECUTION OF DOCUMENTS. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission required by this
agreement or any signature required thereon may be used in lieu of an original
writing or transmission or signature for any and all purposes for which the
original could be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire original
writing or transmission or original signature.
<PAGE> 2
3. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate that prior to the Closing represented Wellstone common stock shall
be deemed for all purposes, other than the payment of dividends or other
distributions, to evidence ownership of the number of shares of Pet Quarters
common stock into which it was converted. No dividend or other distribution
shall be paid to the holders of certificates of Wellstone common stock until
presented for exchange at which time any outstanding dividends or other
distributions shall be paid.
4. REPRESENTATIONS AND WARRANTIES OF WELLSTONE
Wellstone represents and warrants as follows:
4.1. CORPORATE ORGANIZATION AND GOOD STANDING. Wellstone is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and is qualified to do business as a foreign corporation in
each jurisdiction, if any, in which its property or business requires such
qualification.
4.2. REPORTING COMPANY STATUS. Wellstone has filed with the Securities
and Exchange Commission a registration statement on Form 10-SB which became
effective without condition on January 10, 2000 pursuant to the Securities
Exchange Act of 1934 and is, and will be at Closing, a reporting company
pursuant to Section 12(g) thereunder.
4.3. REPORTING COMPANY FILINGS. Wellstone has timely filed and is current
on all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934.
4.4. CAPITALIZATION. Wellstone's authorized capital stock consists of
100,000,000 shares of common stock, $.0001 par value, of which 5,000,000 shares
are issued and outstanding, and 20,000,000 shares of non-designated preferred
stock of which no shares are designated or issued.
4.5. ISSUED STOCK. All the outstanding shares of its common stock are
owned by the Shareholders and duly authorized and validly issued, fully paid and
non-assessable.
4.6. STOCK RIGHTS. Except as may be set out by attached schedule, there
are no stock grants, options, rights, warrants or other rights to purchase or
obtain Wellstone common or preferred Stock issued or committed to be issued.
4.7. CORPORATE AUTHORITY. Wellstone has all requisite corporate power and
authority to own, operate and lease its properties, to carry on its business as
it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this agreement and all other agreements and
instruments related to this agreement.
4.8. AUTHORIZATION. Execution of this agreement has been duly authorized
and approved by Wellstone's board of directors.
4.9. SUBSIDIARIES. Except as may be set out by attached schedule,
Wellstone has no subsidiaries.
<PAGE> 3
4.10. FINANCIAL STATEMENTS. Wellstone's financial statements dated
October 31, 1999, copies of which will have been delivered by Wellstone to Pet
Quarters prior to the Closing (the "Wellstone Financial Statements"), fairly
present the financial condition of Wellstone as of the date therein and the
results of its operations for the periods then ended in conformity with
generally accepted accounting principles consistently applied.
4.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved against in the Wellstone Financial Statements, Wellstone did not
have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
4.12. NO MATERIAL CHANGES. Except as may be set out by attached schedule,
there has been no material adverse change in the business, properties,
liabilities, or financial condition of Wellstone since the date of the Wellstone
Financial Statements.
4.13. LITIGATION. Except as may be set out by attached schedule, there is
not, to the knowledge of Wellstone, any pending, threatened, or existing
litigation, bankruptcy, criminal, civil, or regulatory proceeding or
investigation, threatened or contemplated against Wellstone or against any of
its officers.
4.14. CONTRACTS. Except as may be set out by attached schedule, Wellstone
is not a party to any material contract not in the ordinary course of business
that is to be performed in whole or in part at or after the date of this
agreement.
4.15. TITLE. Except as may be set out by attached schedule, Wellstone has
good and marketable title to all the real property and good and valid title to
all other property included in the Wellstone Financial Statements. Except as set
out in the balance sheet thereof, the properties of Wellstone are not subject to
any mortgage, encumbrance, or lien of any kind except minor encumbrances that do
not materially interfere with the use of the property in the conduct of the
business of Wellstone.
4.16. TAX RETURNS. Except as may be set out by attached schedule, all
required tax returns for federal, state, county, municipal, local, foreign and
other taxes and assessments have been properly prepared and filed by Wellstone
for all years for which such returns are due unless an extension for filing any
such return has been filed. Any and all federal, state, county, municipal,
local, foreign and other taxes and assessments, including any and all interest,
penalties and additions imposed with respect to such amounts have been paid or
provided for. The provisions for federal and state taxes reflected in the
Wellstone Financial Statements are adequate to cover any such taxes that may be
assessed against Wellstone in respect of its business and its operations during
the periods covered by the Wellstone Financial Statements and all prior periods,
and for all periods to the date hereof.
4.17. NO VIOLATION. Consummation of the Exchange will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree, law,
or regulation to which any property of Wellstone is subject or by which
Wellstone is bound.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, individually and separately, represent and warrant as
follows:
<PAGE> 4
5.1. TITLE TO SHARES. The Shareholders, and each of them, are the owners,
free and clear of any liens and encumbrances, of the number of Wellstone shares
which are listed in the attached Exhibit A and which they have contracted to
exchange. The Wellstone shares owned by the Shareholders constitute 100% of the
issued and outstanding common shares of Wellstone.
5.2. LITIGATION. There is no litigation or proceeding pending, or to each
Shareholder's knowledge threatened, against or relating to shares of Wellstone
held by the Shareholders.
5.3 DISCLOSURE. The Shareholders acknowledge that they have been provided
with a copy of the Form 10-SB as filed by Pet Quarters with the Securities and
Exchange Commission ("Form 10-SB").
6. REPRESENTATIONS AND WARRANTIES OF PET QUARTERS
Pet Quarters represents and warrants as follows:
6.1. CORPORATE ORGANIZATION AND GOOD STANDING. Pet Quarters is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Arkansas and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
6.2. CAPITALIZATION. Pet Quarters' authorized capital stock consists of
40,000,000 shares of common stock, $.001 par value, of which 11,653,244 shares
were issued and outstanding as of December 31, 1999, and 10,000,000 shares of
preferred stock, $.001 par value, of which no shares are issued and outstanding.
6.3. ISSUED STOCK. All the outstanding shares of its common stock are
duly authorized and validly issued, fully paid and non-assessable.
6.4. STOCK RIGHTS. Except as may be set out by attached schedule or in
the Form 10-SB, there are no stock grants, options, rights, warrants or other
rights to purchase or obtain Pet Quarters common or preferred Stock issued or
committed to be issued.
6.5. CORPORATE AUTHORITY. Pet Quarters has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its business
as it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this agreement and all other agreements and
instruments related to this agreement.
6.6. AUTHORIZATION. Execution of this agreement has been duly authorized
and approved by Pet Quarters' board of directors.
6.7. SUBSIDIARIES. Except as may be set out by attached schedule or in
the Form 10-SB, Pet Quarters has no subsidiaries.
6.8. FINANCIAL STATEMENTS. Pet Quarters' audited financial statements
dated as of June 30, 1999 and unaudited financial statements dated as of
December 31, 1999, copies of which will have been delivered by Pet Quarters to
Wellstone prior to the Exchange Date (the "Pet Quarters Financial Statements"),
fairly present the financial condition of Pet Quarters as of
<PAGE> 5
the dates therein and the results of its operations for the periods then ended
in conformity with generally accepted accounting principles consistently
applied.
6.9. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved against in the Pet Quarters Financial Statements, Pet Quarters did
not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
6.10. NO MATERIAL CHANGES. Except as may be set out by attached schedule,
there has been no material adverse change in the business, properties, or
financial condition of Pet Quarters since the date of the most recent Pet
Quarters Financial Statements.
6.11. LITIGATION. Except as may be set out by attached schedule, there is
not, to the knowledge of Pet Quarters, any pending, threatened, or existing
litigation, bankruptcy, criminal, civil, or regulatory proceeding or
investigation, threatened or contemplated against Pet Quarters or against any of
its officers.
6.12. CONTRACTS. Except as may be set out by attached schedule or in the
Form 10-SB, Pet Quarters is not a party to any material contract not in the
ordinary course of business that is to be performed in whole or in part at or
after the date of this agreement.
6.13. TITLE. Except as may be set out by attached schedule, Pet Quarters
has good and marketable title to all the real property and good and valid title
to all other property included as owned property in the Pet Quarters Financial
Statements. Except as set out in the balance sheet thereof, the properties of
Pet Quarters are not subject to any mortgage, encumbrance, or lien of any kind
except minor encumbrances that do not materially interfere with the use of the
property in the conduct of the business of Pet Quarters.
6.14. TAX RETURNS. Except as may be set out by attached schedule, all
required tax returns for federal, state, county, municipal, local, foreign and
other taxes and assessments have been properly prepared and filed by Pet
Quarters for all years for which such returns are due unless an extension for
filing any such return has been filed. Any and all federal, state, county,
municipal, local, foreign and other taxes and assessments, including any and all
interest, penalties and additions imposed with respect to such amounts have been
paid or provided for. The provisions for federal and state taxes reflected in
the Pet Quarters Financial Statements are adequate to cover any such taxes that
may be assessed against Pet Quarters in respect of its business and its
operations during the periods covered by the Pet Quarters Financial Statements
and all prior periods.
6.15. NO VIOLATION. Consummation of the Exchange will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree, law,
or regulation to which any property of Pet Quarters is subject or by which Pet
Quarters is bound.
7. CONDUCT OF WELLSTONE PENDING THE CLOSING. Wellstone covenants that
between the date of this agreement and the Closing:
7.1. No change will be made in Wellstone's certificate of incorporation
or bylaws.
<PAGE> 6
7.2. Wellstone will not make any change in its authorized or issued
capital stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock other than as
provided herein.
7.3. Wellstone will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8. CONDUCT PENDING THE CLOSING
Pet Quarters, Wellstone and the Shareholders covenant that between the
date of this agreement and the Closing as to each of them:
8.1. No change will be made in the charter documents or by-laws of Pet
Quarters or Wellstone.
8.2. Wellstone and Pet Quarters will use their best efforts to maintain
and preserve their business organization, employee relationships, and goodwill
intact, and will not enter into any material commitment except in the ordinary
course of business.
8.3. None of the Shareholders will sell, transfer, assign, hypothecate,
lien, or otherwise dispose or encumber the Wellstone shares of common stock
owned by them.
9. CONDITIONS PRECEDENT TO OBLIGATION OF WELLSTONE AND THE SHAREHOLDERS
Wellstone's and the Shareholders' obligation to consummate the Exchange
shall be subject to fulfillment on or before the Closing of each of the
following conditions, unless waived in writing or by acceptance of Pet Quarters'
shares by the Shareholders:
9.1. PET QUARTERS' REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Pet Quarters set forth herein shall be true and correct at the
Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
9.2. PET QUARTERS' COVENANTS. Pet Quarters shall have performed all
covenants required by this agreement to be performed by it on or before the
Closing.
9.3. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been approved
by the Board of Directors of Pet Quarters.
9.4. SUPPORTING DOCUMENTS OF PET QUARTERS. Pet Quarters shall have
delivered to Wellstone and the Shareholders supporting documents in form and
substance reasonably satisfactory to Wellstone and the Shareholders, to the
effect that:
(a) Pet Quarters is a corporation duly organized, validly existing, and
in good standing;
(b) Pet Quarters' authorized capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of Pet
Quarters authorizing the execution of this agreement and the consummation
hereof;
<PAGE> 7
(d) Secretary's certificate of incumbency of the officers and directors
of Pet Quarters;
(e) Pet Quarters' Financial Statements and unaudited financial statement
from the date of Pet Quarters' Financial Statements to close of most recent
fiscal quarter; and
(f) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
10. CONDITIONS PRECEDENT TO OBLIGATION OF PET QUARTERS
Pet Quarters' obligation to consummate the Exchange shall be subject to
fulfillment on or before the Closing of each of the following conditions, unless
waived in writing or by acceptance of Wellstone's shares by Pet Quarters:
10.1. WELLSTONE'S AND THE SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Wellstone and the Shareholders set forth
herein shall be true and correct at the Closing as though made at and as of that
date, except as affected by transactions contemplated hereby.
10.2. WELLSTONE'S AND THE SHAREHOLDERS' COVENANTS. Wellstone and the
Shareholders shall have performed all covenants required by this agreement to be
performed by them on or before the Closing.
10.3. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been approved
by the Board of Directors of Wellstone.
10.4. SHAREHOLDER EXECUTION. This Agreement shall have been executed by
all of the Shareholders of Wellstone.
10.5. SUPPORTING DOCUMENTS OF WELLSTONE. Wellstone shall have delivered
to Pet Quarters supporting documents in form and substance reasonably
satisfactory to Pet Quarters to the effect that:
(a) Wellstone is a corporation duly organized, validly existing, and in
good standing;
(b) Wellstone's capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of
Wellstone authorizing the execution of this agreement and the consummation
hereof;
(d) Secretary's certificate of incumbency of the officers and directors
of Wellstone;
(e) Wellstone's Financial Statements and unaudited financial statements
for the period from the date of the Wellstone's Financial Statements to the
close of the most recent fiscal quarter; and
(f) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
11. SHAREHOLDERS' REPRESENTATIVE. The Shareholders hereby irrevocably
designate and appoint Cassidy & Associates, Washington, D.C. as their agent and
attorney in fact ("Shareholders' Representative") with full power and authority
until the Closing to
<PAGE> 8
execute, deliver, and receive on their behalf all notices, requests, and other
communications hereunder; to fix and alter on their behalf the date, time, and
place of the Closing; to waive, amend, or modify any provisions of this
agreement, and to take such other action on their behalf in connection with this
agreement, the Closing, and the transactions contemplated hereby as such agent
or agents deem appropriate; provided, however, that no such waiver, amendment,
or modification may be made if it would decrease the number of shares to be
issued to the Shareholders hereunder or increase the extent of their obligation
to indemnify Pet Quarters hereunder.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Wellstone, the Shareholders and Pet Quarters set out herein shall
survive the Closing.
13. ARBITRATION
13.1. SCOPE. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether existing
now, in the past or in the future as to which the parties or any affiliates may
be adverse parties, arising out of or in any way based upon this agreement or
the transactions to which it relates (regardless of the cause of action), will
be resolved by arbitration before the American Arbitration Association within
the District of Columbia.
13.2. CONSENT TO JURISDICTION, SITUS AND JUDGEMENT. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration Association
and the situs of the arbitration (and any requests for injunctive or other
equitable relief) within the District of Columbia. Any award in arbitration may
be entered in any domestic or foreign court having jurisdiction over the
enforcement of such awards.
13.3. APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Delaware, determined without regard to
its provisions which would otherwise apply to a question of conflict of laws.
13.4. DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the Federal
Rules of Civil Procedure, as they then exist, as may be modified by the
arbitrator consistent with the desire to simplify the conduct and minimize the
expense of the arbitration.
13.5. RULES OF LAW. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much as possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
13.6. FINALITY AND FEES. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except as to
errors of law or the failure of the arbitrator to adhere to the arbitration
provisions contained in this agreement. Each party to the arbitration shall pay
its own costs and counsel fees except as specifically provided otherwise in this
agreement.
13.7. MEASURE OF DAMAGES. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and/or securities issued
or to be issued and no claims shall be made by any party or affiliate for lost
profits, punitive or multiple damages.
<PAGE> 9
13.8. COVENANT NOT TO SUE. The parties covenant that under no conditions
will any party or any affiliate file any action against the other (except only
requests for injunctive or other equitable relief) in any forum other than
before the American Arbitration Association, and the parties agree that any such
action, if filed, shall be dismissed upon application and shall be referred for
arbitration hereunder with costs and attorney's fees to the prevailing party.
13.9. INTENTION. It is the intention of the parties and their affiliates
that all disputes of any nature between them, arising out of or in any way based
upon this agreement or the transactions to which it relates (regardless of the
cause of action), be decided by arbitration as provided herein and that no party
or affiliate be required to litigate in any other forum any disputes or other
matters except for requests for injunctive or equitable relief. This agreement
shall be interpreted in conformance with this stated intent of the parties and
their affiliates.
13.10. SURVIVAL. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
14. GENERAL PROVISIONS.
14.1. FURTHER ASSURANCES. From time to time, each party will execute such
additional instruments and take such actions as may be reasonably required to
carry out the intent and purposes of this agreement.
14.2. WAIVER. Any failure on the part of either party hereto to comply
with any of its obligations, agreements, or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
14.3. BROKERS. Each party agrees to indemnify and hold harmless the other
party against any fee, loss, or expense arising out of claims by brokers or
finders employed or alleged to have been employed by the indemnifying party.
14.4. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
If to Pet Quarters, to:
Pet Quarters, Inc.
720 East Front Street
Lonoke, Arkansas 72086
If to Wellstone, to:
Wellstone Acquisition Corporation
1504 R Street, N.W.
Washington, D.C. 20009
If to the Shareholders, to:
Cassidy & Associates
1504 R Street N.W.
Washington, D.C. 20009
<PAGE> 10
14.5. GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
14.6. ASSIGNMENT. This agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this agreement
without the written consent of the other party shall be void.
14.7. COUNTERPARTS. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
14.8. EXCHANGE AGENT AND CLOSING DATE. The Exchange Agent shall be
Cassidy & Associates, Washington, D.C. The Closing shall take place on March 6,
2000 unless extended by mutual consent of the parties.
14.9. REVIEW OF AGREEMENT. Each party acknowledges that it has had time
to review this agreement and, as desired, consult with counsel. In the
interpretation of this agreement, no adverse presumption shall be made against
any party on the basis that it has prepared, or participated in the preparation
of, this agreement.
14.10. SCHEDULES. All schedules attached hereto, if any, shall be
acknowledged by each party by signature or initials thereon.
14.11. EFFECTIVE DATE. This effective date of this agreement shall be
March 6, 2000.
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION AMONG PET
QUARTERS, WELLSTONE AND THE SHAREHOLDERS OF WELLSTONE
IN WITNESS WHEREOF, the parties have executed this agreement.
PET QUARTERS, INC.
By
-----------------------------------------
WELLSTONE ACQUISITION CORPORATION
By
-----------------------------------------
SHAREHOLDERS:
TPG CAPITAL CORPORATION
By
-----------------------------------------
<PAGE> 11
Exhibit A
<TABLE>
<CAPTION>
Number of Number of
Wellstone Shares Pet Quarters
To Be Shares To Be Name of
Transferred Received Shareholder Address
<S> <C> <C>
5,000,000 130,208 TPG Capital Corporation,
1504 R Street, N.W.
Washington, D.C. 20009
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 5,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,330
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,330)
<EPS-BASIC> 0.0
<EPS-DILUTED> 0.0
</TABLE>
