U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
TROY ACQUISITION CORPORATION
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(Name of Small Business Issuer)
California 33-0899651
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(State or Other Jurisdiction of I.R.S. Employer Identification
Organization) Number Incorporation or
19900 MacArthur Boulevard, Suite 660, Irvine, California 92612
(Address of Principal Executive Offices including Zip Code)
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(949) 851-9800
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(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act: Common Stock
No Par Value
(Title of Class)
PART I
ITEM 1. BUSINESS.
Troy Acquisition Corporation (the "Company") was incorporated under the
laws of the State of California on February 17, 2000. The Company was formed to
engage in any lawful corporate undertaking, including, without limitation,
mergers and acquisitions, which meet the Company's selected criteria. The
Company has been in the developmental stage since inception and has no
operations to date other than issuing shares to its original shareholder.
The Company will attempt to locate and negotiate with a business entity
for the combination of that target company with the Company. The combination
will normally take the form of a merger, stock-for-stock exchange or
stock-for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended.
No assurances can be given that the Company will be successful in
locating or negotiating with any target company.
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The Company has been formed to provide a method for a foreign or
domestic private company to become a reporting ("public") company with a class
of registered securities.
ASPECTS OF A REPORTING COMPANY
There are certain perceived benefits to being a reporting company.
These are commonly thought to include the following:
* increased visibility in the financial community;
* provision of information required under Rule 144 for trading of
eligible securities;
* compliance with a requirement for admission to quotation on the OTC
Bulletin Board maintained by Nasdaq or on the Nasdaq Small Cap
Market;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency; * shareholder liquidity;
* greater ease in subsequently raising of capital;
* compensation of key employees through stock options for which there
may be a market valuation;
* enhanced corporate image.
There are also certain perceived disadvantages to being a reporting
company. These are commonly thought to include the following:
* requirement for audited financial statements;
* required publication of corporate information;
* required filings of periodic and episodic reports with the
Securities and Exchange Commission;
* increased rules and regulations governing management, corporate
activities and shareholder relations.
COMPARISON WITH INITIAL PUBLIC OFFERING
Certain private companies may find a business combination more
attractive than an initial public offering of their securities. Reasons for this
may include the following:
* inability to obtain underwriter;
* possible larger costs,fees and expenses;
* possible delays in the public offering process;
* greater dilution of their outstanding securities.
Certain private companies may find a business combination less
attractive than an initial public offering of their securities. Reasons for this
may include the following:
* no investment capital raised through a business combination;
* no underwriter support of after-market trading.
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POTENTIAL TARGET COMPANIES
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for which a primary purpose of becoming public is the use
of its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities
or is unable to find an underwriter of securities on terms
acceptable to it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able to obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public
market to satisfy redemption requirements under a qualified
Employee Stock Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target company of its
own management and board of directors.
No assurances can be given that the Company will be able to enter into
a business combination, as to the terms of a business combination, or as to the
nature of the target company.
The proposed business activities described herein classify the Company
as a "blank check" company. The Securities and Exchange Commission and certain
states have enacted statutes, rules and regulations limiting the sale of
securities of blank check companies. The Company will not issue or sell
additional shares or take any efforts to cause a market to develop in the
Company's securities until such time as the Company has successfully implemented
its business plan and it is no longer classified as a blank check company. The
sole shareholder of the Company has executed and delivered an agreement
affirming that it will not sell or otherwise transfer its shares except in
connection with or following a business combination.
The Company is voluntarily filing this Registration Statement with the
Securities and Exchange Commission and is under no obligation to do so under the
Securities Exchange Act of 1934. The Company will continue to file all reports
required of it under the Exchange Act until a business combination has occurred.
A business combination will normally result in a change in control and
management of the Company. Since a benefit of a business combination with the
Company would normally be considered its status as a reporting company, it is
anticipated that the Company will continue to file reports under the Exchange
Act following a business combination. No assurance can be given that this will
occur or, if it does, for how long.
Patrick R. Boyd, the Secretary, Chief Financial Officer and Director and
Tim T. Chang, the Chief Executive Officer and Director are the only officers and
directors of the Company and the controlling shareholders of the Company's sole
shareholder, BAC Consulting Corporation. The Company has no employees nor are
there any other persons than Mr. Boyd and Mr. Chang, who may not devote any of
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their time to its affairs. Mr. Boyd and Mr. Chang will not begin any services on
behalf of the Company until after the effective date of the registration
statement. All references herein to management of the Company are to Mr. Boyd
and Mr. Chang. The inability at any time of Mr. Boyd and Mr. Chang to devote
sufficient attention to the Company could have a material adverse impact on its
operations.
GLOSSARY
"Blank Check" As used herein, a "blank check" company is a development
Company stage company that has no specific business plan or purpose
or has indicated that its business plan is to engage in a
merger or acquisition with an unidentified company or
companies.
Business Combination Normally a merger, stock-for-stock exchange or
stock-for-assets exchange between a target company and the
Registrant or the shareholders of the Registrant.
The Company or The corporation whose common stock is the subject of this
the Registrant Registration Statement.
Exchange Act The Securities Exchange Act of 1934, as amended.
Securities Act The Securities Act of 1933, as amended.
RISK FACTORS
The Company's business is subject to numerous risk factors, including
the following:
THE COMPANY HAS NO OPERATING HISTORY NOR REVENUE AND MINIMAL ASSETS
AND OPERATES AT A LOSS. The Company has had no operating history nor any
revenues or earnings from operations. The Company has no significant assets or
financial resources. The Company has operated at a loss to date and will, in all
likelihood, continue to sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination. See PART
F/S:"FINANCIAL STATEMENTS". BAC Consulting Corporation has agreed to pay all
expenses incurred by the Company until a business combination without repayment
by the Company. BAC Consulting Corporation is the sole shareholder of the
Company. There is no assurance that the Company will ever be profitable.
THE COMPANY HAS ONLY TWO DIRECTORS AND OFFICERS. The Company's Chief
Executive Officer is Tim T. Chang, who is also one of the directors and a
controlling shareholder of its sole shareholder. Patrick R. Boyd is the
Company's Secretary, Chief Financial Officer, the only other Director and a
controlling shareholder of the Company's sole shareholder. Because management
consists of only two persons, the Company does not benefit from multiple
judgments that a greater number of directors or officers would provide and the
Company will rely completely on the judgment of its two officers and directors
when selecting a target company. Mr. Boyd and Mr. Chang anticipate devoting only
a limited amount of time per month to the business of the Company and does not
anticipate commencing any services until after the effective date of the
registration statement. Mr. Boyd and Mr. Chang have not entered into a written
employment agreement with the Company and they are not expected to do so. The
Company has not obtained key man life insurance on Mr. Boyd or Mr. Chang. The
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loss of the services of Mr. Boyd and Mr. Chang would adversely affect
development of the Company's business and its likelihood of continuing
operations.
CONFLICTS OF INTEREST. Mr. Chang, the Company's Chief Executive
Officer, and Mr. Boyd, the Company's Secretary and Chief Financial Officer,
participate in other business ventures which may compete directly with the
Company. Additional conflicts of interest and non-arms length transactions may
also arise in the future. The Company has adopted a policy that it will not
enter into a business combination with any entity in which any member of
management serves as an officer, director or partner, or in which such person or
such person's affiliates or associates hold any ownership interest. The terms of
business combination may include such terms as Mr. Boyd and Mr. Chang remaining
directors or officers of the Company. The terms of a business combination may
provide for a payment by cash or otherwise to BAC Consulting Corporation for the
purchase or retirement of all or part of its common stock of the Company by a
target company or for services rendered incident to or following a business
combination. Mr. Boyd and Mr. Chang would directly benefit from such employment
or payment. Such benefits may influence Mr. Boyd and Mr. Chang's choice of a
target company. The Articles of Incorporation of the Company provide that the
Company may indemnify officers and/or directors of the Company for liabilities,
which can include liabilities arising under the securities laws. Therefore,
assets of the Company could be used or attached to satisfy any liabilities
subject to such indemnification. See "ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS--Conflicts of Interest."
THE PROPOSED OPERATIONS OF THE COMPANY ARE SPECULATIVE. 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 target company.
While business combinations with entities having established operating histories
are preferred, there can be no assurance that the Company will be successful in
locating candidates meeting such criteria. The decision to enter into a business
combination will likely be made without detailed feasibility studies,
independent analysis, market surveys or similar information which, if the
Company had more funds available to it, would be desirable. In the event the
Company completes a business combination the success of the Company's operations
will be dependent upon management of the target company and numerous other
factors beyond the Company's control. There is no assurance that the Company can
identify a target company and consummate a business combination.
PURCHASE OF PENNY STOCKS CAN BE RISKY. In the event that a public
market develops for the Company's securities following a business combination,
such securities may be classified as a penny stock depending upon their market
price and the manner in which they are traded. The Securities and Exchange
Commission has adopted Rule15g-9 which establishes 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 whose securities are admitted to quotation but do not trade on
the Nasdaq Small Cap Market or on a national securities exchange. For any
transaction involving a penny stock, unless exempt, the rules require delivery
by the broker of a document to investors stating the risks of investment in
penny stocks, the possible lack of liquidity, commissions to be paid, current
quotation and investors' rights and remedies, a special suitability inquiry,
regular reporting to the investor and other requirements. Prices for penny
stocks are often not available and investors are often unable to sell such
stock. Thus an investor may lose his investment in a penny stock and
consequently should be cautious of any purchase of penny stocks.
THERE IS A 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 with and acquisitions of business
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies which
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may be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the Company will be
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.
THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION AND NO MINIMUM
REQUIREMENTS FOR BUSINESS COMBINATION. The Company has no current arrangement,
agreement or understanding with respect to engaging in a business combination
with a specific entity. There can be no assurance that the Company will be
successful in identifying and evaluating suitable business opportunities or in
concluding a business combination. No particular industry or specific business
within an industry has been selected for a target 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
company to have achieved, or without which the Company would not consider a
business combination with such business entity. Accordingly, the Company may
enter into a business combination with a business entity having no significant
operating history, losses, limited or no potential for immediate earnings,
limited assets, negative net worth or other negative characteristics. There is
no assurance that the Company will be able to negotiate a business combination
on terms favorable to the Company.
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Company is required to provide certain information about significant
acquisitions including audited financial statements of the acquired company.
These audited financial statements must be furnished within 75 days following
the effective date of a business combination. Obtaining audited financial
statements are the economic responsibility of the target company. The additional
time and costs that may be incurred by some potential target companies to
prepare such financial statements may significantly delay or essentially
preclude consummation of an otherwise desirable acquisition by the Company.
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 Exchange Act are applicable. Notwithstanding a
target company's agreement to obtain audited financial statements within the
required time frame, such audited financials may not be available to the Company
at the time of effecting a business combination. In cases where audited
financials are unavailable, the Company will have to rely upon unaudited
information that has not been verified by outside auditors in making its
decision to engage in a transaction with the business entity. This risk
increases the prospect that a business combination with such a business entity
might prove to be an unfavorable one for the Company.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has neither
conducted, nor have others made available to it, market research indicating that
demand exists for the transactions contemplated by the Company. Even in the
event demand exists for a transaction of the type contemplated by the Company,
there is no assurance the Company will be successful in completing any such
business combination.
REGULATION UNDER INVESTMENT COMPANY ACT. 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. Passive investment interests, as used
in the Investment Company Act, essentially means investments held by entities
which do not provide management or consulting services or are not involved in
the business whose securities are held. In such event, the Company would be
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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. Any violation of
such Act could 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 target company obtaining a controlling interest in the
Company. As a condition of the business combination agreement, BAC Consulting
Corporation, the sole shareholder of the Company, may agree to sell or transfer
all or a portion of its Company's common stock so to provide the target company
with all or majority control. The resulting change in control of the Company
will likely result in removal of the present officers and directors of the
Company and a corresponding reduction in or elimination of his participation in
the future affairs of the Company.
POSSIBLE DILUTION OF VALUE OF SHARES UPON BUSINESS COMBINATION. A business
combination normally will involve the issuance of a significant number of
additional shares. Depending upon the value of the assets acquired in such
business combination, the per share value of the Company's common stock may
increase or decrease, perhaps significantly.
TAXATION. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as 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 company; however, there can be no assurance that such business
combination will meet the statutory requirements of 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.
ITEM 2. PLAN OF OPERATION
SEARCH FOR TARGET COMPANY
The Company has entered into an agreement with BAC Consulting
Corporation, the sole shareholder of the Company, to supervise the search for
target companies as potential candidates for a business combination. The
agreement will continue until such time as the Company has effected a business
combination. BAC Consulting Corporation, has agreed to pay all expenses of the
Company without repayment until such time as a business combination is effected,
without repayment. Tim Chang and Patrick Boyd, the only officers and directors
of the Company are the officers, directors and controlling shareholders of BAC
Consulting Corporation.
BAC Consulting Corporation may only locate potential target companies
for the Company and is not authorized to enter into any agreement with a
potential target company binding the Company. The Company's agreement with BAC
Consulting Corporation is not exclusive and BAC Consulting Corporation has
entered into agreements with other companies similar to the Company on similar
terms. BAC Consulting Corporation, may provide assistance to target companies
incident to and following a business combination, and receive payment for such
assistance from target companies.
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BAC Consulting Corporation owns 5,000,000 shares of the Company's
common stock for which it paid $2,000 or $.0004 per share.
BAC Consulting Corporation has entered, and anticipates that it will
enter, into agreements with other consultants to assist it in locating a target
company and may share its stock in the Company with or grant options on such
stock to such referring consultants and may make payment to such consultants
from its own resources. There is no minimum or maximum amount of stock, options,
or cash that BAC Consulting Corporation may grant or pay to such consultants.
BAC Consulting Corporation is solely responsible for the costs and expenses of
its activities in seeking a potential target company, including any agreements
with consultants, and the Company has no obligation to pay any costs incurred or
negotiated by BAC Consulting Corporation.
BAC Consulting Corporation may seek to locate a target company through
solicitation. Such solicitation may include newspaper or magazine
advertisements, mailings and other distributions to law firms, accounting firms,
investment bankers, financial advisors and similar persons, the use of one or
more Web sites and similar methods. If BAC Consulting Corporation engages in
solicitation, no estimate can be made as to the number of persons who may be
contacted or solicited. To date BAC Consulting Corporation has not utilized
solicitation and expects to rely on consultants in the business and financial
communities for referrals of potential target companies.
Tim Chang is the Chief Executive Officer of BAC Consulting Corporation
and Patrick Boyd is the Secretary and Chief Financial Officer of BAC Consulting
Corporation. Messrs. Boyd and Chang are each partners, through their
professional corporations, in Boyd & Chang, LLP, an Irvine, California based law
firm specializing in corporate finance and securities transactions. Some of
these individuals may be interested in utilizing the services of the law firm
for their companies or clients in regard to a wide variety of possible
securities-related work including mergers, acquisitions, initial public
offerings, stock distributions, incorporations, or other activities. It is
possible over time that certain of the companies or clients represented by these
persons may develop into possible target companies. In addition, BAC Consulting
Corporation has contact with many consultants, accountants, attorneys, brokers,
investment bankers, businessmen, financial advisors and others who work with
businesses which may desire to go public. From time to time such contacts may
refer their contacts, clients, acquaintances and others to BAC Consulting
Corporation.
MANAGEMENT OF THE COMPANY
The Company has no full time employees. Tim T. Chang is the Chief Executive
Officer of the Company and one of its two directors. Patrick R. Boyd is the
Chief Financial Officer, Secretary and one of the two Directors of the Company.
Mr. Boyd and Mr. Chang are also the controlling shareholders of BAC Consulting
Corporation, the Company's sole shareholder. Mr. Chang and Mr. Boyd, as officers
of the Company, have agreed to allocate a limited portion of their time to the
activities of the Company after the effective date of the registration statement
without compensation. Potential conflicts may arise with respect to the limited
time commitment by Mr. Boyd and Mr. Chang and the potential demands of the
Company's activities.
The amount of time spent by Messrs. Chang and Boyd on the activities of the
Company is not predictable. Such time may vary widely from an extensive amount
when reviewing a target company and effecting a business combination to an
essentially quiet time when activities of management focus elsewhere, or some
amount in between. It is impossible to predict the amount of time Mr. Boyd and
Mr. Chang will actually be required to spend to locate a suitable target
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company. Mr. Boyd and Mr. Chang estimate that the business plan of the Company
can be implemented by devoting approximately 10 to 25 hours per month over the
course of several months but such figure cannot be stated with precision. Mr.
Boyd and Mr. Chang do not anticipate performing any services on behalf of the
Company until after the effective date of the registration statement.
GENERAL BUSINESS PLAN
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business entity which desires to seek the
perceived advantages of a corporation which has a class of securities registered
under the Exchange Act. The Company will not restrict its search to any specific
business, industry, or geographical location and the Company may participate in
a business venture of virtually any kind or nature. Management anticipates that
it will be able to participate in only one potential business venture because
the Company has nominal assets and limited financial resources. See PART F/S,
"FINANCIAL STATEMENTS." This lack of diversification should be considered a
substantial risk to the shareholders of the Company because it will not permit
the Company to offset potential losses from one venture against gains from
another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business entities
seeking the perceived benefits of a reporting corporation. Such perceived
benefits may include facilitating or improving the terms on which additional
equity financing may be sought, providing liquidity for incentive stock options
or similar benefits to key employees, increasing the opportunity to use
securities for acquisitions, providing liquidity for shareholders and other
factors. Business opportunities may be available in many different industries
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities difficult
and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets.
Management believes, however, the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a reporting company without incurring the cost and time required to
conduct an initial public offering. Management has not conducted market research
and is not aware of statistical data to support the perceived benefits of a
business combination for the owners of a target company.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management may consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements; history
of operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; the potential for further research,
development, or exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact the proposed activities of the Company; the
potential for growth or expansion; the potential for profit; the perceived
public recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. This discussion of the proposed
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criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Company is subject to all of the reporting requirements included in the
Exchange Act. Included in these requirements is the duty of the Company to file
audited financial statements as part of or within 60 days following the due date
for filing its Current Report on Form 8-K which is required to be filed with the
Securities and Exchange Commission within 15 days following the completion of a
business combination. The Company intends to acquire or merge with a company for
which audited financial statements are available or for which it believes
audited financial statements can be obtained within the required period of time.
The Company may reserve the right in the documents for the business combination
to void the transaction if the audited financial statements are not timely
available or if the audited financial statements provided do not conform to the
representations made by the target company.
The Company will not restrict its search for any specific kind of business
entities, but may acquire a venture which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
business life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer.
Following a business combination the Company may benefit from he services
of others in regard to accounting, legal services, under writings and corporate
public relations. If requested by a target company, management may recommend one
or more underwriters, financial advisors, accountants, public relations firms or
other consultants to provide such services.
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued after
any business combination. Additionally, a target company may be presented to the
Company only on the condition that the services of a consultant or advisor be
continued after a merger or acquisition. Such preexisting agreements of target
companies for the continuation of the services of attorneys, accountants,
advisors or consultants could be a factor in the selection of a target company.
TERMS OF A BUSINESS COMBINATION
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. On the
consummation of a transaction, it is likely that the present management and
shareholders of the Company will no longer be in control of the Company. In
addition, it is likely that the Company's officers and directors will, as part
of the terms of the business combination, resign and be replaced by one or more
new officers and directors.
It is anticipated that any securities issued in any such business
combination would be issued in reliance upon exemption from registration under
applicable federal and state securities laws. In some circumstances, however, as
a negotiated element of its transaction, the Company may agree to register all
or a part of such securities immediately after the transaction is consummated or
at specified times thereafter. If such registration occurs, it will be
undertaken by the surviving entity after the Company has entered into an
agreement for a business combination or has consummated a business combination
and the Company is no longer considered a blank check company. The issuance of
additional securities and their potential sale into any trading market which may
develop in the Company's securities may depress the market value of the
Company's securities in the future if such a market develops, of which there is
no assurance.
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While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a tax-free reorganization under Sections 351 or 368
of the Internal Revenue Code of 1986, as amended.
With respect to negotiations with a target company, management expects
to focus on the percentage of the Company which target company shareholders
would acquire in exchange for their shareholdings in the target company.
Depending upon, among other things, the target company's assets and liabilities,
the Company's shareholders will in all likelihood hold a substantially lesser
percentage ownership interest in the Company following any merger or
acquisition. The percentage of ownership may be subject to significant reduction
in the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the Company's
shareholders at such time.
The Company will participate in a business combination only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing and will
include miscellaneous other terms.
BAC Consulting Corporation will pay all expenses in regard to its
search for a suitable target company. The Company does not anticipate expending
funds itself for locating a target company. Mr. Boyd and Mr. Chang, as the
officers and directors of the Company, will provide their services without
charge or repayment by the Company after the effective date of the registration
statement. The Company will not borrow any funds to make any payments to the
Company's management, its affiliates or associates. If BAC Consulting
Corporation stops or becomes unable to continue to pay the Company's operating
expenses, the Company may not be able to timely make its periodic reports
required under the Securities Exchange Act of 1934 nor to continue to search for
an acquisition target. In such event, the Company would seek alternative sources
of funds or services, primarily through the issuance of its securities.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek a business combination with any entity in which
the Company's officer, director, shareholders or any affiliate or associate
serves as an officer or director or holds any ownership interest.
UNDERTAKINGS AND UNDERSTANDINGS REQUIRED OF TARGET COMPANIES
As part of a business combination agreement, the Company intends to
obtain certain representations and warranties from a target company as to its
conduct following the business combination. Such representations and warranties
may include (i) the agreement of the target company to make all necessary
filings and to take all other steps necessary to remain a reporting company
under the Exchange Act (ii) imposing certain restrictions on the timing and
amount of the issuance of additional free-trading stock, including stock
registered on Form S-8 or issued pursuant to Regulation S and (iii) giving
assurances of ongoing compliance with the Securities Act, the Exchange Act, the
General Rules and Regulations of the Securities and Exchange Commission, and
other applicable laws, rules and regulations.
A prospective target company should be aware that the market price and
trading volume of the Company's securities, when and if listed for secondary
11
<PAGE>
trading, may depend in great measure upon the willingness and efforts of
successor management to encourage interest in the Company within the United
States financial community. The Company does not have the market support of an
underwriter that would normally follow a public offering of its securities.
Initial market makers are likely to simply post bid and asked prices and are
unlikely to take positions in the Company's securities for their own account or
customers without active encouragement and a basis for doing so. In addition,
certain market makers may take short positions in the Company's securities,
which may result in a significant pressure on their market price. The Company
may consider the ability and commitment of a target company to actively
encourage interest in the Company's securities following a business combination
in deciding whether to enter into a transaction with such company.
A business combination with the Company separates the process of
becoming a public company from the raising of investment capital. As a result, a
business combination with the Company normally will not be a beneficial
transaction for a target company whose primary reason for becoming a public
company is the immediate infusion of capital. The Company may require assurances
from the target company that it has or that it has a reasonable belief that it
will have sufficient sources of capital to continue operations following the
business combination. However, it is possible that a target company may give
such assurances in error, or that the basis for such belief may change as a
result of circumstances beyond the control of the target company.
Prior to completion of a business combination, the Company may require
that it be provided with written materials regarding the target company
containing such items as a description of products, services and company
history; management resumes; financial information; available projections, with
related assumptions upon which they are based; an explanation of proprietary
products and services; evidence of existing patents, trademarks, or service
marks, or rights thereto; present and proposed forms of compensation to
management; a description of transactions between such company and its
affiliates during relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements, or
if they are not available, unaudited financial statements, together with
reasonable assurances that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 75 days following
completion of a business combination; and other information deemed relevant.
COMPETITION
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial resources
and limited management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's competitors.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to
acquire any properties. The Company currently uses the offices of BAC Consulting
Corporation at no cost to the Company. BAC Consulting Corporation has agreed to
continue this arrangement until the Company completes a business combination.
12
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known by the Company to be
the beneficial owner of five percent or more of the Company's Common Stock, all
directors individually and all directors and officers of the Company as a group.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
Amount of
Name and Address Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------- --------- --------
BAC Consulting Corporation (1) 5,000,000 100%
19900 MacArthur Boulevard
Suite 660
Irvine, California 92612
Tim T. Chang (1) (2) 5,000,000 100%
19900 MacArthur Boulevard
Suite 660
Irvine, California 92612
Patrick R. Boyd (1) (2) 5,000,000 100%
19900 MacArthur Boulevard
Suite 660
Irvine, California 92612
All Executive Officers and 5,000,000 100%
Directors as a Group (2 Persons)
(1) Mr. Chang and Mr. Boyd are each a shareholder and a director and
officer of BAC Consulting Corporation. BAC Consulting Corporation has agreed to
provide certain assistance to the Company in locating potential target
companies, and to pay all costs of the Company until a business combination,
without reimbursement. See "PLAN OF OPERATION General Business Plan".
(2) As a controlling shareholder, a director and an officer of BAC
Consulting Corporation, Mr. Chang and Mr. Boyd are deemed to be the beneficial
owners of the common stock of the Company owned by BAC Consulting Corporation.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Company has two Directors and two Officers as follows:
Name Age Positions and Offices Held
---- --- --------------------------
Tim T. Chang 34 Chief Executive Officer, Director
Patrick R. Boyd 37 Secretary, Chief Financial Officer, Director
13
<PAGE>
There are no agreements or understandings for the officers or directors to
resign at the request of another person and the above-named officers and
directors are not acting on behalf of nor will act at the direction of any other
person.
Set forth below are the names of the directors and officers of the Company,
all positions and offices with the Company held, the period during which he has
served as such, and the business experience during at least the last five years:
Tim T. Chang, President, Chief Executive Officer, Director. Born in Taipei,
Taiwan, in December 1965, Mr. Chang studied electrical engineering for three
years in college and received a B.A. degree in international relations from the
University of Southern California. Mr. Chang received his Juris Doctor degree
from the McGeorge School of Law, and was admitted to the California Bar. Mr.
Chang is also admitted to practice before the Central District of the United
States District Court, the United States Tax Court and the United States Court
of International Trade. He has been an officer and director of the Company since
February 16, 2000. Mr. Chang has been a partner in the firm of Boyd & Chang, LLP
since 1996. From 1994 to 1996 Mr. Chang was an associated with the firm of
Cummins & White, LLP, in Newport Beach, California.
Patrick R. Boyd, Chief Financial Officer, Secretary, Director. Patrick R.
Boyd was born in Laguna Beach, California in 1963. Mr. Boyd received his
Bachelors of Arts in Economics from the University of Southern California in
1985, and his Juris Doctor from Pepperdine University Law School in 1988. Since
1996, Mr. Boyd has been a partner in the law firm of Boyd and Chang, LLP, in
Irvine, California, specializing in corporate finance and transactional law.
Prior to joining Boyd & Chang, Mr. Boyd was an attorney with the Newport Beach
law firm of Cummins & White, LLP. Mr. Boyd has been a member of the State Bar of
California since 1988.
CURRENT BLANK CHECK COMPANIES
Tim T. Chang, the Chief Executive Officer (president) of the Company, and
Patrick R. Boyd, the Company's Chief Financial Officer and Secretary are
currently involved with the formation of other blank check companies, and
involved in creating additional companies similar to this one. The initial
business purpose of each of these companies is to engage in a business
combination with an unidentified company or companies and each were or will be
classified as a blank check company until completion of a business combination.
Generally target companies will be located for the Company and other
identical blank check companies in chronological order of the date of formation
of such blank check companies or, in the case of blank check companies formed on
the same date, alphabetically. However, certain blank check companies may differ
from the Company in certain items such as place of incorporation, number of
shares and shareholders, working capital, types of authorized securities,
preference of a certain blank check company name by management of the target
company, or other items. It may be that a target company may be more suitable
for or may prefer a certain blank check company formed after the Company. In
such case, a business combination might be negotiated on behalf of the more
suitable or preferred blank check company regardless of date of formation.
14
<PAGE>
The following chart summarizes certain information concerning recent
blank check companies with which Mr. Chang and Mr. Boyd are or have been
involved which filed a registration statement on Form 10-SB.
<TABLE>
<CAPTION>
Registration
Form/Effective
Corporation Date/File Number Status
- ----------- ---------------- ------
<S> <C> <C>
Exodus Acquisition Corporation (1) Form 10-SB Has not entered into agreement for
Effective May 5, 2000 for a business combination
File No. 0-29827
Anaconda Venture Corporation (1) Form 10-SB Has not entered into an agreement for
Effective May 23, 2000 for a business combination
File No. 0-30073
Fighton Succession Corporation (1) Form 10-SB Has not entered into an agreement for
Effective May 23, 2000 for a business combination
File No. 0-30081
Trojan Transition Corporation (1) Form 10-SB Has not entered into an agreement for
Not yet effective for a business combination
</TABLE>
(1) Mr. Chang and Mr. Boyd are the only directors. Mr. Chang is the Chief
Executive Officer (President), and Mr. Boyd is the Chief Financial Officer and
Secretary. Both are beneficial shareholders.
CONFLICTS OF INTEREST
Tim T. Chang and Patrick R. Boyd, the Company's only officers and
directors, expect to organize other companies of a similar nature and with a
similar purpose as the Company. Consequently, there are potential inherent
conflicts of interest in acting as an officer and director of the Company. In
addition, insofar as Mr. Chang and Mr. Boyd are engaged in other business
activities, they may devote only a portion of their time to the Company's
affairs.
A conflict may arise in the event that another blank check company with
which Mr. Boyd and Mr. Chang are affiliated also actively seeks a target
company. It is anticipated that target companies will be located for the Company
and other blank check companies in chronological order of the date of formation
of such blank check companies or, in the case of blank check companies formed on
the same date, alphabetically. However, other blank check companies may differ
from the Company in certain items such as place of incorporation, number of
shares and shareholders, working capital, types of authorized securities, or
other items. It may be that a target company may be more suitable for or may
prefer a certain blank check company formed after the Company. In such case, a
business combination might be negotiated on behalf of the more suitable or
preferred blank check company regardless of date of formation. However, Mr. Boyd
and Mr. Chang's beneficial and economic interest in all blank check companies
with which they are currently involved will be identical.
Mr. Boyd and Mr. Chang are the principals of the Irvine, California law
firm of Boyd & Chang, LLP.
15
<PAGE>
As such, demands may be placed on the time of Mr. Boyd and Mr. Chang which
will detract from the amount of time they are able to devote to the Company. Mr.
Chang and Mr. Boyd intend to devote as much time to the activities of the
Company as required. However, should such a conflict arise, there is no
assurance that Mr. Chang and Mr. Boyd would not attend to other matters prior to
those of the Company. Mr. Chang and Mr. Boyd estimate that the business plan of
the Company can be implemented in theory by devoting approximately 10 to 25
hours per month over the course of several months but such figure cannot be
stated with precision.
Mr. Chang is the Chief Executive Officer and Mr. Boyd is the Secretary and
Chief Financial Officer and each are directors and a controlling shareholders of
BAC Consulting Corporation, a California corporation, which is the sole
shareholder of the Company. At the time of a business combination, some or all
of the shares of common stock owned by BAC Consulting Corporation may be
purchased by the target company or retired by the Company. The amount of common
stock sold or continued to be owned by BAC Consulting Corporation cannot be
determined at this time.
The terms of business combination may include such terms as Mr. Chang or
Mr. Boyd remaining as directors or officers of the Company and/or the continuing
securities or other legal work of the Company being handled by the law firm of
which Mr. Boyd and Mr. Chang are the principals. The terms of a business
combination may provide for a payment by cash or otherwise to BAC Consulting
Corporation for the purchase or retirement of all or part of its common stock of
the Company by a target company or for services rendered incident to or
following a business combination. Mr. Chang or Mr. Boyd would directly benefit
from such employment or payment. Such benefits may influence Mr. Chang and Mr.
Boyd's choice of a target company.
The Company will not enter into a business combination, or acquire any
assets of any kind for its securities, in which management of the Company or any
affiliates or associates have any interest, direct or indirect.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest in
favor of the Company could result in liability of management to the Company.
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 insecurities. 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. Any violation of such Act would subject the
Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION.
The Company's officers and directors do not receive any compensation for
their services rendered to the Company, have not received such compensation in
16
<PAGE>
the past, and are not accruing any compensation pursuant to any agreement with
the Company. However, Mr. Boyd and Mr. Chang, the officers and directors of the
Company anticipate receiving benefits as a beneficial shareholders of the
Company, as the officers and directors and controlling shareholders of BAC
Consulting Corporation and, possibly, as principals of Boyd & Chang, LLP, which
may perform legal services for the Company after the business combination. See
"ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS Conflicts
of Interest".
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has issued a total of 5,000,000 shares of common stock to the
following persons for a total of $2,000 in cash:
Name Number of Total Shares Consideration
- ---- ---------------------- -------------
BAC Consulting Corporation 5,000,000 $2,000
Mr. Chang is the Chief Executive Officer, a director, and a controlling
shareholder of BAC Consulting Corporation. Mr. Boyd is the Secretary, Chief
Financial Officer, a director and a controlling shareholder of BAC Consulting
Corporation. The engagement agreement provides for monthly legal fees of a flat
rate of $250 per month to accrue. The agreement is terminable at will by either
the Company or Boyd & Chang, LLP. A copy of the engagement agreement, in its
entirety is attached as Exhibit 10.1 to this Registration Statement. The Company
also entered into a Consulting Agreement with BAC Consulting Corporation,
pursuant to which BAC Consulting Corporation agreed to provide certain
assistance to the Company and pay certain costs without reimbursement. A copy of
the Consulting Agreement is attached as Exhibit 10.2. With respect to the sales
made to BAC Consulting Corporation, the Company relied upon the exemption from
registration for offer and sales exclusively within one state, Section 4(2) of
the Securities Act of 1933, as amended (the"Securities Act") and Rule 506
promulgated thereunder.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, no par value, of which there are 5,000,000 issued and
outstanding. The following statements relating to the capital stock set forth
the material terms of the Company's securities; however, reference is made to
the more detailed provisions of, and such statements are qualified in their
entirety by reference to, the Articles of Incorporation and the By-laws, copies
of which are filed as exhibits to this registration statement.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each share
on all matters to be voted on by the stockholders. Holders of common stock are
entitled to cumulative voting rights. Holders of common stock are entitled to
share ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. In
17
<PAGE>
the event of a liquidation, dissolution or winding up of the Company, the
holders of common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. All of the outstanding shares of
common stock are fully paid and non-assessable.
Holders of common stock have no preemptive rights to purchase the Company's
common stock. There are no conversion or redemption rights or sinking fund
provisions with respect to the common stock.
DIVIDENDS
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in its business operations and accordingly, the Board of Directors does not
anticipate declaring any dividends prior to a business combination.
TRADING OF SECURITIES IN SECONDARY MARKET
The National Securities Market Improvement Act of 1996 limited the
authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file
reports under Sections 13 or 15(d) of the Exchange Act. Upon effectiveness of
this registration statement, the Company will be required to, and will, file
reports under Section 13 of the Exchange Act. As a result, sales of the
Company's common stock in the secondary market by the holders thereof may then
be made pursuant to Section 4(1) of the Securities Act (sales other than by an
issuer, underwriter or broker) without qualification under state securities
acts.
Following a business combination, a target company will normally wish to
cause the Company's common stock to trade in one or more United States
securities markets. The target company may elect to take the steps required for
such admission to quotation following the business combination or at some later
time.
In order to qualify for listing on the Nasdaq Small Cap Market, a company
must have at least (i) net tangible assets of $4,000,000 or market
capitalization of $50,000,000 or net income for two of the last three years of
$750,000; (ii) public float of 1,000,000 shares with a market value of
$5,000,000; (iii) a bid price of $4.00; (iv) three market makers; (v) 300
shareholders and (vi) an operating history of one year or, if less than one
year, $50,000,000 in market capitalization. For continued listing on the Nasdaq
Small Cap Market, a company must have at least (i) net tangible assets of
$2,000,000 or market capitalization of $35,000,000 or net income for two of the
last three years of $500,000; (ii) a public float of 500,000 shares with a
market value of $1,000,000; (iii) a bid price of $1.00; (iv) two market makers;
and (v) 300 shareholders.
If, after a business combination, the Company does not meet the
qualifications for listing on the Nasdaq Small Cap Market, the Company may apply
for quotation of its securities on the OTC Bulletin Board. In certain cases the
Company may elect to have its securities initially quoted in the "pink sheets"
published by the National Quotation Bureau, Inc.
To have its securities quoted on the OTC Bulletin Board a company must:
(1) be a company that reports its current financial information to the
Securities and Exchange Commission, banking regulators or insurance regulators;
18
<PAGE>
(2) have at least one market maker who completes and files a Form 211 with
NASD Regulation, Inc.
The OTC Bulletin Board is a dealer-driven quotation service. Unlike the
Nasdaq Stock Market, companies cannot directly apply to be quoted on the OTC
Bulletin Board, only market makers can initiate quotes, and quoted companies do
not have to meet any quantitative financial requirements. Any equity security of
a reporting company not listed on the Nasdaq Stock Market or on a national
securities exchange is eligible.
In general there is greatest liquidity for traded securities on the Nasdaq
Small Cap Market, less on the NASD OTC Bulletin Board, and least through
quotation by the National Quotation Bureau, Inc. on the "pink sheets". It is not
possible to predict where, if at all, the securities of the Company will be
traded following a business combination.
TRANSFER AGENT
Atlas Stock Transfer, Salt Lake City, Utah, will act as transfer agent for
the common stock of the Company.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) MARKET PRICE. There is no trading market for the Company's common stock
at present and there has been no trading market to date. There is no assurance
that a trading market will ever develop or, if such a market does develop, that
it will continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes 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,
19
<PAGE>
(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.
(B) HOLDERS. There is one holder of the Company's common stock. The issued
and outstanding shares of the Company's common stock were issued in accordance
with the exemptions from registration afforded by Section 4(2) of the Securities
Act of 1933, and Rule 506 promulgated thereunder, and the exemption available
for an entirely intrastate offering.
(C) DIVIDENDS. The Company has not paid any dividends to date, and has no
plans to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS. There is no litigation pending or threatened by
or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. The Company has not changed accountants since its
formation and there are no disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years,
the Company has sold securities which were not registered as follows:
Number of
Date Name Shares Consideration
- ---- ---- ------ -------------
February 21, 2000 BAC Consulting Corporation 5,000,000 $2,000
Mr. Boyd and Mr. Chang are the only officers, directors and controlling
shareholders of BAC Consulting Corporation. With respect to the sales made to
BAC Consulting Corporation, the Company relied upon Section4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated there under and the
exemption from registration available for an entirely intra state offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The General Corporation Law
of the State of California provides that articles of incorporation may contain a
provision limiting the personal liability of a director to the corporation or
20
<PAGE>
its stockholders for monetary damages for breach of duty as director provided
that such provision shall not eliminate or limit the liability of a director (i)
for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of the law, (ii) for acts or omissions that a director
believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show reckless disregard for
the director's duty to the corporation or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing the director's duties, of a risk of serious injury to the
corporation or its shareholders, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation or its shareholders, (vi) with regard to contracts or
obligations described under Section 310 of the California Corporations Code, as
amended or (vii) under Section 316 of the California Corporations Code.
Additionally, the foregoing limitation of liability shall not limit the
liability of a director for any act or omissions occurring prior to the date
when this provision becomes effective and this limitation of liability shall not
eliminate or limit the liability of an officer for any act or omission as an
officer for any act or omission as an officer, notwithstanding that the officer
is also a director or that his or her actions, if negligent or improper have
been ratified by the directors.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING
THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
FINANCIAL STATEMENTS. Set forth below are the audited financial statements for
the Company for the period ended March 31, 2000. The following financial
statements are attached to this report and filed as a part thereof.
21
<PAGE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
<PAGE>
<TABLE>
<CAPTION>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<S> <C> <C>
PAGE F-1 INDEPENDENT AUDITORS' REPORT
PAGE F-2 BALANCE SHEET AS OF MARCH 31, 2000
PAGE F-3 STATEMENT OF OPERATIONS FOR THE PERIOD FROM FEBRUARY 17, 2000
(INCEPTION) TO MARCH 31, 2000
PAGE F-4 STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIENCY FOR THE PERIOD FROM
FEBRUARY 17, 2000 (INCEPTION) TO MARCH 31, 2000
PAGE F-5 STATEMENT OF CASH FLOWS FOR THE PERIOD FROM FEBRUARY 17, 2000
(INCEPTION) TO MARCH 31, 2000
PAGES F-6 - F-8 NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2000
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of:
Troy Acquisition Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of Troy Acquisition Corporation
(a development stage company) as of March 31, 2000 and the related statements of
operations, changes in stockholder's deficiency and cash flows for the period
from February 17, 2000 (inception) to March 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Troy Acquisition Corporation (a
development stage company) as of March 31, 2000, and the results of its
operations and its cash flows for the period from February 17, 2000 (inception)
to March 31, 2000 in conformity with generally accepted accounting principles.
/s/Weinberg & Company, P.A
--------------------------
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 10, 2000
F-1
<PAGE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 2000
ASSETS
------
Cash $ 500
-------
TOTAL ASSETS $ 500
-------
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
----------------------------------------
LIABILITIES
Accounts payable $ 750
-------
STOCKHOLDER'S DEFICIENCY
Common Stock, no par value, 50,000,000 shares authorized,
5,000,000 issued and outstanding 2,000
Additional paid-in capital 358
Deficit accumulated during development stage (2,608)
-------
Total Stockholder's Deficiency (250)
-------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 500
-------
See accompanying notes to financial statements
F-2
<PAGE>
USA DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
USA DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
February 17, 2000
(Inception)
to March 31, 2000
-----------------
Income $ --
Expenses
Professional fees 2,250
Organization expense 358
-----------
Total expenses 2,608
-----------
NET LOSS $ (2,608)
-----------
LOSS PER SHARE - BASIC AND DILUTED $ (0.0005)
-----------
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC
AND DILUTED 5,000,000
-----------
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIENCY
FOR THE PERIOD FROM FEBRUARY 17, 2000 (INCEPTION)
TO MARCH 31, 2000
-----------------
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING
ISSUED PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Common Stock Issuance 5,000,000 $ 2,000 $ -- $ -- $ 2,000
Fair value of expenses contributed -- -- 358 -- 358
Net loss for the period ended
March 31, 2000 -- -- -- (2,608) (2,608)
BALANCE, MARCH 31, 2000 5,000,000 $ 2,000 $ 358 $ (2,608) $ (250)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
February 17, 2000
(Inception) to March 31,
2000
-----------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (2,608)
Adjustment to reconcile net loss to net cash
used by operating activities
Increase in accounts payable 750
Contributed expenses 358
--------------
Net cash used by operating activities (1,500)
--------------
CASH FLOWS FROM INVESTING
ACTIVITIES --
--------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock 2,000
--------------
Net cash provided by financing activities 2,000
--------------
INCREASE IN CASH AND CASH 500
EQUIVALENTS
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD --
--------------
CASH AND CASH EQUIVALENTS - END OF
PERIOD $ 500
--------------
See accompanying notes to financial statement.
F-5
<PAGE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
--------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A Organization and Business Operations
Troy Acquisition Corporation (a development stage company)
("the Company") was incorporated in California on February 17,
2000 to serve as a vehicle to effect a merger, exchange of
capital stock, asset acquisition or other business combination
with a domestic or foreign private business. At March 31,
2000, the Company had not yet commenced any formal business
operations, and all activity to date relates to the Company's
formation and proposed fund raising. The Company's fiscal year
end is December 31.
The Company's ability to commence operations is contingent
upon its ability to identify a prospective target business and
raise the capital it will require through the issuance of
equity securities, debt securities, bank borrowings or a
combination thereof.
B Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
C Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash
equivalents.
D Earnings per Share
Net loss per common share for the period from February 17,
2000 (inception) to March 31, 2000 is computed based upon the
weighted average common shares outstanding as defined by
Financial Accounting Standards No. 128 "Earnings Per Share".
There were no common stock equivalents outstanding at March
31, 2000.
F-6
<PAGE>
TROY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
--------------------
E Income Taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("Statement 109").
Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date. There were no current or deferred income tax
expense or benefits due to the Company not having any material
operations for the period ended March 31, 2000.
NOTE 2 STOCKHOLDER'S EQUITY
A Common Stock
The Company is authorized to issue 50,000,000 shares of common
stock with no par value. The Company issued 5,000,000 shares
of its common stock to BAC Consulting Corporation ("BAC") for
an aggregate consideration of $2,000.
B Additional Paid-In Capital
Additional paid-in capital at March 31, 2000 represents the
fair value of the amount of organization costs incurred by BAC
on behalf of the Company. (See Note 3)
F-7
<PAGE>
NOTE 3 AGREEMENTS
(A) Consulting
On February 21, 2000, the Company signed an agreement with
BAC, a related entity (See Note 4). The Agreement calls for
BAC Consulting Corporation to provide the following services,
without reimbursement from the Company, until the Company
enters into a business combination as described in Note 1A:
1. Preparation and filing of required documents with the
Securities and Exchange Commission.
2. Location and review of potential target companies.
3. Payment of all corporate, organizational, and other costs
incurred by the Company.
(B) Legal
On March 10, 2000, the Company signed an agreement with Boyd
and Chang, LLP, a related entity (see Note 4). The agreement
calls for Boyd and Chang, LLP to provide legal services at
standard rates and provide secretarial and office support at a
flat rate of $250 per month.
NOTE 4 RELATED PARTIES
Legal counsel to the Company is a firm owned by the directors
of the Company who also owns a controlling interest in the
outstanding stock of BAC. (See Note 3)
F-8
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Articles of Incorporation
3.2 Bylaws
3.3 Specimen stock certificate
10.1 Consulting Agreement with BAC Consulting Corporation
10.2 Engagement Agreement with Boyd & Chang, LLP
22
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
23.1 Consent of Accountants
27 Financial Data Schedule
23
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned thereunto duly authorized.
TROY ACQUISITION CORPORATION
By: /s/ Tim T. Chang
----------------
Tim T. Chang, Chief Executive Officer
April 20, 2000
24
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
TROY ACQUISITION CORPORATION
I.
The name of this corporation is TROY ACQUISITION CORPORATION.
II.
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California for this corporation's
initial agent for service of process is Patrick Boyd, 19900 MacArthur Boulevard,
Suite 660, Irvine, California 92612.
IV.
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
50,000,000.
V.
No director of this corporation shall be personally liable for monetary
damages in any action brought by or in the right of the corporation for breach
of such director's duties to the corporation or its shareholders; provided,
however, that the foregoing shall not limit or eliminate the liability of
directors (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of the law, (ii) for acts or omissions that a
25
<PAGE>
director believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show reckless disregard for
the director's duty to the corporation or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing the director's duties, of a risk of serious injury to the
corporation or its shareholders, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation or its shareholders, (vi) with regard to contracts or
obligations described under Section 310 of the California Corporations Code, as
amended or (vii) under Section 316 of the California Corporations Code.
Additionally, the foregoing limitation of liability shall not limit the
liability of a director for any act or omissions occurring prior to the date
when this provision becomes effective and this limitation of liability shall not
eliminate or limit the liability of an officer for any act or omission as an
officer for any act or omission as an officer, notwithstanding that the officer
is also a director or that his or her actions, if negligent or improper have
been ratified by the directors.
VI.
This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through Bylaw
provisions, agreements with agents, votes of shareholders or disinterested
directors, or otherwise, to the fullest extent permissible under California law.
Any amendment, repeal, or modification of any provisions of this Article VI
shall not adversely affect any rights or protection of an agent of this
corporation existing at the time of such amendment, repeal or modification.
February 14, 2000 /s/Patrick R. Boyd
------------------
Patrick R. Boyd, Incorporator
26
EXHIBIT 3.2
TROY ACQUISITION CORPORATION
BY-LAWS
OF
TROY ACQUISITION CORPORATION,
a California corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE.
The Board of Directors is hereby granted full power and authority to
fix and locate and to change the principal executive office of the Corporation
from one location to another within or outside the State of California. If the
principal executive office is located outside this state, and the Corporation
has one or more business offices in this state, the Board of Directors shall fix
and designate a principal business office in the State of California, the
location of which principal business office shall be noted on the bylaws by the
secretary, opposite this section, or this section may be amended to state the
new location.
Section 2. OTHER OFFICES.
Other business offices may at any time be established by the Board of
Directors at any place or places within or outside the State of California.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS.
All annual or other meetings of shareholders shall be held at the
principal executive office of the Corporation, or at any other place within or
without the State of California which may be designated either by the Board of
Directors or by the written consent of all persons entitled to vote thereat and
not present at the meeting, given either before or after the meeting, and filed
with the secretary of the Corporation.
Section 2. ANNUAL MEETINGS.
The annual meetings of shareholders shall be held on the 2nd Tuesday of
May in each year at the Corporation's executive offices, or at such other date
and/or time as shall be determined by the Board of Directors provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is a full business day. At such meetings directors shall be
27
<PAGE>
elected, reports of the affairs of the Corporation shall be considered, and any
other business may be transacted which is within the powers of the shareholders.
Written notice of each annual meeting shall be given to each
shareholder entitled to vote, either personally or by mail or other means of
written communication, charges prepaid, addressed to such shareholder at his
address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice. If any notice or report addressed to the
shareholder at the address of such shareholder appearing on the books of the
Corporation is returned to the Corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice or report to the shareholder at such address, all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available for the shareholder upon written demand of the
shareholder at the principal executive office of the Corporation for a period of
one (1) year from the date of the giving of the notice or report to all other
shareholders. If a shareholder gives no address, notice shall be deemed to have
been given if sent by mail or other means of written communication addressed to
the place where the principal executive office of the Corporation is situated,
or if published at least once in some newspaper of general circulation in the
county in which said principal executive office is located.
All such notices shall be given to each shareholder entitled thereto
not less than ten (10) days nor more than sixty (60) days before each annual
meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the Corporation shall be prima facie evidence of the giving of
notice.
Such notices shall specify:
(i) The place, the date, and the hour of such meeting;
(ii) Those matters which the board, at the time of the mailing of the
notice, intends to present for action by the shareholders;
(iii) If directors are to be elected, the names of nominees intended at
the time of the notice to be presented by management for election;
(iv) The general nature of a proposal, if any, to take action with
respect to approval of, (i) a contract or other transaction with an
interested director, (ii) amendment of the Articles of
Incorporation, (iii) a reorganization of the Corporation as defined
in Section 181 of the General Corporation Law, (iv) voluntary
dissolution of the Corporation, of (v) a distribution in
dissolution other than in accordance with the rights of outstanding
preferred shares, if any; and
(v) Such other matters, if any, as may be expressly required by statute.
Section 3. SPECIAL MEETINGS.
Special meetings of the shareholders, for the purpose of taking any
action permitted by the shareholders under the General Corporation Law and the
Articles of Incorporation of this Corporation, may be called at any time by the
chairman of the board or the president, or by the Board of Directors, or by one
28
<PAGE>
or more shareholders holding not less than ten percent (10%) of the votes at the
meeting. Upon request in writing that a special meeting of shareholders be
called for any proper purpose, directed to the chairman of the board, president,
vice president or secretary by any person (other than the board) entitled to
call a special meeting of shareholders, the officer forthwith shall cause notice
to be given to shareholders entitled to vote that a meeting will be held at a
time requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after receipt of the request.
Except in special cases where other express provision is made by statute, notice
of such special meetings shall be given in the same manner as for annual
meetings of shareholders. In addition to the matters required by items (a) and,
if applicable, (c) of the preceding Section, notice of any special meeting shall
specify the general nature of the business to be transacted, and no other
business may be transacted at such meeting.
Section 4. QUORUM.
The presence in person or by proxy of the persons entitled to vote a
majority of the voting shares at any meeting shall constitute a quorum for the
transaction of business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section 5. ADJOURNED MEETING AND NOTICE THEREOF.
Any shareholder's meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of a majority of the
shares, the holders of which are either present in person or represented by
proxy thereat, but in the presence of a quorum no other business may thereafter
be transacted at such meeting, except as provided in Section 4 above.
When any shareholder's meeting, either annual or special, is adjourned
for forty-five (45) days or more, or if after adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
as in the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement of the time
and place thereof at the meeting at which such adjournment is taken.
Section 6. VOTING.
Unless a record date for voting purposes be fixed as provided in
Section 1 of Article VI of these bylaws then, subject to the provisions of
Sections 701 through 704, inclusive, of the Corporations Code of California
(relating to voting of shares held by a fiduciary, in the name of a Corporation,
or in joint ownership), only persons in whose names shares entitled to vote
stand on the stock records of the Corporation at the close of business on the
business day next preceding the day on which the meeting of shareholders is held
shall be entitled to vote at such meeting, and such day shall be the record date
for such meeting. Such vote may be viva voce or by ballot; provided, however,
that all elections for directors must be by ballot upon demand made by a
shareholder at any election and before the voting begins. If a quorum is
present, except with respect to election of directors, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the General Corporation Law or the
Articles of Incorporation. Subject to the requirements of the next sentence,
every shareholder entitled to vote at any election for directors shall have the
right to cumulate his votes and give one candidate a number of votes equal to
29
<PAGE>
the number of directors to be elected multiplied by the number of votes to which
his shares are entitled, or to distribute his votes on the same principle among
as many candidates as he shall think fit. No shareholder shall be entitled to
cumulate votes unless the name of the candidate or candidates for whom such
votes would be cast has been placed in nomination prior to the voting and any
shareholder has given notice at the meeting prior to the voting, of such
shareholder's intention to cumulate his votes. The candidates receiving the
highest number of votes of shares entitled to be voted for them, up to the
number of directors to be elected, shall be elected.
Section 7. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS.
----------------------------------------------------
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, or who, though
present, has, at the beginning of the meeting, not properly objected to the
transaction of any business because the meeting was not lawfully called or
convened, or to particular matters of business legally required to be included
in the notice, but not so included, signs a written waiver of notice, or a
consent to the holding of such meeting, or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 8. ACTION WITHOUT MEETING.
-----------------------
Directors may be elected without a meeting by a consent in writing,
setting forth the action so taken, signed by all of the persons who would be
entitled to vote for the election of directors, provided that, without notice
except as hereinafter set forth, a director may be elected at any time by the
written consent of persons holding a majority of the outstanding shares entitled
to vote for the election of directors to fill a vacancy on the Board of
Directors that has not been filled by the directors.
Any other action which, under any provision of the California General
Corporation Law, may be taken at a meeting of the shareholders, may be taken
without a meeting, and without notice except as hereinafter set forth, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Unless the consents of
all shareholders entitled to vote have been solicited in writing:
(vi) Notice of any proposed shareholder approval of, (i) a
contract or other transaction with an interested
director, (ii) indemnification of any person
authorized by Section 15 of Article III of these
bylaws, (iii) a reorganization of the Corporation as
defined in Sec tion 181 of the General Corporation
Law, or (iv) a distribution in dissolution other than
in accordance with the rights of outstanding
preferred shares, if any, without a meeting by less
than unanimous written consent, shall be given at
least ten (10) days before the consummation of the
action authorized by such approval; and
(vii) Prompt notice shall be given of the taking of any
other corporate action approved by shareholders
without a meeting by less than unanimous written
consent, to those shareholders entitled to vote who
have not consented in writing. Such notices shall be
given in the manner and shall be deemed to have been
given as provided in Section 2 of Article II of these
bylaws.
30
<PAGE>
Unless, as provided in Section 1 of Article VI of these bylaws, the
Board of Directors has fixed a record date for the determination of shareholders
entitled to notice of and to give such written consent, the record date for such
determination shall be the day on which the first written consent is given. All
such written consents shall be filed with the secretary of the Corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the Corporation.
Section 9. PROXIES.
--------
Every person entitled to vote or execute consents shall have the right
to do so either in person or by one (1) or more agents authorized by a written
proxy executed by such person or his duly authorized agent and filed with the
secretary of the Corporation. Any proxy duly executed is not revoked and
continues in full force and effect until, (i) an instrument revoking it or a
duly executed proxy bearing a later date is filed with the secretary of the
Corporation prior to the vote pursuant thereto, (ii) the person executing the
proxy attends the meeting and votes in person, or (iii) written notice of the
death or incapacity of the maker of such proxy is received by the Corporation
before the vote pursuant thereto is counted; provided that no such proxy shall
be valid after the expiration of eleven (11) months from the date of its
execution, unless the person executing it specified therein the length of time
for which such proxy is to continue in force.
Section 10. INSPECTORS OF ELECTION.
-----------------------
In advance of any meeting of shareholders, the Board of Directors may
appoint any persons other than nominees for office as inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one (1) or three (3). If appointed at a meeting on
the request of one (1) or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one (1) or three (3)
inspectors are to be appointed. In case any person appointed as inspector fails
to appear or fails or refuses to act, the vacancy may, and on the request of any
shareholder or a shareholder's proxy shall, be filled by appointment by the
Board of Directors in advance of the meeting, or at the meeting by the chairman
of the meeting.
The duties of such inspectors shall be as prescribed by Section 707 of
the General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. In the determination of the validity
and effect of proxies, the dates contained on the forms of proxy shall
presumptively determine the order of execution of the proxies, regardless of the
postmark dates on the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three (3) inspectors of election, the decision, act or certificate
31
<PAGE>
of a majority is effective in all respects as the decision, act or certificate
of all. Any report or certificate made by the inspectors of election is Prima
facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
---------
Section 1. POWERS.
-------
Subject to limitations in the Articles of Incorporation and to the
provisions of the California General Corporation Law as to action to be
authorized or approved by the shareholders or by the outstanding shares, and
subject to the duties of directors as prescribed by the bylaws, all corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the Corporation shall be controlled by, the Board of Directors.
Without prejudice to such general powers, but subject to the same provisions and
limitations, it is hereby expressly declared that the directors shall have the
following powers, to wit:
First - To select and remove all the officers, agents and employees of
the Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or the bylaws, fix
their compensation and require security for faithful service.
Second - To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the Articles of Incorporation or the bylaws, as they may deem
best.
Third - To change the principal executive office and principal office
for the transaction of the business of the Corporation from one location to
another as provided in Article I, Section 1, hereof; to fix and locate from time
to time one or more subsidiary offices of the Corporation within or without the
State of California, as provided in Article I, Section 2, hereof; to designate
any place within or without the State of California to hold shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at all times
comply with the provisions of law.
Fourth - To authorize the issue of shares of stock of the Corporation
from time to time, upon such terms as may be lawful.
Fifth - To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidence of debt and securities therefor.
Sixth - By resolution adopted by a majority of the authorized number of
directors, to designate an executive and other committees, each consisting of
one (1) or more directors, to serve at the pleasure of the board, and to
prescribe the manner in which proceedings of such committee shall be conducted.
Unless the Board of Directors shall otherwise prescribe the manner of
proceedings of any such committee, meetings of such committee may be regularly
scheduled in advance and may be called at any time by any member thereof;
otherwise, the provisions of these bylaws with respect to notice and conduct of
meetings of the board shall govern. Any such committee, to the extent provided
in a resolution of the board, shall have all of the authority of the board,
except with respect to:
32
<PAGE>
(i) The approval of any action for which the General Corporation Law or
the Articles of Incorporation also require shareholder approval;
(ii) The filling of vacancies on the board or in any committee;
(iii) The fixing of compensation of the directors for serving on the
board or on any committee;
(iv) The adoption, amendment or repeal of bylaws;
(v) The amendment or repeal of any resolution of the board;
(vi) Any distribution to the shareholders, except at a rate or in a
periodic amount or within a price range determined
by the board; and
(vii) The appointment of other committees of the board or the members
thereof.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.
--------------------------------------
The authorized number of directors of the Corporation shall be not less
than one (1) nor more than five (5). The exact number of authorized directors
shall be two (2) until changed, within the limits specified above, by a bylaw
amending this section, duly adopted by the board of directors or by the
shareholders. The maximum or minimum number of directors cannot be changed nor
can a fixed number be substituted for the maximum and minimum numbers, except by
a duly adopted amendment to the articles of incorporation or by an amendment to
this bylaw duly approved by a majority of the outstanding shares entitled to
vote.
Section 3. ELECTION AND TERM OF OFFICE.
----------------------------
The directors shall be elected at each annual meeting of shareholders but,
if any such annual meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meeting of shareholders held for
that purpose. All directors shall hold office until their respective successors
are elected, subject to the General Corporation Law and the provisions of these
bylaws with respect to vacancies on the board.
Section 4. VACANCIES.
----------
A vacancy in the Board of Directors shall be deemed to exist in case of the
death, resignation or removal of any director,if a director has been declared of
unsound mind by order of court or convicted of a felony, if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
Vacancies in the Board of Directors, except for a vacancy created by the
removal of any directors, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, and each
director so elected shall hold office until his successor is selected at an
annual or a special meeting of the shareholders. A vacancy in the Board of
Directors created by the removal of a director may only be filled by the vote of
a majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares.
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The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the Board of Directors of
the Corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the Board of Directors accepts the resignation of a
director tendered to take effect at a future time, the board or the shareholders
shall have the power to elect a successor to take office when the resignation is
to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
--------------------------------------------
Regular meetings of the Board of Directors shall be held at any place
within or without the State of California which has been designated from time to
time by resolution of the board or by written consent of all members of the
board. In the absence of such designation, regular meetings shall be held at the
principal executive office of the Corporation. Special meetings of the board may
be held either at a place so designated or at the principal executive office of
the Corporation. Any meeting, regular or special, may be held by conference,
telephone or similar communications equipment, so long as all directors
participating in the meeting can hear one another and all such directors shall
be deemed to be present at the meeting.
Section 6. ANNUAL MEETING.
---------------
Immediately following each annual meeting of shareholders, the Board of
Directors shall hold a regular meeting at the place of said annual meeting or at
such other place as shall be fixed by the Board of Directors, for the purpose of
organization, election of officers, and the transaction of other business. Call
and notice of such meetings are hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS.
-----------------------
Other regular meetings of the Board of Directors shall be held without
call at such time as shall from time to time be fixed by the Board of Directors.
Such regular meetings may be held without notice.
Section 8. SPECIAL MEETINGS.
-----------------
Special meetings of the Board of Directors for any purpose or purposes
shall be called at any time by the chairman of the board, the president, any
vice president, the secretary or by any two (2) directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director or communicated to each director by
telephone, or by telegraph or mail, charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation or, if it is not so
shown on such records or is not readily ascertainable, at the place at which the
meetings of the directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or delivered to the
34
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telegraph company in the place in which the principal executive office of the
Corporation is located at least forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is delivered, personally or by
telephone, as above provided, it shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery, personally or by telephone, as above provided, shall
be due, legal and personal notice to such director.
Any notice shall state the date, place and hour of the meeting and the
general nature of the business to be transacted, and no other business may be
transacted at the meeting.
Section 9. ACTION WITHOUT MEETING.
-----------------------
Any action by the Board of Directors may be taken without a meeting if
all the members of the board shall individually or collectively consent in
writing to such action. Such written consent or consents shall be filed with the
minutes of the proceedings of the board and shall have the same force and effect
as a unanimous vote of such directors.
Section 10. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE.
----------------------------------------------
Presence of a majority of the authorized number of directors at a
meeting of the Board of Directors constitutes a quorum for the transaction of
business, except as hereinafter provided. Members of the board may participate
in a meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another. Participation in a meeting as permitted in the preceding sentence
constitutes presence in person at such meeting. Every act or decision done or
made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors, unless
a greater number, or the same number after disqualifying one (1) or more
directors from voting, is required by law, by the Articles of Incorporation, or
by these bylaws. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of a director, provided that
any action taken is approved by at least a majority of the required quorum for
such meeting.
Section 11. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS.
----------------------------------------------------
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present and if,
either before or after the meeting, each of the directors not present or who,
though present, has prior to the meeting or at its commencement, protested the
lack of proper notice to him, signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 12. ADJOURNMENT.
------------
A quorum of the directors may adjourn any directors' meeting to meet
again at a stated day and hour; provided, however, that in the absence of a
quorum, a majority of the directors present at any directors' meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the board.
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Section 13. NOTICE OF ADJOURNMENT.
----------------------
If the meeting is adjourned for more than twenty-four (24) hours,
notice of any adjournment to another time or place shall be given prior to the
time of the adjourned meeting to the directors who were not present at the time
of adjournment. Otherwise, notice of the time and place of holding an adjourned
meeting need not be given to absent directors if the time and place be fixed at
the meeting adjourned.
Section 14. FEES AND COMPENSATION.
----------------------
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the board.
Section 15. INDEMNIFICATION OF AGENTS OF THE CORPORATION;
---------------------------------------------
PURCHASE OF LIABILITY INSURANCE.
--------------------------------
(i) Upon and in the event of a determination by the Board of
Directors of this Corporation, this Corporation shall have the power to
indemnify any person who is or was a director, officer, employee, or other agent
of this Corporation or of its predecessor, or is or was serving as such of
another Corporation, partnership, joint venture, trust, or other enterprise, at
the request of this Corporation against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
threatened, pending, or completed action or proceeding, whether civil, criminal,
administrative, or investigative, to the fullest extent permitted under law,
including, but not limited to, Section 317 of the California Corporations Code,
as that Section now exists or may hereafter from time to time be amended to
provide.
(iii) Upon and in the event of a determination by the Board of
Directors of this Corporation to purchase liability insurance, this Corporation
shall have the power to purchase and maintain insurance on behalf of any agent
of the Corporation against any liability asserted against or incurred by the
agent in such capacity or arising out of the agent's status as such whether or
not this Corporation would have the power to indemnify the agent against such
liability under the provisions of this section.
ARTICLE IV
OFFICERS
--------
Section 1. OFFICERS.
---------
The officers of the Corporation shall be a president, a secretary and a
chief financial officer. The Corporation may also have, at the discretion of the
Board of Directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same person.
Section 2. ELECTION.
---------
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen annually by the Board of Directors, and each such
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officer shall hold office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC.
---------------------------
The Board of Directors may appoint, and may empower the president to
appoint, such other officers as the business of the Corporation may require,
each of whom shall hold office, for such period, have such authority and perform
such duties as are provided in the bylaws or as the Board of Directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION.
------------------------
Any officer may be removed, either with or without cause, by the Board
of Directors, at any regular or special meeting thereof, or, except in case of
an officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors (subject, in each case, to
the rights, if any, of an officer under any contract of employment).
Any officer may resign at any time by giving written notice to the
Board of Directors or to the president, or to the secretary of the Corporation,
without prejudice, however, to the rights, if any, of the Corporation under any
contract to which such officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. VACANCIES.
----------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the bylaws for regular appointment to such office.
Section 6. CHAIRMAN OF THE BOARD.
----------------------
The chairman of the board, if there shall be such an officer, shall, if
present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by the bylaws.
Section 7. PRESIDENT.
----------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the Corporation. He shall
preside at all meetings of the shareholders and, in the absence of the chairman
of the board, or if there be none, at all meetings of the Board of Directors. He
shall be ex officio a member of all the standing committees, including the
executive committee, if any, and shall have the general powers, and duties of
management usually vested in the office of president of a Corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the bylaws.
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Section 8. VICE PRESIDENT.
--------------
In the absence or disability of the president, the vice presidents in order
of their rank as fixed by the Board of Directors or, if not ranked, the vice
president designated by the Board of Directors, shall perform all the duties of
the president, and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the powers of the president and perform such other
duties as from time to time may be prescribed for them respectively by the Board
of Directors or the bylaws.
Section 9. SECRETARY.
----------
The secretary shall record or cause to be recorded, and shall keep or
cause to be kept, at the principal executive office and such other place as the
Board of Directors may order, a book of minutes of actions taken at all meetings
of directors and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at directors' meetings, the number of shares present
or represented at shareholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
bylaws or by law to be given, and he shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the bylaws.
Section 10. CHIEF FINANCIAL OFFICER.
------------------------
The chief financial officer, who shall also be deemed to be the
treasurer when a treasurer may be required, shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the names and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the Corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or the bylaws.
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ARTICLE V
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.
--------------------------------------------
The Corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed, and as
determined by resolution of the Board of Directors, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the Corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
Corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days prior
written demand on the Corporation, and (ii) obtain from the transfer agent of
the Corporation on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholders' names and addresses,
who are entitled to vote for the election of directors, and their shareholdings,
as of the most recent record date for which that list has been compiled or as of
a date specified by the shareholder after the date of demand. This list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or the date specified in the
demand as the date as of which the list is to be compiled. The record of
shareholders shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate, at any time during usual
business hours, for a purpose reasonably related to the holder's interest as a
shareholder or as the holder of a voting trust certificate. Any inspection and
copying under this Section 1 may be made in person or by an agent or attorney of
the shareholder or holder of a voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS.
-------------------------------------
The Corporation shall keep at its principal executive office, or if its
principal executive office is not in the State of California, at its principal
business office in this State, the original or a copy of the bylaws as amended
to date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the Corporation
is outside the State of California and the Corporation has no principal business
office in this state, the Secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the bylaws as amended to
date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
-----------------------------------------------------
The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
Board of Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal executive
office of the Corporation. The minutes shall be kept in written form or any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary Corporation of the
Corporation.
39
<PAGE>
Section 4. INSPECTION BY DIRECTORS.
------------------------
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind and the physical
properties of the Corporation and each of its subsidiary Corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS.
------------------------------
The Board of Directors of the Corporation shall not be required to
cause an annual report to be sent to the shareholders pursuant to Section 1501
of the California Corporations Code so long as there are less than one hundred
(100) holders of record of its shares (determined as provided in Section 605 of
the California Corporations Code). If the Board of Directors so resolves, by a
vote of a majority of the directors, the Board of Directors shall cause an
annual report to be sent to the shareholders not later than one hundred twenty
(120) days after the close of the fiscal or calendar year. Such report shall
contain a balance sheet as of the end of such fiscal year and an income
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accountants, or, if there is no such report,
the certificate of an authorized officer of the Corporation that such statements
were prepared without audit from the books and records of the Corporation.
Nothing herein shall be interpreted as prohibiting the Board of Directors from
issuing other periodic reports to the shareholders of the Corporation as the
Board of Directors considers appropriate.
Section 6. FINANCIAL STATEMENTS.
---------------------
A copy of any annual financial statement and any income statement of
the Corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the Corporation as of the end of each such period,
that has been prepared by the Corporation shall be kept on file in the principal
executive office of the Corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the Corporation makes a written
request to the Corporation for an income statement of the Corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and a balance
sheet of the Corporation as of the end of that period, the chief financial
officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
making the request within thirty (30) days after receipt of the request. If the
Corporation has not sent to the shareholders its annual report for the last
fiscal year, this report shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report of the independent accountants if
any, engaged by the Corporation or the certificate of an authorized officer of
the Corporation that the financial statements were prepared without audit from
the books and records of the Corporation.
40
<PAGE>
ARTICLE VI
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE.
------------
The Board of Directors may fix a time in the future as a record date
for the determination of the shareholders entitled to notice of and to vote at
any meeting of shareholders or entitled to give consent to corporate action in
writing without a meeting, to receive any report, to receive any dividend or
distribution, or any allotment of rights, or to exercise rights in respect to
any change, conversion, or exchange of shares. The record date so fixed shall be
not more than sixty (60) days prior to any other event for the purposes of which
it is fixed. When a record date is so fixed, only shareholders of record on that
date are entitled to notice of and to vote at any such meeting, to give consent
without a meeting, to receive any report, to receive a dividend, distribution,
or allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date, except as otherwise provided in the Articles of Incorporation
or bylaws.
Section 2. CHECKS, DRAFTS, ETC..
---------------------
All checks, drafts or other orders for payment of money, notices or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the Board of
Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
-------------------------------------------------
The Board of Directors, except as otherwise provided in the bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances; and, unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or to any amount.
Section 4. CERTIFICATE FOR SHARES.
----------------------
Every holder of shares in the Corporation shall be entitled to have a
certificate signed in the name of the Corporation by the chairman or vice
chairman of the board or the president or vice president and by the chief
financial officer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legend or other statement
as may be required by the California General Corporation Law, the Corporate
Securities Law of 1968, the federal securities laws, and any agreement between
the Corporation and the issuee thereof.
41
<PAGE>
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and canceled at the same time;
provided, however, that a new certificate will be issued without the surrender
and cancellation of the old certificate if (1) the old certificate is lost,
apparently destroyed or wrongfully taken; (2) the request for the issuance of
the new certificate is made with in a reasonable time after the owner of the old
certificate has notice of its loss, destruction, or theft; (3) the request for
the issuance of a new certificate is made prior to the receipt of notice by the
Corporation that the old certificate has been acquired by a bona fide purchaser;
(4) the owner of the old certificate files a sufficient indemnity bond with or
provides other adequate security to the Corporation; and (5) the owner satisfies
any other reasonable requirements imposed by the Corporation.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
----------------------------------------------
The president or any vice president and the secretary or any assistant
secretary of this Corporation are authorized to vote, represent and exercise on
behalf of this Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized to do so by proxy or power of attorney duly executed by
said officers.
Section 6. CONSTRUCTION AND DEFINITIONS.
----------------------------
Unless the context otherwise requires, the general provisions, rules of
construction and definitions contained in the California General Corporation Law
shall govern the construction of these bylaws. Without limiting the generality
of the foregoing, the masculine gender includes the feminine and neuter, the
singular number includes the plural and the plural number includes the singular,
and the term "person" includes a Corporation as well as a natural person.
ARTICLE VII
AMENDMENTS
Section 1. POWER OF SHAREHOLDERS.
---------------------
New bylaws may be adopted or these bylaws may be amended or repealed by
the affirmative vote of a majority of the outstanding shares entitled to vote,
or by the written assent of the shareholders entitled to vote such shares,
except as otherwise provided by law or by the Articles of Incorporation;
provided, however, that if the Articles of Incorporation set forth the number of
authorized directors of the Corporation the authorized number of directors may
be changed only by an amendment of the Articles of Incorporation.
42
<PAGE>
Section 2. POWER OF DIRECTORS.
------------------
Subject to the right of shareholders as provided in Section 1 of this
Article VII to adopt, amend or repeal bylaws, other than a bylaw or amendment
thereof changing the authorized number of directors, may be adopted, amended or
repealed by the Board of Directors.
43
EXHIBIT 10.1 - Engagement Agreement
April 20, 2000
VIA FACSIMILE
- -------------
(949) 851-0159
Troy Acquisition Corporation
19900 MacArthur Boulevard
Suite 660
Irvine, California 92612
Re: Engagement
----------
Gentlemen:
By this letter we intend to evidence terms under which Troy Acquisition
Corporation ("Client") engages Boyd & Chang, LLP (the "Firm"). Our agreement is
as follows.
(ii) Engagement. Client engages the Firm to provide legal services for
Client as requested. The nature of the services to initially be
provided are general corporate securities and related services.
(iii) Legal Fees. Client will pay the Firm for legal services performed at
the rates set forth in Schedule "A".
3. Additional Support. The Firm will also provide client with all necessary
secretarial support and office, telephone, furniture, facsimile, reception and
administrative services as are necessary to operate Client from time to time at
the flat rate of $250 per month set forth in this Agreement.
4. Statements. The Firm will send Client a statement setting forth the fees
and costs incurred by Client on a monthly basis. All such fees and costs shall
accrue and non-reimbursable in the form of cash.
5. Results. The Firm has made no promises or guarantees to Client
concerning the
44
<PAGE>
outcome of the referenced matter, and nothing in this agreement shall be
construed as such a promise or guarantee.
6. Termination of Services. Our relationship shall be at will and either
the Firm or Client shall have the right to terminate this relationship at any
time with or without cause.
7. Arbitration. Any dispute hereunder, or concerning the rights of any
of the parties hereto, including, but not limited to, any dispute over the
amount of fees or costs due and owing and any dispute over alleged malpractice
shall be decided by arbitration by a retired judge of the Superior Court to be
agreed upon by the parties. Client understands that it may well be entitled to a
jury trial as to any claim against the Firm for malpractice or for other claims
and that Client hereby waives any such right. Client represents that it has had
the opportunity to consult independent counsel of its choice regarding its
waiver of any right to a jury as specified above and as to the other terms of
this agreement and has either done so or has knowingly and willingly of its own
free choice chosen not to consult such independent counsel. If the parties
cannot agree upon an arbitrator, the presiding judge of the Superior Court of
Orange County shall be requested to appoint a retired judge to act in such
capacity, upon petition of any party hereto. In the event the presiding judge
fails or refuses for thirty (30) days after a request to make such appointment,
the court shall be petitioned to appoint a lawyer licensed to practice in
California as sole arbitrator. Any decision or award as a result of any
arbitration proceeding shall include the assessment of costs and reasonable
attorneys' fees to the prevailing party and shall be enforceable in any court of
law.
8. Entire Agreement. This agreement contains the entire understanding
among the parties hereto and supersedes any prior understandings and agreements
among us with respect to the subject matter herein. There are no
representations, agreements, arrangements or understandings among the parties,
oral or written, relating to the subject matter of this agreement that are not
fully expressed herein. Any statements, promises or inducements, whether made by
any party or agent of any party, that are not contained in this agreement shall
not be valid or binding. This agreement may not be enlarged, modified or altered
except by a written agreement signed by all the parties hereto.
9. Notice. All notices, requests, demands or other communications
necessary to be given hereunder shall be in writing and shall be deemed to have
been given if delivered via facsimile or if mailed by United States Mail,
postage prepaid, to the parties at the following addresses (or at such other
addresses as a party may notify the other party of in writing in accordance with
this section).
If to the Firm address to: Boyd & Chang, LLP
19900 MacArthur Boulevard, Suite 660
Irvine, CA 92612
Facsimile: (714) 851-0159
Attention: Patrick R. Boyd
If to Client address to: Troy Acquisition Corporation
19900 MacArthur Boulevard
45
<PAGE>
Suite 660
Irvine, CA 92612
Telephone: (949) 851-9800
Facsimile: (949) 851-0159
Attention: Tim T. Chang
10. Retention of Client's File. Client is entitled to a copy of the file
materials maintained or generated by the Firm with respect to Client's
representation by the Firm, except those undisclosed work product materials
reflecting the Firm's impressions, conclusions, opinions, legal research or
theories upon reasonable notice and at Client's expense. Where the Firm
withdraws, Client cancels this agreement and substitutes the Firm out as
attorneys of record in any litigation in which the Firm were representing
Client, or upon completion of the work for which the Firm were retained by
Client, Client is entitled, upon giving the Firm reasonable notice, to custody
of the original Client file and the Firm, at their expense, are entitled to keep
a copy of any of said Client file materials they deem desirable. At the
conclusion of the handling by the Firm of the matter to which this agreement
pertains, the Firm may at any time, in the Firm's absolute discretion, store the
original file or destroy all or part of the file.
11. Counterparts. This agreement may be executed in counterparts, each of
which may be deemed an original, and taken together they shall constitute one
and the same agreement. For the purposes of the relationship between Client and
the Firm, facsimiles and future means of electronic communication may be deemed
and shall be treated as originals.
* * *
If the foregoing is acceptable to you, please sign where indicated
below.
Very truly yours,
BOYD & CHANG, LLP
Patrick R. Boyd
ACKNOWLEDGED AND AGREED TO
AS OF FEBRUARY 21, 2000
TROY ACQUISITION CORPORATION
By:/s/Tim T. Chang
------------------
Tim T. Chang, President
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SCHEDULE "A" OF SERVICES AND FEES
---------------------------------
Deposit: None
FEES
FEES
Senior Partner $250
Jr. Partner $200
Associate $150
Law Clerk $ 85
Paralegal $ 85
Computer Litigation
Analyst $ 35
46
EXHIBIT 10.2
CONSULTING AGREEMENT
AGREEMENT between BAC CONSULTING CORPORATION ("BAC") and TROY
ACQUISITION CORPORATION (the "Company").
WHEREAS the Company is a development stage company that has no specific
business plan and intends to merge, acquire or otherwise combine with an
unidentified company (the "Business Combination");
WHEREAS BAC is a shareholder of the Company and desires that the
Company locate a suitable target company for a Business Combination;
WHEREAS the Company desires that BAC assist it in locating a suitable
target company for a Business Combination;
NOW THEREFORE, it is agreed:
1.00 ACTIONS BY BAC. BAC agrees to assist in:
1.01 The preparation and filing with the Securities and Exchange
Commission of a registration statement on Form 10-SB for the common stock of the
Company;
1.02 The location and review of potential target companies for a
business combination and the introduction of potential candidates to the
Company;
1.03 The preparation and filing with the Securities and Exchange
Commission of all required filings under the Securities Exchange Act of 1934
until the Company enters into a business combination;
2.00 PAYMENT OF THE COMPANY EXPENSES. BAC agrees to pay on behalf of
the Company all corporate, organizational and other costs incurred or accrued by
the Company until effectiveness of a business combination. BAC understands and
agrees that it will not be reimbursed for any payments made by it on behalf of
the Company.
3.00 INDEPENDENT CONSULTANT. BAC is not now, and shall not be,
authorized to enter into any agreements, contracts or understandings on behalf
of the Company and BAC is not, and shall not be deemed to be, an agent of the
Company.
4.00 USE OF OTHER CONSULTANTS. The Company understands and agrees that
BAC intends to work with consultants, brokers, bankers, or others to assist it
in locating business entities suitable for a business combination and that BAC
may share with such consultants or others, in its sole discretion, all or any
portion of its stock in the Company and may make payments to such consultants
from its own resources for their services. The Company shall have no
responsibility for all or any portion of such payments.
5.00 BAC EXPENSES. BAC will bear its own expenses incurred in regard to
its actions under this agreement.
6.00 ARBITRATION. The parties hereby agree that any and all claims
(except only for requests for injunctive or other equitable relief) whether
47
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existing now, in the past or in the future as to which the parties or any
affiliates may be adverse parties, and whether arising out of this agreement or
from any other cause, will be resolved by arbitration before the American
Arbitration Association within the State of California.
7.00 COVENANT OF FURTHER ASSURANCES. The parties agree to take any
further actions and to execute any further documents which may from time to time
be necessary or appropriate to carry out the purposes of this agreement.
8.00 EFFECTIVE DATE. The effective date of this agreement is as of
February 21,2000.
IN WITNESS WHEREOF, the parties have approved and executed this
agreement. BAC Consulting Corporation //s// Tim C. Chang President TROY
ACQUISITION CORPORATION //s// Tim C. Chang President
48
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 10-SB Registration Statement,
of Troy Acquisition Corporation our report as of and for the period ended March
31, 2000 dated April 10, 2000, relating to the financial statements of Troy
Acquisition Corporation which appears in such Form 10-SB.
WEINBERG & COMPANY, P.A.
Certified Public Accountants
Boca Raton, Florida
April 20, 2000
49
