UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of the Securities and Exchange
Act of 1934
2
PARTICLE 2, INC.
(Exact name of registrant as specified in its charter)
Nevada Applied For
(State of organization) (I.R.S. Employer Identification No.)
2980 South Rainbow Boulevard, Suite 200-C, Las Vegas, NV 89129
(Address of principal executive offices)
Registrant's telephone number, including area code (702) 307-0488
Registrant's Agent: Daniel G. Chapman, Esq., 2080 E. Flamingo
Road, Suite 112, Las Vegas, NV 89119
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
ITEM 1. DESCRIPTION OF BUSINESS
Background
Particle 2, Inc. (the "Company") is a Nevada corporation formed
on February 24, 2000. Its principal place of business is located
at 2980 South Rainbow Boulevard, Suite 200-C, Las Vegas, NV
89129. The Company was organized to engage in any lawful
corporate business, including but not limited to, participating
in mergers with and acquisitions of other companies. The Company
has been in the developmental stage since inception and has no
operating history other than organizational matters.
On February 24, 2000, the Company issued 5,000,000 shares of its
stock to the founder of the corporation and the sole officer and
director.
The primary activity of the Company currently involves seeking a
company or companies that it can acquire or with whom it can
merge. The Company has not selected any company as an acquisition
target or merger partner and does not intend to limit potential
candidates to any particular field or industry, but does retain
the right to limit candidates, if it so chooses, to a particular
field or industry. The Company's plans are in the conceptual
stage only.
The Board of Directors has elected to begin implementing the
Company's principal business purpose, described below under "Item
2, Plan of Operation". As such, the Company can be defined as a
"shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity.
The proposed business activities described herein classify the
Company as a "blank check" company. Many states have enacted
statutes, rules, and regulations limiting the sale of securities
of "blank check" companies in their respective jurisdictions.
Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as
the Company has successfully implemented its business plan.
The Company is filing this registration statement on a voluntary
basis, pursuant to section 12(g) of the Securities Exchange Act
of 1934 (the "Exchange Act"), in order to ensure that public
information is readily accessible to all shareholders and
potential investors, and to increase the Company's access to
financial markets. In the event the Company's obligation to file
periodic reports is suspended pursuant to the Exchange Act, the
Company anticipates that it will continue to voluntarily file
such reports.
Risk Factors
The Company's business is subject to numerous risk factors,
including the following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company
has had no operating history and has received no revenues or
earnings from operations. The Company has no significant assets
or financial resources. The Company will, in all likelihood,
sustain operating expenses without corresponding revenues, at
least until it completes a business combination. This may result
in the Company incurring a net operating loss which will increase
continuously until the Company completes a business combination
with a profitable business opportunity. There is no assurance
that the Company will identify a business opportunity or complete
a business combination.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success
of the Company's proposed plan of operation will depend to a
great extent on the operations, financial condition, and
management of the identified business opportunity. While
management intends to seek business combinations with entities
having established operating histories, it cannot assure that the
Company will successfully locate candidates meeting such
criteria. In the event the Company completes a business
combination, the success of the Company's operations may be
dependent upon management of the successor firm or venture
partner firm together with numerous other factors beyond the
Company's control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND
COMBINATIONS. The Company is, and will continue to be, an
insignificant participant in the business of seeking mergers and
joint ventures with, and acquisitions of small private entities.
A large number of established and well-financed entities,
including venture capital firms, are active in mergers and
acquisitions of companies which may also be desirable target
candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise,
and managerial capabilities than the Company. The Company is,
consequently, at a competitive disadvantage in identifying
possible business opportunities and successfully completing a
business combination. Moreover, the Company will also compete
with numerous other small public companies in seeking merger or
acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION - NO
STANDARDS FOR BUSINESS COMBINATION. The Company has no
arrangement, agreement, or understanding with respect to engaging
in a business combination with any private entity. There can be
no assurance the Company will successfully identify and evaluate
suitable business opportunities or conclude a business
combination. Management has not identified any particular
industry or specific business within an industry for evaluations.
The Company has been in the developmental stage since inception
and has no operations to date. Other than issuing shares to its
original shareholders, the Company never commenced any
operational activities. There is no assurance the Company will be
able to negotiate a business combination on terms favorable to
the Company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net
worth or other criteria which it will require a target business
opportunity to have achieved, and without which the Company would
not consider a business combination in any form with such
business opportunity. Accordingly, the Company may enter into a
business combination with a business opportunity having no
significant operating history, losses, limited or no potential
for earnings, limited assets, negative net worth, or other
negative characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While
seeking a business combination, management anticipates devoting
up to twenty hours per month to the business of the Company. The
Company's officers have not entered into written employment
agreements with the Company and are not expected to do so in the
foreseeable future. The Company has not obtained key man life
insurance on its officers or directors. Notwithstanding the
combined limited experience and time commitment of management,
loss of the services of any of these individuals would adversely
affect development of the Company's business and its likelihood
of continuing operations. See "MANAGEMENT."
CONFLICTS OF INTEREST - GENERAL. The Company's officers and
directors participate in other business ventures which compete
directly with the Company. Additional conflicts of interest and
non "arms-length" transactions may also arise in the event the
Company's officers or directors are involved in the management of
any firm with which the Company transacts business. The Company's
Board of Directors has adopted a resolution which prohibits the
Company from completing a combination with any entity in which
management serve as officers, directors or partners, or in which
they or their family members own or hold any ownership interest.
Management is not aware of any circumstances under which this
policy could be changed while current management is in control of
the Company. See "ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS - CONFLICTS OF INTEREST."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION.
Companies subject to Section 13 of the Securities Exchange Act of
1934 (the "Exchange Act") must provide certain information about
significant acquisitions, including certified financial
statements for the company acquired, covering one or two years,
depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target entities to
prepare such statements may significantly delay or even preclude
the Company from completing an otherwise desirable acquisition.
Acquisition prospects that do not have or are unable to obtain
the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the 1934 Act
are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company
has not conducted or received results of market research
indicating that market demand exists for the transactions
contemplated by the Company. Moreover, the Company does not have,
and does not plan to establish, a marketing organization. If
there is demand for a business combination as contemplated by the
Company, there is no assurance the Company will successfully
complete such transaction.
LACK OF DIVERSIFICATION. In all likelihood, the Company's
proposed operations, even if successful, will result in a
business combination with only one entity. Consequently, the
resulting activities will be limited to that entity's business.
The Company's inability to diversify its activities into a number
of areas may subject the Company to economic fluctuations within
a particular business or industry, thereby increasing the risks
associated with the Company's operations.
REGULATION. Although the Company will be subject to regulation
under the Securities Exchange Act of 1934, management believes
the Company will not be subject to regulation under the
Investment Company Act of 1940, insofar as the Company will not
be engaged in the business of investing or trading in securities.
In the event the Company engages in business combinations which
result in the Company holding passive investment interests in a
number of entities, the Company could be subject to regulation
under the Investment Company Act of 1940. In such event, the
Company would be required to register as an investment company
and could be expected to incur significant registration and
compliance costs. The Company has obtained no formal
determination from the Securities and Exchange Commission as to
the status of the Company under the Investment Company Act of
1940 and, consequently, any violation of such Act would subject
the Company to material adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination
involving the issuance of the Company's common stock will, in all
likelihood, result in shareholders of a private company obtaining
a controlling interest in the Company. Any such business
combination may require management of the Company to sell or
transfer all or a portion of the Company's common stock held by
them, or resign as members of the Board of Directors of the
Company. The resulting change in control of the Company could
result in removal of one or more present officers and directors
of the Company and a corresponding reduction in or elimination of
their participation in the future affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS
COMBINATION. The Company's primary plan of operation is based
upon a business combination with a private concern which, in all
likelihood, would result in the Company issuing securities to
shareholders of such private company. Issuing previously
authorized and unissued common stock of the Company will reduce
the percentage of shares owned by present and prospective
shareholders, and a change in the Company's control and/or
management.
DISADVANTAGES OF BLANK CHECK OFFERING. The Company may enter into
a business combination with an entity that desires to establish a
public trading market for its shares. A target company may
attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business
combination with the Company. The perceived adverse consequences
may include, but are not limited to, time delays of the
registration process, significant expenses to be incurred in such
an offering, loss of voting control to public shareholders, and
the inability or unwillingness to comply with various federal and
state securities laws enacted for the protection of investors.
These securities laws primarily relate to registering securities
and full disclosure of the Company's business, management, and
financial statements.
TAXATION. Federal and state tax consequences will, in all
likelihood, be major considerations in any business combination
the Company may undertake. Typically, these transactions may be
structured to result in tax-free treatment to both companies,
pursuant to various federal and state tax provisions. The Company
intends to structure any business combination so as to minimize
the federal and state tax consequences to both the Company and
the target entity. Management cannot assure that a business
combination will meet the statutory requirements for a tax-free
reorganization, or that the parties will obtain the intended tax-
free treatment upon a transfer of stock or assets. A non-
qualifying reorganization could result in the imposition of both
federal and state taxes, which may have an adverse effect on both
parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY
BUSINESS OPPORTUNITIES. Management believes that any potential
target company must provide audited financial statements for
review, and for the protection of all parties to the business
combination. One or more attractive business opportunities may
forego a business combination with the Company, rather than incur
the expenses associated with preparing audited financial
statements.
BLUE SKY CONSIDERATIONS. Because the securities registered
hereunder have not been registered for resale under the blue sky
laws of any state, and the Company has no current plans to
register or qualify its shares in any state, holders of these
shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that
there may be significant state blue sky restrictions upon the
ability of new investors to purchase the securities. These
restrictions could reduce the size of any potential market. As a
result of recent changes in federal law, non-issuer trading or
resale of the Company's securities is exempt from state
registration or qualification requirements in most states.
However, some states may continue to restrict the trading or
resale of blind-pool or "blank-check" securities. Accordingly,
investors should consider any potential secondary market for the
Company's securities to be a limited one.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and
"forward-looking statements" as that term is defined in Section
27A of the Securities Act of 1933 as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical
fact, are forward-looking statements. Although Management
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without
limitation, in conjunction with those forward-looking statements
contained in this Statement.
Plan of Operation - General
The Company's plan is to seek, investigate, and if such
investigation warrants, acquire an interest in one or more
business opportunities presented to it by persons or firms
desiring the perceived advantages of a publicly held corporation.
At this time, the Company has no plan, proposal, agreement,
understanding, or arrangement to acquire or merge with any
specific business or company, and the Company has not identified
any specific business or company for investigation and
evaluation. No member of Management or any promoter of the
Company, or an affiliate of either, has had any material
discussions with any other company with respect to any
acquisition of that company. The Company will not restrict its
search to any specific business, industry, or geographical
location, and may participate in business ventures of virtually
any kind or nature. Discussion of the proposed business under
this caption and throughout this Registration Statement is
purposefully general and is not meant to restrict the Company's
virtually unlimited discretion to search for and enter into a
business combination.
The Company may seek a combination with a firm which only
recently commenced operations, or a developing company in need of
additional funds to expand into new products or markets or
seeking to develop a new product or service, or an established
business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to
be easier to raise by a public company. In some instances, a
business opportunity may involve acquiring or merging with a
corporation which does not need substantial additional cash but
which desires to establish a public trading market for its common
stock. The Company may purchase assets and establish wholly-owned
subsidiaries in various businesses or purchase existing
businesses as subsidiaries.
Selecting a business opportunity will be complex and extremely
risky. Because of general economic conditions, rapid
technological advances being made in some industries, and
shortages of available capital, management believes that there
are numerous firms seeking the benefits of a publicly-traded
corporation. Such perceived benefits of a publicly traded
corporation may include facilitating or improving the terms on
which additional equity financing may be sought, providing
liquidity for the principals of a business, creating a means for
providing incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of
applicable statutes) for all shareholders, and other items.
Potentially available business opportunities may occur in many
different industries and at various stages of development, all of
which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and
complex.
Management believes that the Company may be able to benefit from
the use of "leverage" to acquire a target company. Leveraging a
transaction involves acquiring a business while incurring
significant indebtedness for a large percentage of the purchase
price of that business. Through leveraged transactions, the
Company would be required to use less of its available funds to
acquire a target company and, therefore, could commit those funds
to the operations of the business, to combinations with other
target companies, or to other activities. The borrowing involved
in a leveraged transaction will ordinarily be secured by the
assets of the acquired business. If that business is not able to
generate sufficient revenues to make payments on the debt
incurred by the Company to acquire that business, the lender
would be able to exercise the remedies provided by law or by
contract. These leveraging techniques, while reducing the amount
of funds that the Company must commit to acquire a business, may
correspondingly increase the risk of loss to the Company. No
assurance can be given as to the terms or availability of
financing for any acquisition by the Company. During periods when
interest rates are relatively high, the benefits of leveraging
are not as great as during periods of lower interest rates,
because the investment in the business held on a leveraged basis
will only be profitable if it generates sufficient revenues to
cover the related debt and other costs of the financing. Lenders
from which the Company may obtain funds for purposes of a
leveraged buy-out may impose restrictions on the future
borrowing, distribution, and operating policies of the Company.
It is not possible at this time to predict the restrictions, if
any, which lenders may impose, or the impact thereof on the
Company.
The Company has insufficient capital with which to provide the
owners of businesses significant cash or other assets. Management
believes the Company will offer owners of businesses the
opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to
conduct an initial public offering. The owners of the businesses
will, however, incur significant post-merger or acquisition
registration costs in the event they wish to register a portion
of their shares for subsequent sale. The Company will also incur
significant legal and accounting costs in connection with the
acquisition of a business opportunity, including the costs of
preparing post-effective amendments, Forms 8-K, agreements, and
related reports and documents. Nevertheless, the officers and
directors of the Company have not conducted market research and
are not aware of statistical data which would support the
perceived benefits of a merger or acquisition transaction for the
owners of a businesses. The Company does not intend to make any
loans to any prospective merger or acquisition candidates or to
unaffiliated third parties.
The Company will not restrict its search for any specific kind of
firms, 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 corporate 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. However, the Company does not intend to obtain funds
in one or more private placements to finance the operation of any
acquired business opportunity until such time as the Company has
successfully consummated such a merger or acquisition. The
Company also has no plans to conduct any offerings under
Regulation S.
Sources of Opportunities
The Company will seek a potential business opportunity from all
known sources, but will rely principally on personal contacts of
its officers and directors as well as indirect associations
between them and other business and professional people. It is
not presently anticipated that the Company will engage
professional firms specializing in business acquisitions or
reorganizations.
Management, while not especially experienced in matters relating
to the new business of the Company, will rely upon their own
efforts and, to a much lesser extent, the efforts of the
Company's shareholders, in accomplishing the business purposes of
the Company. It is not anticipated that any outside consultants
or advisors, other than the Company's legal counsel and
accountants, will be utilized by the Company to effectuate its
business purposes described herein. However, if the Company does
retain such an outside consultant or advisor, any cash fee earned
by such party will need to be paid by the prospective
merger/acquisition candidate, as the Company has no cash assets
with which to pay such obligation. There have been no
discussions, understandings, contracts or agreements with any
outside consultants and none are anticipated in the future. In
the past, the Company's management has never used outside
consultants or advisors in connection with a merger or
acquisition.
As is customary in the industry, the Company may pay a finder's
fee for locating an acquisition prospect. If any such fee is
paid, it will be approved by the Company's Board of Directors and
will be in accordance with the industry standards. Such fees are
customarily between 1% and 5% of the size of the transaction,
based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably
down to 1% in a $4,000,000 transaction. Management has adopted a
policy that such a finder's fee or real estate brokerage fee
could, in certain circumstances, be paid to any employee,
officer, director or 5% shareholder of the Company, if such
person plays a material role in bringing a transaction to the
Company.
The Company will not have sufficient funds to undertake any
significant development, marketing, and manufacturing of any
products which may be acquired. Accordingly, if it acquires the
rights to a product, rather than entering into a merger or
acquisition, it most likely would need to seek debt or equity
financing or obtain funding from third parties, in exchange for
which the Company would probably be required to give up a
substantial portion of its interest in any acquired product.
There is no assurance that the Company will be able either to
obtain additional financing or to interest third parties in
providing funding for the further development, marketing and
manufacturing of any products acquired.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by
or under the supervision of the officers and directors of the
Company (see "Item 5). Management intends to concentrate on
identifying prospective business opportunities which may be
brought to its attention through present associations with
management. In analyzing prospective business opportunities,
management will consider, among other factors, such matters as;
1. the available technical, financial and managerial resources
2. working capital and other financial requirements
3. history of operation, if any
4. prospects for the future
5. present and expected competition
6. the quality and experience of management services which may
be available and the depth of that management
7. the potential for further research, development or
exploration
8. specific risk factors not now foreseeable but which then may
be anticipated to impact the proposed activities of the Company
9. the potential for growth or expansion
10. the potential for profit
11. the perceived public recognition or acceptance of products,
services or trades
12. name identification
Management will meet personally with management and key personnel
of the firm sponsoring the business opportunity as part of their
investigation. To the extent possible, the Company intends to
utilize written reports and personal investigation to evaluate
the above factors. The Company will not acquire or merge with any
company for which audited financial statements cannot be
obtained.
Opportunities in which the Company participates will present
certain risks, many of which cannot be identified adequately
prior to selecting a specific opportunity. The Company's
shareholders must, therefore, depend on Management to identify
and evaluate such risks. Promoters of some opportunities may have
been unable to develop a going concern or may present a business
in its development stage (in that it has not generated
significant revenues from its principal business activities prior
to the Company's participation.) Even after the Company's
participation, there is a risk that the combined enterprise may
not become a going concern or advance beyond the development
stage. Other opportunities may involve new and untested products,
processes, or market strategies which may not succeed. Such risks
will be assumed by the Company and, therefore, its shareholders.
The investigation of specific business opportunities and the
negotiation, drafting, and execution of relevant agreements,
disclosure documents, and other instruments will require
substantial management time and attention as well as substantial
costs for accountants, attorneys, and others. If a decision is
made not to participate in a specific business opportunity the
costs incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to
consummate that transaction may result in the loss by the Company
of the related costs incurred.
There is the additional risk that the Company will not find a
suitable target. Management does not believe the Company will
generate revenue without finding and completing a transaction
with a suitable target company. If no such target is found,
therefore, no return on an investment in the Company will be
realized, and there will not, most likely, be a market for the
Company's stock.
Acquisition of Opportunities
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise, or
licensing agreement with another corporation or entity. It may
also purchase stock or assets of an existing business. Once a
transaction is complete, it is possible that the present
management and shareholders of the Company will not be in control
of the Company. In addition, a majority or all of the Company's
officers and directors may, as part of the terms of the
transaction, resign and be replaced by new officers and directors
without a vote of the Company's shareholders.
It is anticipated that securities issued in any such
reorganization would be issued in reliance on exemptions from
registration under applicable Federal and state securities laws.
In some circumstances, however, as a negotiated element of this
transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain
conditions, or at specified time thereafter. The issuance of
substantial additional securities and their potential sale into
any trading market which may develop in the Company's Common
Stock may have a depressive effect on such market.
While the actual terms of a transaction to which the Company may
be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to
avoid the creation of a taxable event and thereby structure the
acquisition in a so called "tax free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code of 1986,
as amended (the "Code"). In order to obtain tax free treatment
under the Code, it may be necessary for the owners of the
acquired business to own 80% or more of the voting stock of the
surviving entity. In such event, the shareholders of the Company,
including investors in this offering, would retain less than 20%
of the issued and outstanding shares of the surviving entity,
which could result in significant dilution in the equity of such
shareholders.
As part of the Company's investigation, officers and directors of
the Company will meet personally with management and key
personnel, may visit and inspect material facilities, obtain
independent analysis or verification of certain information
provided, check references of management and key personnel, and
take other reasonable investigative measures, to the extent of
the Company's limited financial resources and management
expertise.
The manner in which the Company participates in an opportunity
with a target company will depend on the nature of the
opportunity, the respective needs and desires of the Company and
other parties, the management of the opportunity, and the
relative negotiating strength of the Company and such other
management.
With respect to any mergers or acquisitions, negotiations with
target company management will be expected to focus on the
percentage of the Company which the target company's 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 lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage
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 Company can be expected
to have a significant dilutive effect on the percentage of shares
held by the Company's then shareholders, including purchasers in
this offering.
Management has advanced, and will continue to advance, funds
which shall be used by the Company in identifying and pursuing
agreements with target companies. Management anticipates that
these funds will be repaid from the proceeds of any agreement
with the target company, and that any such agreement may, in
fact, be contingent upon the repayment of those funds.
Competition
The Company is an insignificant participant among firms which
engage in business combinations with, or financing of,
development-stage enterprises. There are many established
management and financial consulting companies and venture capital
firms which have significantly greater financial and personal
resources, technical expertise and experience than the Company.
In view of the Company's limited financial resources and
management availability, the Company will continue to be at
significant competitive disadvantage vis-a-vis the Company's
competitors.
Year 2000 Compliance
The Company is aware of the issues associated with the
programming code in existing computer systems as the year 2000
approaches. The Company has assessed these issues as they relate
to the Company, and since the Company currently has no operating
business and does not use any computers, and since it has no
customers, suppliers or other constituents, it does not believe
that there are any material year 2000 issues to disclose in this
Form 10-SB.
Regulation and Taxation
The Investment Company Act of 1940 defines an "investment
company" as an issuer which is or holds itself out as being
engaged primarily in the business of investing, reinvesting or
trading securities. While the Company does not intend to engage
in such activities, the Company may obtain and hold a minority
interest in a number of development stage enterprises. The
Company could be expected to incur significant registration and
compliance costs if required to register under the Investment
Company Act of 1940. Accordingly, management will continue to
review the Company's activities from time to time with a view
toward reducing the likelihood the Company could be classified as
an "investment company".
The Company intends to structure a merger or acquisition in such
manner as to minimize Federal and state tax consequences to the
Company and to any target company.
Employees
The Company's only employees at the present time are its officers
and directors, who will devote as much time as the Board of
Directors determine is necessary to carry out the affairs of the
Company. (See "Item 5).
ITEM 3. DESCRIPTION OF PROPERTY.
The Company neither owns nor leases any real property at this
time. The Company does have the use of a limited amount of office
space from sole officer and director, J. E. Dhonau at no cost to
the Company, and Management expects this arrangement to continue.
The Company pays its own charges for long distance telephone
calls and other miscellaneous secretarial, photocopying, and
similar expenses.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth each person known to the Company,
as of February 24, 2000, to be a beneficial owner of five percent
(5%) or more of the Company's common stock, by the Company's
directors individually, and by all of the Company's directors and
executive officers as a group. Except as noted, each person has
sole voting and investment power with respect to the shares
shown.
<TABLE>
<S> <C> <C> <C>
Title of Name/Address Shares Percentage
Class of Owner Beneficially Ownership
Owned
Common J. E. Dhonau 5,000,000 100%
2980 S. Rainbow Blvd.
Suite 200-C
Las Vegas, NV 89129
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS
The members of the Board of Directors of the Company serve until
the next annual meeting of the stockholders, or until their
successors have been elected. The officers serve at the pleasure
of the Board of Directors.
There are no agreements for any officer or director to resign at
the request of any other person, and none of the officers or
directors named below are acting on behalf of, or at the
direction of, any other person.
The Company's officers and directors will devote their time to
the business on an "as-needed" basis, which is expected to
require 5-10 hours per month.
Information as to the directors and executive officers of the
Company is as follows:
<TABLE>
<S> <C> <C>
Name/Address Age Position
J. E. Dhonau President/Secretary/T
2980 S. Rainbow Blvd. reasurer/Director
Suite 200-C
Las Vegas, NV 89129
</TABLE>
J. E. Dhonau; President/Secretary/Treasurer/Director
Mr. Dhonau has over twenty years of experience in marketing and
business have held positions as president, national marketing
director, and regional marketing director in several national
marketing organizations. Mr. Dhonau has extensive experience in
the marketing industry having held positions in A.L. Williams,
Primerica, World Marketing Alliance, World Class Network and
VisionQuest International.
Since February 1999, Mr. Dhonau turned all focus to his own
company. Merchant Resources, Inc. emerged to assist and support
emerging companies in the technologies and Internet industry. Mr.
Dhonau offers his vast experience in business to assist companies
through many challenges of early and on-going stages of growth.
From financing through managerial implementation, Mr. Dhonau
offers his network of relationships to bring success for
management and shareholders alike.
October 1998 to February 1999, Mr. Dhonau was given the position
of president of a creative Internet e-commerce solution leading
the way into the new development and marketing of retail products
on the World Wide Web. He was instructed by the company to assist
and poise the company for a possible take-over. As of January,
1999, the proprietary software and processes of said company
began its merger with an Internet giant proving the value of
multiples through the vergence of sales on the Internet.
From January 1997 to October 1998, Mr. Dhonau also founded an
innovative communication firm, Product Partners, Inc., servicing
the network marketing industry raising $2.5M. This business
allows the conversion of Internet technologies and telephonic
software advancement to blend together for better broadcast and
messaging to field representatives of major corporations.
From March 1995 to January 1997, Mr. Dhonau served as president
of World Class Network, which developed product packages for
World Class Network. World Class Network serviced the travel
needs of twenty thousand multi-level marketing agents inside
their program.
Mr. Dhonau attended the University of Cincinnati with emphasis in
accounting and marketing. In 1984, Mr. Dhonau received the
Charlie Hustle Award from Ashland Oil Company for his
contribution to the growth of the company.
Blank Check Experience
In addition to the experience described above, Mr. J. E. Dhonau
is or has been an officer and/or director of a number of blank
check companies.
<TABLE>
<S> <C> <C> <C> <C>
Incorporation Name Form Type File Date of Status
Number Filing (4) (1)
Silver Stream Corp. Form SB-2 333- Feb. 18, No
Form SB-2 30688 2000 No
333- Feb. 24,
30992 2000
Red Bluff, Inc. Form SB-2 333- Feb. 18, No
Form SB- 30720 2000
2/A Feb. 24,
2000
Western Sky, Inc. Form SB-2 333- Feb. 18, No
Form SB- 30728 2000
2/a Feb. 24,
2000
Horizon Sky, Inc. N/A N/A N/A No
(2)
</TABLE>
(1) Under Status "No" represents that the company is currently
seeking a merger or acquisition candidate.
(2) This non-reporting company is included for information
purposes only.
(3) The SEC has no additional comments as of the date of this
filing on March 2, 2000.
(4) On the 61st day of filing, each company becomes subject to
the reporting requirements under the Securities Exchange Act of
1934.
The Company's Board of Directors has not established any
committees.
Conflicts of Interest
Insofar as the officers and directors are engaged in other
business activities, management anticipates it will devote only a
minor amount of time to the Company's affairs. The officers and
directors of the Company may in the future become shareholders,
officers or directors of other companies which may be formed for
the purpose of engaging in business activities similar to those
conducted by the Company. The Company does not currently have a
right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate
to the Company's proposed business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all
opportunities contemplated by the Company's plan of operation
which come to their attention, either in the performance of their
duties or in any other manner, will be considered opportunities
of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the
officer or director. Subject to the next paragraph, if a
situation arises in which more than one company desires to merge
with or acquire that target company and the principals of the
proposed target company have no preference as to which company
will merge or acquire such target company, the company of which
the President first became an officer and director will be
entitled to proceed with the transaction. Except as set forth
above, the Company has not adopted any other conflict of interest
policy with respect to such transactions.
Investment Company Act of 1940
Although the Company will be subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934,
management believes the Company will not be subject to regulation
under the Investment Company Act of 1940 insofar as the Company
will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business
combinations which result in the Company holding passive
investment interests in a number of entities, the Company could
be subject to regulation under the Investment Company Act of
1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant
registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission
as to the status of the Company under the Investment Company Act
of 1940 and, consequently, any violation of such Act would
subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
None of the Company's officers and/or directors receive any
compensation for their respective services rendered to the
Company, nor have they received such compensation in the past.
They both have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to
occur until the Registrant has generated revenues from operations
after consummation of a merger or acquisition. As of the date of
this registration statement, the Company has no funds available
to pay directors. Further, none of the directors are accruing any
compensation pursuant to any agreement with the Company.
It is possible that, after the Company successfully consummates a
merger or acquisition with an unaffiliated entity, that entity
may desire to employ or retain one or more members of the
Company's management for the purposes of providing services to
the surviving entity, or otherwise provide other compensation to
such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of
management will not be a consideration in the Company's decision
to undertake any proposed transaction. Each member of management
has agreed to disclose to the Company's Board of Directors any
discussions concerning possible compensation to be paid to them
by any entity which proposes to undertake a transaction with the
Company and further, to abstain from voting on such transaction.
Therefore, as a practical matter, if each member of the Company's
Board of Directors is offered compensation in any form from any
prospective merger or acquisition candidate, the proposed
transaction will not be approved by the Company's Board of
Directors as a result of the inability of the Board to
affirmatively approve such a transaction.
It is possible that persons associated with management may refer
a prospective merger or acquisition candidate to the Company. In
the event the Company consummates a transaction with any entity
referred by associates of management, it is possible that such an
associate will be compensated for their referral in the form of a
finder's fee. It is anticipated that this fee will be either in
the form of restricted common stock issued by the Company as part
of the terms of the proposed transaction, or will be in the form
of cash consideration. However, if such compensation is in the
form of cash, such payment will be tendered by the acquisition or
merger candidate, because the Company has insufficient cash
available. The amount of such finder's fee cannot be determined
as of the date of this registration statement, but is expected to
be comparable to consideration normally paid in like
transactions. No member of management of the Company will receive
any finders fee, either directly or indirectly, as a result of
their respective efforts to implement the Company's business plan
outlined herein. Persons "associated" with management is meant to
refer to persons with whom management may have had other business
dealings, but who are not affiliated with or relatives of
management.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the
Registrant for the benefit of its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors has passed a resolution which contains a
policy that the Company will not seek an acquisition or merger
with any entity in which any of the Company's Officers,
Directors, principal shareholders or their affiliates or
associates serve as officer or director or hold any ownership
interest. Management is not aware of any circumstances under
which this policy may be changed through their own initiative.
The proposed business activities described herein classify the
Company as a "blank check" company. Many states have enacted
statutes, rules and regulations limiting the sale of securities
of "blank check" companies in their respective jurisdictions.
Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as
the Company has successfully implemented its business plan
described herein.
ITEM 8. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no current market for the Company's stock. There has
been no trading in the Company's stock, therefore high and low
bid quotations are not available.
There is 1 record owner of the Company's stock. The Company has
never paid a cash dividend and has no present intention of doing
so in the foreseeable future.
Market Price
The Registrant's Common Stock is not quoted at the present time.
Effective August 11, 1993, the Securities and Exchange Commission
adopted Rule 15g-9, which established the definition of a "penny
stock," for purposes relevant to the Company, as any equity
security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and
(ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve
a person's account for transactions in penny stocks, the broker
or dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a
reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating
to the penny stock market, which, in highlight form, (i) sets
forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks
of investing in penny stocks in both public offerings and in
secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in
the account and information on the limited market in penny
stocks.
The National Association of Securities Dealers, Inc. (the
"NASD"), which administers NASDAQ, has recently made changes in
the criteria for initial listing on the NASDAQ Small Cap market
and for continued listing. For initial listing, a company must
have net tangible assets of $4 million, market capitalization of
$50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years.
For initial listing, the common stock must also have a minimum
bid price of $4 per share. In order to continue to be included on
NASDAQ, a company must maintain $2,000,000 in net tangible assets
and a $1,000,000 market value of its publicly-traded securities.
In addition, continued inclusion requires two market-makers and a
minimum bid price of $1.00 per share.
Management intends to strongly consider undertaking a transaction
with any merger or acquisition candidate which will allow the
Company's securities to be traded without the aforesaid
limitations. However, there can be no assurances that, upon a
successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange,
or be able to maintain the maintenance criteria necessary to
insure continued listing. The failure of the Company to qualify
its securities or to meet the relevant maintenance criteria after
such qualification in the future may result in the discontinuance
of the inclusion of the Company's securities on a national
exchange. In such events, trading, if any, in the Company's
securities may then continue in the non-NASDAQ over-the-counter
market. As a result, a shareholder may find it more difficult to
dispose of, or to obtain accurate quotations as to the market
value of, the Company's securities.
Holders
There is 1 holder of the Company's Common Stock. On February 24,
2000, the Company issued 5,000,000 shares of its stock to the
founder of the corporation and the sole officer and director. All
of the issued and outstanding shares of the Company's Common
Stock were issued in accordance with the exemption from
registration afforded by Section 4(2) of the Securities Act of
1933.
Dividends
The Registrant has not paid any dividends to date, and has no
plans to do so in the immediate future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
With respect to the sales made, the Registrant relied on Section
4(2) of the Securities Act of 1933, as amended. No advertising or
general solicitation was employed in offering the shares. The
securities were offered for investment only and not for the
purpose of resale or distribution, and the transfer thereof was
appropriately restricted.
Of the issued and outstanding shares, all 5,000,000 are subject
to resale restrictions and, unless registered under the
Securities Act of 1933 (the "Act") or exempted under another
provision of the Act, will be ineligible for sale in the public
market. In general, under Rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one year holding
period, under certain circumstances, may sell within any three-
month period a number of shares which does not exceed the greater
of one percent of the then outstanding Common Stock or the
average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation
by a person who has satisfied a two-year holding period and who
is not, and has not been for the preceding three months, an
affiliate of the Company.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The Company's Articles of Incorporation authorizes the issuance
of 25,000,000 shares of Common Stock, par value $0.001 per share,
of which 5,000,000 are issued and outstanding. The shares are non-
assessable, without pre-emptive rights, and do not carry
cumulative voting rights. Holders of common shares are entitled
to one vote for each share on all matters to be voted on by the
stockholders. The shares are fully paid, non-assessable, without
pre-emptive rights, and do not carry cumulative voting rights.
Holders of common shares are entitled to share ratably in
dividends, if any, as may be declared by the Company from time-to-
time, from funds legally available. In the event of a
liquidation, dissolution, or winding up of the Company, the
holders of shares of common stock are entitled to share on a pro-
rata basis all assets remaining after payment in full of all
liabilities.
Management is not aware of any circumstances in which additional
shares of any class or series of the Company's stock would be
issued to management or promoters, or affiliates or associates of
either.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and its affiliates may not be liable to its
shareholders for errors in judgment or other acts or omissions
not amounting to intentional misconduct, fraud, or a knowing
violation of the law, since provisions have been made in the
Articles of incorporation and By-laws limiting such liability.
The Articles of Incorporation and By-laws also provide for
indemnification of the officers and directors of the Company in
most cases for any liability suffered by them or arising from
their activities as officers and directors of the Company if they
were not engaged in intentional misconduct, fraud, or a knowing
violation of the law. Therefore, purchasers of these securities
may have a more limited right of action than they would have
except for this limitation in the Articles of Incorporation and
By-laws.
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means such officers and directors
are required to exercise good faith and integrity in handling the
Company's affairs. A shareholder may be able to institute legal
action on behalf of himself and all others similarly stated
shareholders to recover damages where the Company has failed or
refused to observe the law.
Shareholders may, subject to applicable rules of civil procedure,
be able to bring a class action or derivative suit to enforce
their rights, including rights under certain federal and state
securities laws and regulations. Shareholders who have suffered
losses in connection with the purchase or sale of their interest
in the Company in connection with such sale or purchase,
including the misapplication by any such officer or director of
the proceeds from the sale of these securities, may be able to
recover such losses from the Company.
ITEM 13. FINANCIAL STATEMENTS.
The financial statements and supplemental data required by this
Item 13 follow the index of financial statements appearing at
Item 15 of this Form 10-SB.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Registrant has not changed accountants since its formation,
and Management has had no disagreements with the findings of its
accountants.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS
Report of Independent Auditors, Merdinger, Fruchter,
Rosen & Corso, P.C., dated March 1, 2000
Balance Sheet as of February 24, 2000
Notes to Financial Statements
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
888 SEVENTH AVENUE
NEW YORK, NEW YORK 10106
----------------
TEL: (212) 757-6400
FAX: (212) 757-6124
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of PARTICLE 2,
INC. as of February 24, 2000. The financial statement is the
responsibility of the Company's management. Our responsibility is
to express an opinion on this financial statement based on our
audit.
We conduct our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present farily, in all material respects, the financial
position of PARTICLE 2, INC. as of February 24, 2000 in
conformity with generally accepted accounting principles.
/s/ Merdinger, Fruchter, Rosen & Corso, P.C.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
March 1, 2000
PARTICLE 2, INC.
BALANCE SHEET
FEBRUARY 24, 2000
<TABLE>
<S> <C>
ASSETS $
-
LIABILITIES
Capital -
Subscription of Stock Receivable (5,000)
Common Stock, $0.001 par value; 5,000
50,000,000 shares authorized,
5,000,000 share issued and outstanding
Total Capital -
TOTAL LIABILITIES $ -
</TABLE>
The accompanying note is an integral part of the financial
statement.
PARTICLE 2, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 24, 2000
NOTE 1 - NATURE OF OPERATIONS
Particle 2, Inc. was incorporated on February 24, 2000 in the
State of Nevada. The Corporation's principal business activity
has not been determined.
EXHIBITS
3.1 Articles of Incorporation
3.2 By-Laws
Articles of Incorporation
of
Particle 2, Inc.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, for the purpose of association to
establish a corporation for the transaction of business and the
promotion and conduct of the objects and purposes hereinafter
stated, under the provisions of and subject to the requirements
of the laws of the State of Nevada, do make, record and file
these Articles of Incorporation in writing.
AND WE DO HEREBY CERTIFY:
ARTICLE ONE: The name of this Corporation is:
Particle 2, Inc.
Article Two: The principal office in the State of Nevada is to
be located at:
2980 S. Rainbow Blvd., #200-C, Las Vegas, Nevada 89146
The Resident agent for this Corporation shall be:
J. E. Dhonau, of Merchant Resources, 2980 S. Rainbow Blvd.
#200-C, Las Vegas, Nevada 89146. This Corporation may also
maintain an office or offices at such other places within or
outside the State of Nevada, as it may from time to time
determine. Corporate business of every kind and nature may be
conducted, and meetings of directors and stockholders held
outside the State of Nevada, the same as in the State of
Nevada.
Article Three: This Corporation may engage in any lawful
activity.
Article Four: This Corporation is authorized to issue only one
class of shares of stock, the total number of which is 25,000,000
shares, each with par value of $0.001. Such stock may be issued
by this Corporation from time to time by the Board of Directors
thereof. The shares of stock shall be designated "Common Stock"
and the holders thereof shall be entitled to one (1) vote for
each share held by them.
Article Five: No Director or Officer of this Corporation shall
be liable to this Corporation or its stockholders for any breach
of fiduciary duty as Officer or Director of this Corporation.
This provision shall not affect liability for acts or omissions
which involve intentional misconduct, fraud, a knowing violation
or law, or the payment of dividends in violation of NRS 78.300.
All expenses incurred by Officers or Directors in defending a
civil or criminal action, suit, or proceeding, must be paid by
this Corporation as they are incurred in advance of a final
disposition of the action, suit or proceeding, upon receipt of
an undertaking by or on behalf of a Director or Officer to
repay the amount if it is ultimately determined by a court of
competent jurisdiction, that he or she did not act in good
faith, and in the manner he or she reasonably believed to be
or not opposed to the best interests of this Corporation.
The members of the governing Board shall be styled Directors,
and the number of Directors shall not be less than one (1)
pursuant to the terms of NRS 78.115. The names and addresses
of the first Board of Directors, which shall consist of one
(1) members are:
<TABLE>
<S> <C>
J. E. Dhonau 2980 S. Rainbow Blvd.,
#200-C, Las Vegas,
Nevada 89146
</TABLE>
The number of Directors of this Corporation may from time to
time be increased or decreased as set forth hereinabove by an
amendment to the By-Laws in that regard, and without the
necessity of amending these Articles of Incorporation.
The name and address of the incorporator is:
<TABLE>
<S> <C>
J. E. Dhonau 2980 S. Rainbow Blvd.,
#200-C
Las Vegas, NV 89146
</TABLE>
Article Six: The capital stock of this Corporation, after the
amount of the subscription price has been paid in cash or in
kind, shall be and remain non-assessable and shall not be subject
to assessment to pay debts of this Corporation.
Article Seven: This Corporation shall have perpetual
existence.
Article Eight: No holder of any shares of this Corporation
shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of this Corporation of any class now
or hereafter authorized, or any securities exchangeable for or
convertible into such shares, or warrants or other instruments
evidencing rights or options to subscribe for, purchase or
otherwise acquire such shares.
Article Nine: This Corporation shall not be governed by the
provisions of NRS 78.411 to 78.444, inclusive.
Executed this 23rd day of February, 2000.
/s/ J. E. Dhonau
J. E. Dhonau, Incorporator
By-Laws
of
Particle 2, Inc.
ARTICLE I
Meetings of Stockholders
Section 1. The annual meeting of the stockholders of this
Corporation shall be held at the principal executive office of
this Corporation, or at any other place, within or outside of the
State of Nevada, specified by the Board of Directors. The annual
meeting of the stockholders, after the year of incorporation,
shall be held at the time and date in each year fixed by the
Board of Directors. The meeting shall be held for the purpose of
electing directors of this Corporation to serve during the
ensuing year and for the transaction of such other business as
may be brought before the meeting.
At least ten (10) days' written notice specifying the day,
hour and place when and where the annual meeting shall be
convened, shall be mailed in a United States Post Office
addressed to each of the stockholders of record at the time of
issuing the notice at his, her or its address last known as it
appears on the books of this Corporation.
Section 2. Special meetings of the stockholders may be held
at the office of this Corporation in the State of Nevada, or
elsewhere, whenever called by the President, by the Board of
Directors, or by a vote of or an instrument in writing signed by
the holders of at least a majority of the issued and outstanding
capital stock of this Corporation. At least ten (10) days'
written notice specifying the day, hour and place when and there
the annual meeting shall be convened, shall be mailed in a United
States Post Office addressed to each of the stockholders of
record at the time of issuing the notice at his, her or its
address last known as it appears on the books of this
Corporation.
Section 3. If all the stockholders of this Corporation shall
waive notice of a meeting, no notice of such meeting shall be
required, and whenever all of the stockholders shall meet in
person or by proxy, such meeting shall be valid for all purposes,
without call or notice, and at such meeting any corporate action
may be taken.
The written certificate of the officer or officers calling any
meeting, setting forth the substance of the notice and the
day, hour and place of the mailing of the same to the several
stockholders, and the respective addresses to which the same
were mailed shall be prima facie evidence of the manner and
fact of the calling and giving of such notice.
If the address of any stockholder does not appear upon the
books of this Corporation, it will be sufficient to address
any notice to such stockholder at the principal office of this
Corporation.
Section 4. All business lawful to be transacted by the
stockholders of this Corporation may be transacted at any special
meeting or at any adjournment thereof. Only such business
referred to in the notice calling such special meeting, however,
shall be acted upon during such special meeting or adjournment,
unless all of the outstanding capital stock of this Corporation
is represented either in person or by proxy, in which case any
lawful business may be transacted, and such meeting shall be
valid for all purposes.
Section 5. At the stockholders' meetings, the holders of a
majority of the entire issued and outstanding capital stock of
this Corporation shall constitute a quorum for all purposes. If
the holders of the amount of stock necessary to constitute a
quorum shall fail to attend (at the time and place fixed by these
By-Laws for any annual meeting, or fixed by a notice as provided
above for any special meeting), either in person or by proxy, a
majority in interest of the stockholders present in person or by
proxy may adjourn from time-to-time without notice other than by
announcement at the meeting, until holders of the amount of stock
requisite to constitute a quorum shall attend. Any business that
might have been transacted at the originally-called meeting may
be transacted at any such adjourned meeting at which a quorum
shall be present.
Section 6. At such meeting of the stockholders, every
stockholder shall be entitled to vote in person or by his duly-
authorized proxy appointed by instrument in writing subscribed by
such stockholder of by his duly-authorized attorney. Each
stockholder shall have one (1) vote for each share of stock
standing registered in his, her or its name on the book of the
Corporation, ten (10) days preceding the day of such meeting. The
votes for directors, and upon demand by any stockholder, upon any
question properly before the meeting, shall be by viva voce.
At each meeting of the stockholders, a full, true and complete
list, in alphabetical order, indicating all stockholders
entitled to vote at such meeting and the number of shares held
by each such stockholder, certified by the Secretary of this
Corporation, shall be furnished. The list shall be prepared at
least ten (10) days before such meeting and shall be open to
inspection by the stockholders, their agents or their proxies,
at the place where such meeting is to be held, and for ten
(10) days prior thereto. Only persons in whose names shares of
stock are registered on the books of this Corporation for ten
(10) days preceding the date of such meeting, as evidenced by
the list of stockholders, shall be entitled to vote at such
meeting. Proxies and powers-of-attorney to vote must be filed
with the Secretary of this Corporation before an election or a
meeting of the stockholders, or they cannot be used at such
election or meeting.
Section 7. At each meeting of the stockholders, the polls
shall be opened and closed; the proxies and ballots issued,
received, and be taken in charge of, for the purpose of the
meeting, and all questions touching the qualifications of voters
and the validity of proxies, and the acceptance or rejection of
votes, shall be decided by two inspectors. Such inspectors shall
be appointed at the meeting by the presiding officer of the
meeting.
Section 8. At the stockholders' meetings the regular order of
business shall be as follows:
Reading and approving the Minutes of previous meeting or
meetings;
Reports of the Board of Directors, President, Treasurer,
and/or Secretary of this Corporation in the order listed;
Reports of any Committee;
Election of Directors;
Unfinished business;
New business;
Adjournment.
ARTICLE II
Directors and Their Meetings
Section 1. The Board of Directors of this Corporation shall
consist of no less than one (1) and no more than five (5) persons
who shall be chosen by the stockholders at the annual meeting.
Each Director shall hold office for one year, and until his or
her successor is elected and qualified. The initial Board shall
consist of five (5) Directors.
Section 2. When any vacancy occurs among the Directors as a
result of death, resignation, disqualification or other cause,
the stockholders, at any regular or special meeting, or at any
adjourned meeting thereof, or the remaining Directors, if any, by
the affirmative vote of a majority thereof, shall elect a
successor to hold office for the unexpired portion of the term of
the Director whose place shall have become vacant and until his
or her successor is elected and qualified.
Section 3. The meeting of the Directors may be held at the
principal office of this Corporation in the State of Nevada, or
elsewhere, at such place or places as the Board of Directors may,
from time-to-time, determine.
Section 4. Regular meetings of the Board of Directors shall
be held as often as necessary. Notice of such regular meetings
shall be mailed to each director by the Secretary at least three
(3) days prior to the day fixed for such meeting. No regular
meeting shall be held void or invalid if such notice is not
given, provided that the meeting is held at the time and place
fixed by these By-Laws for holding such regular meetings.
Special meetings of the Board of Directors may be held on the
call of the President or Secretary on at least three (3) days'
notice by mail or telegraph.
Any meeting of the Board, no matter where held, at which all
of the members shall be present, even though without notice,
or of which notice shall have been waived by all absent
Directors, shall be valid for all purposes, provided a quorum
shall be present, unless otherwise indicated in the notice
calling the meeting or in the waiver of notice.
Any and all business may be transacted at any regular or
special meeting of the Board of Directors.
Section 5. A majority of the Directors in office shall
constitute a quorum for the transaction of business. At any
meeting at which less than a quorum is present, a majority of
Directors present may vote to adjourn from time-to-time until a
quorum shall be present; no notice of such adjournment shall be
required. The Board of Directors may prescribe rules not in
conflict with these By-Laws for the conduct of its business;
provided, however, that in fixing salaries for officers of this
Corporation, the unanimous action of all Directors shall be
required.
Section 6. A Director need not be a stockholder of this
Corporation.
Section 7. The Directors shall be allowed and paid all
necessary expenses incurred in attending any meeting of the
Board, but shall not receive any compensation for their services
as directors until such time as this Corporation is able to
declare and pay dividends on its capital stock.
Section 8. The Board of Directors shall make a report to the
stockholders at annual meetings of the stockholders and shall,
upon request, furnish a true copy of such report to each
stockholder. The Board, in its discretion, may submit any
contract or act for approval or ratification at any meeting of
stockholders called for the purpose of considering any such
contract or act, provided a quorum is present.
Section 9. The Board of Directors shall have the power from
time-to-time to provide for the management of the offices of this
Corporation in such manner as they see fit, and in particular,
from time-to-time to delegate any of the powers of the Board in
the course of the current business of this Corporation to any
standing or special committee or to any officer or agent and to
appoint any persons to be agents of this Corporation with such
powers (including the power to sub-delegate), and upon such terms
as may be deemed fit.
Section 10. At meetings of the Board of Directors, the regular
order of business shall be as follows:
Reading and approving the Minutes of previous meeting or
meetings;
Reports of Officers and Committee-members;
Election of Officers;
Unfinished business;
New business;
Adjournment.
ARTICLE III
Officers and Their Duties
Section 1. The officers of this Corporation shall consist of
the President, the Secretary, and the Treasurer, each of whom
shall be appointed by the Board of Directors. This Corporation
may also have one or more Vice Presidents, Assistant Secretaries,
or Assistant Treasurers. The Board of Directors may appoint other
officers. The order of seniority of the Vice Presidents, if any
such officers exist, shall be the order of their nomination
unless otherwise determined by the Board of Directors. Any two or
more of such offices may be held by the same individual. The
Board of Directors shall designate one officer as the chief
financial officer (CFO) of this Corporation. In the absence of
such designation, the Treasurer shall be the CFO. The Board of
Directors may appoint, and may empower the President to appoint,
such other officers as the business of this Corporation may
require. Each of these other officers shall have such authority
and may perform such duties as are provided in these By-Laws or
as the Board of Directors may determine from time-to-time. The
salary and other compensation of officers shall be fixed from
time-to-time by resolution or in the manner determined by the
Board of Directors.
Each officer of this Corporation shall hold office from the
date elected to the date when his or her successor is elected;
provided that all officers, as well as any employee or agent
of this Corporation, may be removed at any time at the
pleasure of the Board of Directors. Nothing in these By-Laws
shall be construed as creating any kind of contractual right
to employment with this Corporation. Any officer may resign at
any time by giving written notice to the Board of Directors,
the President or the Secretary of this Corporation. Receipt of
such notice, however, is without prejudice to the rights, if
any, of this Corporation under any contract to which such
officer is a party. Any such resignation shall take effect at
the date of receipt or at such later time specified therein.
Unless otherwise specified therein, acceptance of such
resignation is not necessary for the resignation to become
effective. A vacant office may be filled by vote of the Board
of Directors, or the Board may vest an officer with the power
to fill a vacant office.
Section 2. The President shall be the executive officer of
this Corporation and shall have a duty to supervise, control and
manage the day-to-day operation of this Corporation, subject only
to directions from the Board of Directors with regard to the
direction of this Corporation's affairs. The President shall have
full power to execute any and all documents for and on behalf of
this Corporation, including, but not limited to, entering into
leases for real property, equipment, furniture, furnishings,
hiring and firing all personnel, setting and establishing
operational manuals and policies, entering into contracts
necessary for the day-to-day operation of this Corporation,
establishing lines of credit for this Corporation and accounts
payable thereof; except when such powers have been specifically
limited by the Board of Directors. The President shall also be a
member and chairman of any Executive Committee that may be
established; shall preside at all meetings of the Board of
Directors and all meetings of stockholders; shall sign all
Certificates of Stock issued by this Corporation; perform any and
all other duties prescribed by the Board of Directors which can
be performed during the normal work period.
Section 3. The Vice Presidents (if any such officers are
appointed), in order of their seniority, may assume and perform
the duties of the President in the absence or disability of the
President, or at such times that the office of the President is
vacant. The Vice Presidents shall have such titles, perform such
other duties, and have such other powers as the Board of
Directors, the President, or these By-Laws may designate from
time-to-time.
Section 4. The Treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the
properties and business transactions of this Corporation. The
books of account shall at all reasonable times be open to
inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in
the name of and to the credit of this Corporation, with such
depositories as may be designated by the Board of Directors.
The Treasurer shall render to the President and the Directors,
whenever they request, an account of all the Treasurer's
transactions as Treasurer, and of the financial condition of
this Corporation.
The Treasurer shall be responsible for the establishment and
maintenance of accounting and other systems required to
control and account for the assets of this Corporation, and
provide safeguards therefore; to collect information required
for management purposes; and to perform such other duties, and
to have such other powers, as the Board of Directors or the
President may designate from time-to-time.
The President may direct any Assistant Treasurer to assume and
perform the duties of the Treasurer in the absence or
disability of the Treasurer, and each Assistant Treasurer
shall perform such other duties and have such other powers as
the Board of Directors or the President may designate from
time-to-time.
Section 5. The Secretary shall keep the minutes of all
meetings of the Board of Directors, the stockholders, and the
Executive Committee, if any, in books provided for such purpose.
The Secretary shall attend to the giving and serving of all
notices of this Corporation; may sign with the President or Vice
President, in the name of this Corporation, all contracts
authorized by the Board of Directors or Executive Committee;
shall affix the corporate seal of this Corporation thereto when
so authorized by the Board of Directors or Executive Committee;
shall have custody of the corporate seal; shall affix the
corporate seal to all Certificates of Stock duly issued by this
Corporation; shall have charge of the Stock Certificate Books,
Transfer Books, Stock Ledgers and such other books and papers as
the Board of Directors or Executive Committee may direct, all of
which shall at all reasonable times be open to the examination of
any Director upon application at the office of this Corporation
during business hours; and shall, in general, perform all duties
incident to the office of Secretary.
Section 6. The Board of Directors may appoint an Assistant
Secretary who shall have such powers and perform such duties as
may be prescribed by the Secretary or the Board of Directors.
Section 7. Unless otherwise ordered by the Board of
Directors, the President shall have full power and authority on
behalf of this Corporation to attend and to act and vote at any
meeting of the stockholders of any corporation in which this
Corporation may hold stock. At such meetings, the President shall
possess and may exercise any and all rights and powers incident
to the ownership of such stock, and which, as the owner thereof,
this Corporation might have possessed and exercised if present.
The Board of Directors, by resolution, from time-to-time, may
confer like powers on any person or persons in place of the
President to represent this Corporation for the purposes in this
section mentioned.
ARTICLE IV
Capital Stock
Section 1. The capital stock of this Corporation shall be
issued in such manner, at such times, and upon such conditions as
shall be prescribed by the Board of Directors.
Section 2. Ownership of stock in this Corporation shall be
evidenced by Certificates of Stock in such forms as shall be
prescribed by the Board of Directors, and shall be under the seal
of this Corporation and signed by the President or Vice President
and the Secretary or Assistant Secretary. No certificate shall be
valid unless it is so signed.
All Certificates shall be numbered consecutively. The name of
the person owning the shares represented thereby with the
number of such shares and the date of issue shall be entered
upon the books of this Corporation.
All certificates surrendered to this Corporation shall be
canceled. No new certificate shall be issued until the former
certificate for the same number of shares shall have been
surrendered or canceled.
Section 3. No transfer of stock shall be valid as against
this Corporation except on surrender and cancellation therefore,
accompanied by an assignment or transfer by the owner, made
either in person or under assignment, a new certificate shall be
issued therefore.
Whenever any transfer shall be expressed as made for
collateral security and not absolutely, the same shall be
expressed in the entry of said transfer on the books of this
Corporation.
Section 4. The Board of Directors shall have power and
authority to make all such rules and regulations not inconsistent
herewith as it may deem expedient concerning the issue, transfer
and registration of Certificates for shares of the capital stock
of this Corporation. The Board of Directors may appoint a
transfer agent and registrar of transfers, and may require all
Certificates to bear the signature of such transfer agent and
registrar of transfers.
Section 5. The Stock Transfer Books shall be closed for all
meetings of the stockholders for the period of ten (10) days
prior to such meetings, and shall be closed for the payment of
dividends during such periods as may be fixed from time-to-time
by the Board of Directors. During such periods, no stock shall be
transferable.
Section 6. Any person or persons applying for a Certificate
in lieu of one alleged to have been lost or destroyed shall make
affidavit of affirmation of the fact, and shall deposit with this
Corporation an affidavit. Whereupon, at the end of six months
after the deposit of said affidavit and upon such person or
persons giving bond of indemnity to this Corporation in an amount
double the current value of the stock against any damage, loss,
or inconvenience to this Corporation, which may or can arise in
consequence of a new or duplicate Certificate being issued in
lieu of the one lost or missing, the Board of Directors may cause
to be issued to such person or persons a new Certificate, or a
duplicate of the Certificate so lost or destroyed. The Board of
Directors may, in its discretion, refuse to issue such new or
duplicate Certificate save upon the order of some court having
jurisdiction in such matter, anything herein to the contrary
notwithstanding.
Section 7. All holders of stock of this Corporation are
subject to the provisions of Article IX of these By-Laws.
Section 8. Each certificate evidencing ownership of stock in
this Corporation shall contain the following endorsement upon its
face so as to give notice to any transferee thereof:
"The shares of stock represented by this certificate are subject
to all of the terms expressed in the Corporation's By-Laws,
particularly those in Article IX that restrict the transfer or
encumbrance of these shares. A copy of the By-Laws is on file at
the Corporation's office."
ARTICLE V
Offices and Books
Section 1. The principal office of this Corporation, in
Nevada, shall be:
2980 South Rainbow Boulevard, Suite 200-C, Las Vegas, NV 89129
Section 2. This Corporation may have a principal office in
any other state or territory as the Board of Directors may
designate.
Section 3. The Stock and Transfer Books and a copy of the By-
Laws and Articles of Incorporation of this Corporation shall be
kept at its principal office in the State of Nevada, for the
inspection of all who are authorized or have the right to see the
same, and for the transfer of stock. All other books of this
Corporation shall be kept at such places as may be prescribed by
the Board of Directors.
ARTICLE VI
Indemnification
Section 1. For purposes of this Article, "Indemnitee" shall
mean each Director or Officer who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in,
any Proceeding (as hereinafter defined), by reason of the fact
that he or she is or was a Director or Officer of this
Corporation or is or was serving in any capacity at the request
of this Corporation as a Director, Officer, employee, agent,
partner, or fiduciary of, or in any other capacity for, another
corporation, partnership, joint venture, trust, or other
enterprise. The term "Proceeding" shall mean any threatened,
pending or completed action or suit (including, without
limitation, an action, suit or proceeding by or in the right of
this Corporation), whether civil, criminal, administrative or
investigative.
Each Indemnitee shall be indemnified and held harmless by this
Corporation for all actions taken by him or her, and for all
omissions (regardless of the date of any such action or
omission), to the fullest extent permitted by Nevada law,
against all expense, liability and loss (including, without
limitation, attorney fees, judgments, fines, taxes, penalties,
and amounts paid or to be paid in settlement) reasonably
incurred or suffered by the Indemnitee in connection with any
Proceeding.
Indemnification pursuant to this Section shall continue as to
an Indemnitee who has ceased to be a Director or Officer and
shall inure to the benefit of his or her heirs, executors and
administrators.
This Corporation may, by action of its Board of Directors, and
to the extent provided in such action, indemnify employees and
other persons as though they were Indemnitees.
The rights to indemnification as provided in this Article
shall be non-exclusive of any other rights that any person may
have or hereafter acquire under an statute, provision of this
Corporation's Articles of Incorporation or By-Laws, agreement,
vote of stockholders or Directors, or otherwise.
Section 2. This Corporation may purchase and maintain
insurance or make other financial arrangements on behalf of any
person who is or was a Director, Officer, employee or agent of
this Corporation, or is or was serving at the request of this
Corporation in such capacity for another corporation,
partnership, joint venture, trust or other enterprise for any
liability asserted against him or her and liability and expenses
incurred by him or her in such capacity, whether or not this
Corporation has the authority to indemnify him or her against
such liability and expenses.
The other financial arrangements which may be made by this
Corporation may include, but are not limited to, (a) creating
a trust fund; (b) establishing a program of self-insurance;
(c) securing its obligation of indemnification by granting a
security interest or other lien on any of this Corporation's
assets, and (d) establishing a letter of credit, guarantee or
surety. No financial arrangement made pursuant to this section
may provide protection for a person adjudged by a court of
competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for intentional misconduct, fraud, or
a knowing violation of law, except with respect to advancing
expenses or indemnification ordered by a court.
Any insurance or other financial arrangement made on behalf of
a person pursuant to this section may be provided by this
Corporation or any other person approved by the Board of
Directors, even if all or part of the other person's stock or
other securities is owned by this Corporation. In the absence
of fraud:
the decision of the Board of Directors as to the propriety
of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section, and the choice of the
person to provide the insurance or other financial arrangement is
conclusive; and
the insurance or other financial arrangement
v is not void or voidable; and
v does not subject any Director approving it to personal
liability for his action,
v even if a Director approving the insurance or other
financial arrangement is a beneficiary of the insurance or other
financial arrangement.
Section 3. The provisions of this Article relating to
indemnification shall constitute a contract between this
Corporation and each of its Directors and Officers, which may be
modified as to any Director or Officer only with that person's
consent or as specifically provided in this section.
Notwithstanding any other provision of the By-Laws relating to
their amendment generally, any repeal or amendment of this
Article which is adverse to any Director or Officer shall apply
to such Director or Officer only on a prospective basis and shall
not limit the rights of an Indemnitee to indemnification with
respect to any action or failure to act occurring prior to the
time of such repeal or amendment. Notwithstanding any other
provision of these By-Laws, no repeal or amendment of these By-
Laws shall affect any or all of this Article so as to limit or
reduce the indemnification in any manner unless adopted by (a)
the unanimous vote of the Directors of this Corporation then
serving, or (b) the stockholders as set forth in ARTICLE VIII
hereof; provided that no such amendment shall have retroactive
effect inconsistent with the preceding sentence.
Section 4. References in this Article to Nevada law or to any
provision thereof shall be to such law as it existed on the date
these By-Laws were adopted or as such law thereafter may be
changed; provided that (a) in the case of any change which
expands the liability of an Indemnitee or limits the
indemnification rights or the rights to advancement of expenses
which this Corporation may provide, the rights to limited
liability, to indemnification and to the advancement of expenses
provided in this Corporation's Articles of Incorporation, these
By-Laws, or both shall continue as theretofore to the extent
permitted by law; and (b) if such change permits this
Corporation, without the requirement of any further action by
stockholders or Directors, to limit further the liability of
Indemnitees or to provide broader indemnification rights or
rights to the advancement of expenses than this Corporation was
permitted to provide prior to such change, liability thereupon
shall be so limited and the rights to indemnification and
advancement of expenses shall be so broadened to the extent
permitted by law.
ARTICLE VII
Miscellaneous
Section 1. The Board of Directors shall have power to reserve
over and above the capital stock paid in, such an amount in its
discretion, as it may deem advisable, to fix as a reserve fund,
and may, from time-to-time, declare dividends from the
accumulated profits of this Corporation in excess of the amounts
so reserved and pay the same to the stockholders of this
Corporation, and may also, if it deems the same advisable,
declare stock dividends of the unissued capital stock of this
Corporation.
Section 2. No agreement, contract or obligation (other than
checks in payment of indebtedness incurred by authority of the
Board of Directors) involving the payment of moneys or the credit
of this Corporation of more than FIVE THOUSAND DOLLARS ($5,000),
shall be made without the authority of the Board of Directors or
of the Executive Committee, if any.
Section 3. Unless otherwise ordered by the Board of
Directors, all agreements and contracts shall be signed by the
President and the Secretary in the name and on behalf of this
Corporation, and shall have the Corporate Seal attached thereto.
Section 4. All moneys of this Corporation shall be deposited
when and as received by the Treasurer in such bank or banks or
other depository as may from time-to-time be designated by the
Board of Directors, and such deposits shall be made in the name
of this Corporation.
Section 5. No note, draft, acceptance, endorsement or other
evidence of indebtedness shall be valid against this Corporation
unless the same shall be signed by the President or Vice
President and attested by the Secretary or an Assistant
Secretary, or signed by the Treasurer or an Assistant Treasurer
and countersigned by the President, Vice President or Secretary,
except that the Treasurer or an Assistant Treasurer may, without
countersignature, make endorsements for deposit to the credit of
this Corporation in all its duly authorized depositories.
Section 6. No loan or advance of money shall be made by this
Corporation to any stockholder or Officer therein, unless the
Board of Directors shall otherwise authorize.
Section 7. No Director or Officer of this Corporation shall
be entitled to any salary or compensation for any services
performed for this Corporation, unless such salary or
compensation shall be fixed by resolution of the Board of
Directors, adopted by the unanimous vote of all the Directors
voting in favor thereof.
Section 8. This Corporation may take, acquire, hold,
mortgage, sell or otherwise deal in stocks, bonds or other
securities of any other Corporation, if and as often as the Board
of Directors shall so elect.
Section 9. The Directors shall have the power to authorize
and cause to be executed, mortgages and liens, without limit as
to amount, upon the property and franchise of this Corporation.
Pursuant to affirmative vote, either in person or by proxy, of
the holders of a majority of the capital stock issued and
outstanding, the Directors shall have the authority to dispose in
any manner of the whole property of this Corporation.
Section 10. This Corporation shall have a Corporate Seal, the
design thereof being as follows:
ARTICLE VIII
Amendment of By-Laws
Section 1. Amendments and changes of these By-Laws may be
made at any regular or special meeting of the Board of Directors
by a vote of not less than all of the entire Board, or may be
made by a vote of, or a consent in writing by the holders of a
majority of the issued and outstanding capital stock.
ARTICLE IX
Restrictions on Transfers of Stock
Section 1 Restrictions
Section 1.1 No stock of this Corporation shall be transferred
on the books of this Corporation unless in compliance with the
terms of this Article.
Section 1.2 Except as otherwise provided below, a shareholder
is hereby prohibited from making a voluntary sale, transfer,
assignment, hypothecation, gift, or any other alienation of any
share or shares in this Corporation, or any right or interest
therein; nor shall a shareholder allow any such share or shares
to become subject to an involuntary transfer by order of a court,
sale upon execution of a judgment, appointment of a receiver or
trustee in bankruptcy for a shareholder, or any other legal
process resulting in a transfer of said shares.
Section 1.3 In the event that a shareholder desires to make a
prohibited voluntary transfer, or has been forced to subject his
stock to a prohibited involuntary transfer, the shareholder shall
be required to offer for sale to this Corporation all of his
shares subject to such a prohibited transfer, at the price and
upon the terms specified in this Article. This Corporation shall
be notified of the offer by the shareholder in writing, and that
shall constitute a notice of disposition of shares within the
meaning of section 2 below.
Section 1.4 Any shares of stock of this Corporation shall be
subject to the terms of this Article, and any holder hereof shall
confirm in writing the holder's obligation to be bound by all of
the terms, provision, options, and restrictions of this Article.
Section 2 Purchase of shares
Section 2.1 Within a period of sixty (60) days following the
delivery of such notice of disposition of shares, this
Corporation shall notify the holder of such shares (the "Selling
Shareholder") if it elects to purchase all or a portion of such
shares.
Section 2.2 The occurrence of any event which would require
transmission to this Corporation of a notice of disposition of
shares shall immediately give rise to all options given herein to
this Corporation and its shareholders to purchase such shares,
and such options may be exercised without regard to whether any
notice of disposition of shares is in fact given by the Selling
Shareholder. The period under section 2.1 above shall not,
however, begin to run until this Corporation, through its
officers or directors, shall have actual knowledge of such event.
Section 2.3 To the extent this Corporation elects not to
purchase such shares or is legally prohibited from doing so, it
shall, within the said sixty (60) day period, so notify all
shareholders of record who own at least twenty percent (20%) of
the outstanding stock of this Corporation (a "Qualified
Shareholder"). Any such shareholder may, within thirty (30) days
after the service of such notice, elect to purchase any part or
all of the stock so offered. Any Qualified Shareholder desiring
to purchase said stock shall notify the Selling Shareholder in
writing within the said thirty (30) day period. In the event more
than one Qualified Shareholder desires to purchase said stock,
those shares shall be prorated among them based upon their
respective holdings in this Corporation.
Section 2.4 In the event this Corporation and all Qualified
Shareholders declines to purchase said stock, the holder may
within a period of six months from the date of giving said notice
sell or transfer said stock as he or she may see fit. The person
or persons acquiring said stock shall hold it subject to all the
terms, conditions and options contained in this Article. If no
transfer is made within the six month period, no further
disposition of said stock may be made without again giving the
notice and providing the option to this Corporation as set forth
herein.
Section 2.5 The purchase price and terms of any purchase under
this Article shall be as set forth in sections 6 and 7 below.
Section 3 Notwithstanding the above provisions, a shareholder may
make a lifetime gift of his stock, whether in trust or outright,
to another shareholder, his parents, or his children or their
issue. Any such gift to a minor shall be subject to the condition
that the same be affirmed by such minor upon attaining the age of
majority and, if not affirmed by a letter in writing to this
Corporation within sixty (60) days after such minor attains
majority, such stock shall be subject to the purchase option
provisions set forth above as if a notice of disposition had been
given on the last day of said period for affirmance, except as
limited by section 9 below.
Section 4 No provision in this Article shall prevent any
shareholder from pledging his shares as security for a debt or
obligation, but such pledge shall provide that in the event of
foreclosure, the person acquiring such shares shall be subject to
the terms and conditions of this Article. A foreclosure shall be
deemed to constitute notice from the purchaser thereof to this
Corporation of a disposition of the stock under section 2 above.
The options thereupon given this Corporation under the terms of
section 2 above shall apply to all foreclosed shares.
Section 5 Death of a Shareholder
Section 5.1 Upon the death of a shareholder, the personal
representative of his estate, trustee of his living trust, or
other successor-in-interest to his shares, shall within thirty
(30) days of the date of the death notify this Corporation of
such death and deliver to this Corporation proof of its authority
to act as the successor-in-interest to the deceased shareholder.
Section 5.2 Upon receipt of the notification of death, this
Corporation shall within sixty (60) days purchase the stock of
the deceased shareholder from the successor-in-interest of the
deceased shareholder according to the provisions of sections 6
and 7 below.
Section 6 Purchase Price
Section 6.1 At least annually, at the annual meeting of this
Corporation or as otherwise mutually agreed, the shareholders
shall determine by unanimous agreement a total value to be placed
upon all outstanding stock of this Corporation.
Section 6.2 The total value of this Corporation's stock shall
be divided by the number of outstanding shares of stock of this
Corporation at the date a notice of disposition is delivered.
This value shall be used to calculate the total value of shares
offered by the Selling Shareholder.
Section 6.3 If, at the time a notice of disposition is
delivered, more than one year has elapsed since the base value
was last determined, the base value shall be the last agreed
value or the net book value of this Corporation determined in
accordance with generally accepted accounting principles,
whichever is higher.
Section 7 Purchase Terms
Section 7.1 The down payment shall be five percent (5%) of the
total purchase price. The down payment shall be in cash at the
time notification is made by the purchaser of his or her election
to purchase, or upon determination of the total purchase price
under the provisions of this Article, whichever is later.
Section 7.2 The balance of the purchase price shall be
represented by a promissory note of the purchaser or purchasers
payable in equal annual installments on the anniversary date of
the payment of the down payment.
Section 7.3 Such promissory note shall be non-negotiable in
form and shall bear interest at the prevailing prime rate for
loans of similar duration charged by the largest bank in the
state of Nevada. Such interest shall be payable on the annual
payment date of principal. The holder of such note shall have the
right to declare the note due and payable in full in the event of
a default in the making of any payment. In the event of the death
of the maker of the note, the unpaid balance of that note shall
become immediately due and payable at the election of the holder
of the note.
Section 7.4 The Selling Shareholder shall, upon receiving the
down payment and the note, if any, for the balance of the
purchase price, endorse the certificates representing the shares
being sold to the purchaser or purchasers of said shares.
Section 7.5 So long as no default occurs in making payments
due under the note, the purchaser of the shares shall be entitled
to receive all dividends thereon and shall be entitled to vote
such shares.
Section 8 Life Insurance
Section 8.1 This Corporation may, if it deems advisable in
order to assure continuity in its management and policies,
purchase life insurance policies in such amounts as it deems
advisable upon the lives of any one or more of its shareholders,
but shall not be obligated to do so. Should such insurance be
purchased, the down payment to be made by reason of sale
following the death of an insured shareholder shall be increased
above the section 7 amount to the lesser of the agreed selling
price as determined in section 6 and the actual amount of the
life insurance proceeds.
Section 8.2 If this Corporation has purchased a life insurance
policy for a shareholder who has sold his shares under the
provisions of this Article during his lifetime, the coverage
shall be continued by this Corporation during the period allowed
for the installment payment of such shares. After final payment
has been made, the Selling Shareholder may purchase from this
Corporation any life insurance policies then in effect at their
cash surrender values.
Section 9 Other Provisions
Section 9.1 Time is of the essence in carrying out the terms
of this Article. Each party, therefore, agrees to perform any
acts herein required of such party and to execute and deliver any
documents required to carry out the provisions of this Agreement
promptly within the time periods herein described.
Section 9.2 Each shareholder agrees to insert in his will a
direction and authorization to his executor to fulfill and comply
with the provisions hereof.
Section 9.3 Notwithstanding any of the restrictions imposed
above, this Corporation has the absolute right to refuse to
record any transfer of stock where such refusal is necessary to
maintain the Corporation's status, where that status is dependent
upon the number or identity of this Corporation's shareholders,
to preserve exemptions under federal or state security laws, or
for any other reasonable purpose.
Section 9.4 The provisions of this Article shall extend to and
be binding upon this Corporation, its successors and assigns, and
to all shareholders, their personal representatives, heirs,
legatees, and assigns.
KNOW ALL MEN BY THESE PRESENTS: That I, the undersigned, being
the Directors of Particle 2, Inc., do hereby consent to the
foregoing By-Laws and adopt the same as and for the By-Laws of
Inc. IN WITNESS WHEREOF, we have hereunto set our hands this 23rd
day of February, 2000.
/s/ J. E. Dhonau
J. E. Dhonau, Director
SIGNATURES
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.
Particle 2, Inc.
By: /s/ J. E. Dhonau
J. E. Dhonau, President
